CARSON CITY -- The good news is that Gov. Jim Gibbons and legislative leaders agreed Wednesday on more cuts needed to balance a two-year state budget with a projected shortfall of $914 million.
The bad news is the shortfall might become even greater, making additional cuts necessary.
An agreement reached late in the day excludes further cuts to public education and state operating budgets. No layoffs are expected, and employees still will receive a 4 percent pay increase in July.
"We have reached a bipartisan, bicameral and administrative resolution on this whole process," Gibbons said in announcing the budget agreement.
The state is getting hit with greater demands for assistance, including Medicaid, a health care program for the poor, while at the same time dealing with tax revenues that are far below projections.
The projected $914 million shortfall amounts to 13 percent of the nearly $7 billion state budget approved last year for the current two-year budget cycle, which ends June 30, 2009.
In a short meeting in the governor's office in the Capitol, Gibbons and lawmakers agreed on the last $55 million in cuts needed to cover the projected shortfall. They include:
•Saving $17.5 million by not continuing to pre-fund the state health insurance program for retirees. Gibbons succeeded last year in getting funding to start to cover the unfunded liability. About $33 million has been set aside.
•Eliminating $2.1 million for a juvenile detention facility in White Pine County.
•Eliminating $3.9 million in funding to cover greater than expected utility expenses for state agencies and the university system.
•Cutting $286,500 for a bridge over the Clover Creek Wash at Caliente.
Some programs were spared the budget ax, including $1 million in homeless funding to local governments, including $600,000 to Clark County.
Assembly Speaker Barbara Buckley, D-Las Vegas, said, "It was very important to the Assembly not to further harm education or the health care division, which already have taken harsh cuts."
Senate Majority Leader Bill Raggio, R-Reno, said, "We really have taken some very heavy hits," adding that more cuts might be necessary in coming months if the economy does not start to recover.
Although pleased with their efforts, Budget Director Andrew Clinger warned that further cuts could be possible.
In a report to lawmakers meeting earlier in the day as the Interim Finance Committee, Clinger said few options are left if more cuts are needed.
Officials should know the state's fiscal status better by the end of May, he said.
"This problem could be worse -- to the tune of $20 million to $30 million worse," he said.
Meanwhile, unresolved issues remain concerning the budget savings projected by the Department of Corrections.
Buckley said the Interim Finance Committee still must give final agreement on plans to close the Southern Nevada Correctional Center in July and transfer the 500 inmates and prison staff to other prisons.
In January, Gibbons cut the state budget by $565 million, but a slumping economy required an additional $349 million in savings and cuts.
To balance what was originally a two-year, $6.8 billion budget, lawmakers agreed to drain the state's $267 million rainy day fund and cut more than $190 million from construction projects, primarily for the Nevada System of Higher Education and the Department of Corrections.
In addition, $60 million in new revenue, including additional interest income from the state's unclaimed property fund, was identified by Treasurer Kate Marshall.
Contact Review-Journal Capital Bureau chief Ed Vogel at firstname.lastname@example.org or 775- 687-3901. Contact Review-Journal Capital Bureau reporter Sean Whaley at email@example.com or 775- 687-3900.