Cutting session delayed
CARSON CITY — A state panel on Friday offered the most pessimistic tax revenue projection to date, prompting Gov. Jim Gibbons to delay a special legislative session to allow more time to grapple with a quarter billion dollars in new budget cuts.
The Economic Forum, assembled by a Gibbons executive order, took a conservative approach to forecasting how state gaming, sales and other tax revenues will grow beginning July 1.
As a result, the new shortfall figure lawmakers must deal with when they convene on Friday is $250 million, more than a $243 million shortfall projected by state Budget Director Andrew Clinger. And far above the $94 million projected by legislative fiscal analysts.
The $250 million is on top of $913 million in cuts already made to the current 2007-2009 two-year budget, bringing the total to nearly $1.2 billion.
Gibbons said the size of the new shortfall, combined with an announcement Friday of a dramatic jump in the unemployment rate to a level not seen since 1994, made it prudent to give lawmakers more time to consider how to balance the budget. The session had been scheduled to convene Monday.
“Today’s revelation that unemployment in Nevada has reached levels not seen even in the months following the terrorist attacks of Sept. 11 reinforces the need for this special session of the Legislature to cope with our budget crisis,” he said. “However, because this and much more new information is just coming out today, I believe it’s prudent to give lawmakers and the staff from the executive and legislative branches the time to let this information sink in.”
Josh Hicks, general counsel to Gibbons, said every type of potential budget cut is on the table for the session, from 4 percent cost-of-living raises set to take effect July 1 for state employees and public teachers, to cuts to programs. Tax increases, he said, “are not on the governor’s table.”
But a plan being pushed by Lt. Gov. Brian Krolicki to bring in millions by bonding the state’s tobacco settlement funds is a potential issue for discussion, Hicks said.
Gibbons will go into the session with a plan to balance the budget, he said. Efforts will be made in meeting with lawmakers from both parties next week to come up with a bipartisan solution.
“That’s the ideal solution, but you never know,” he said. “With $250 million to fill you don’t know how that’s going to go.”
Gibbons wants the Legislature to prepare to balance the budget in a three-day special session.
Assembly Speaker Barbara Buckley, D-Las Vegas, said she and Senate Majority Leader Bill Raggio, R-Reno, will try to reach a compromise on a solution before the special session begins. She added that she hopes they can craft a solution that will allow legislators to finish the special session quickly.
“This delay will help the Assembly and the Senate to reach a solution over the next few days,” she said.
Buckley called the new estimate of a $250 million shortfall “an aggressive number.” She said the Economic Forum, aware that past estimates of revenue growth were significantly off target, decided to be “very conservative” in its projections.
Assemblywoman Sheila Leslie, D-Reno, also expressed skepticism about the $250 million shortfall.
“When you have political appointees, it is a political process,” she said. “Only time will tell who is right.”
The governor appoints three of the five forum members, with the Senate majority leader and Assembly speaker appointing one member each to complete the panel.
Raggio said the shortfall actually could be even greater than $250 million, depending on a final assessment Monday by the legislative fiscal analysts. But he said he is committed to going “more than halfway” with Buckley and Senate Minority Leader Steven Horsford, D-Las Vegas, to reach a compromise solution before the special session convenes.
“The last thing we want is a long special session with a lot of partisan bickering,” he said. “We want to make sure we do what is necessary to balance the budget without tax increases.”
The Economic Forum, with four new members, took a cautious approach to the state’s short-term economic future. The panel of private citizens voted repeatedly to support the lower, not higher, revenue growth estimate.
In estimating tax revenue, the forum considers factors such as upcoming casino openings, tourism figures, oil prices and other economic trends and forecasts.
For the state’s major two revenues, gaming and sales taxes, the panel sided more closely with Gibbons’ staff. Gaming revenues are now expected to rise 2 percent next year, well below the legislative estimate of 5.4 percent growth.
For sales, the panel took the Gibbons number of a 3.6 percent drop next year, rather than a 3.1 percent increase as suggested by legislative staff. This decision alone created a $70 million shortfall.
Cathy Santoro, a new forum member and senior vice president and treasurer of MGM Mirage, said the short-term economic outlook for the state is flat at best. Other panel members generally agreed.
Santoro said there are recessionary factors in play in Nevada and nationally.
“I think all of us have seen declines in our stock prices,” she said. “I think all of us have seen business fall off. And so I think there are clearly recessionary trends that are in play. The best thing you can do when they are in play is think smart and move quickly to address them.”
Some who sat in on the forum discussion supported the cautious approach.
Mary Lau, president and chief executive officer of the Retail Association of Nevada, said she figured the shortfall would be closer to Gibbons’ estimate once the dismal unemployment report came out earlier in the day.
“If you look at those numbers on employment the only sector that’s growing is mostly local government,” she said. “All the business sectors are losing employees.”
Lau’s advice: “Weather the storm, make prudent cuts and go from there.”
Paul Enos of the Nevada Motor Transport Association defended Gibbons’ call for a special session, which has been criticized by some Democratic lawmakers as unnecessary. A $250 million shortfall makes the session essential, he said.
“The trucking industry, the one that I represent, we’ve seen a decrease in the number of trucks registered in the state of Nevada since the first of the year, by almost 12 percent,” Enos said. “I think everybody’s hurting. It’s painful for everybody right now.”
Review-Journal Capital Bureau chief Ed Vogel contributed to this report. Contact Review-Journal Capital Bureau reporter Sean Whaley at swhaley@reviewjournal.com or 775- 687-3900.
