A reassuring performance
A 50 percent drop in home sales — linked to the collapse of the national subprime mortgage industry — has been the primary cause of a drop in state tax revenue, according to state Budget Director Andrew Clinger. When home sales drop, fewer people buy furniture, cars and household products. The state and counties collect less sales tax.
Gov. Jim Gibbons responded by placing a hiring freeze on all but critical state public safety jobs and by calling together legislators and municipal politicians for a Wednesday meeting in Carson City, asking for their suggestions as he seeks ways to reduce state spending — targeted at $6.8 billion in the current biennial budget — by at least $285 million.
And that may not be all.
“It is entirely possible agencies may be called on to make further reductions,” when he announces his budget revisions early next year, the governor warned.
But even for those who favor an active government, the term “cuts” is misleading. This year’s Legislature planned to increase state spending by more than 18 percent. Should he end up reducing planned state spending by $285 million, Gov. Gibbons pointed out Wednesday, that would still allow state budget growth of more than $700 million — a 13.32 percent spending increase over the budget for the period that ended June 30.
Gov. Gibbons did the right thing Wednesday. His message was clear: “A lot of people in Nevada are finding it hard to make ends meet,” the governor said. “For many working families, the last thing they can absorb is higher taxes. … We need to solve our fiscal problems by reducing state spending, not increasing taxes.”
Particularly stark is the contrast between the rhetoric and the reality within realms such as the state university system. Chancellor Jim Rogers balked at the governor’s request last month that he outline a possible 5 percent reduction in the university system’s vastly increased budget. He would not preside over the destruction of the university system, Mr. Rogers declared.
Yet, as Budget Director Clinger pointed out Wednesday, even if such a cut were to go through, the university system will have more money, in absolute terms, to deal with 6.55 percent fewer students next year. An additional 4.81 percent drop in student enrollment is projected for next year.
Other Democrats proved more constructive. Assembly Speaker Barbara Buckley, D-Las Vegas, and Senate Minority Leader Dina Titus, also D-Las Vegas, both suggested Gov. Gibbons postpone some building projects and dip into the state’s rainy day fund to cover shortfalls.
The governor replied that both proposals had merit. “The rainy day fund is not off the books,” he said. “But I don’t want to dip in and take the whole thing.”
Because lawmakers habitually earmark every penny of projected state revenue, and because no economy grows in a straight, diagonal line, economic troughs like this one are nothing new. A packet of materials handed out at the governor’s meeting Wednesday noted that every governor over the past 30 years has been forced to rein in projected spending increases during economic downturns. Gov. Gibbons further pointed out that he is the first, however, to have assembled political leaders in a meeting like Wednesday’s, seeking their input on how to limit spending increases.
The packet included legal citations explaining the governor was under no obligation to do this — he’s fully empowered to make budget cuts unilaterally during emergencies.
In the face of panicked mewing from some quarters, demanding a special session to raise taxes on already strapped Nevada businesses and families, the governor thus offers the calming effect of firm leadership, while demonstrating that he’s open to suggestions from all levels of government, and both sides of the aisle.
To date, a reassuring performance.