CARSON CITY -- In a grim State of the State address, Gov. Jim Gibbons Thursday pitched his budget not as a set of drastic cuts, but as the state's only route back to prosperity, which he said could not be achieved through higher taxes.
"As governor, I must, first and foremost, look at the economic situation of our people in order to determine that our state government does not pile on and make our citizens' problems worse," Gibbons said. "Nevada government should meet the needs of the people; people should not meet the needs of Nevada government."
The Republican governor's biennial address, delivered in the Assembly chambers in the state Capitol, sought to explain the difficult choices presented in his two-year budget, also unveiled Thursday.
The budget relies on a mix of massive cuts, especially to higher education, and new sources of revenue, including a tax increase on hotel rooms, to cope with a huge drop in state coffers.
The cuts will be painful and controversial. But they are necessary, Gibbons said, to avoid higher taxes that would burden the population.
"Many of Nevada's families and businesses are being stretched to their breaking point and making remarkable sacrifices in the face of the most difficult economic downturn of our lifetimes," Gibbons said. "Ladies and gentlemen, I will not ask these businesses and individuals to pay more when they have less."
In a 55-minute speech heavy on anti-tax themes, Gibbons did not mention the $292 million tax increase contained in the budget. He made only a passing allusion to the tax money he would redirect from Clark and Washoe counties to help the state meet its obligations.
While defending the cuts in the budget, which Gibbons incorrectly described as $2.2 billion lower than his previous budget, the governor emphasized the state services that will be sustained. (The budget is $2.4 billion less than the amount that would have been required to maintain current service levels, but only $633 million less than the budget Gibbons signed in 2007.)
Gibbons stressed that the budget he is presenting protects property tax rebates for seniors, juvenile justice and child welfare programs, the Millennium Scholarship, and all-day kindergarten in at-risk schools.
The amount cut from the state's higher education system -- $473 million, including salaries and benefits -- "will bring challenges to the system," Gibbons said. But 14 percent of the state's budget still would go to higher education under his proposal, he said, while the national average is 11 percent.
Democrats who control the state Legislature reacted angrily to Gibbons' proposals and vowed to chart a different course to craft a final state budget during the legislative session that begins Feb. 2.
In her televised response to Gibbons' speech, Assembly Speaker Barbara Buckley, D-Las Vegas, called the proposed cuts "drastic."
In an economy like today's, she said, "We must focus on preserving our state's services that are truly necessary."
Buckley said Gibbons is talking about cutting per-pupil spending for grade-school students by 7 percent; potentially cutting money to the state's two major universities, UNLV and UNR, by half; cutting retired teachers off health insurance; and eliminating the state office that fights the proposed nuclear waste repository at Yucca Mountain.
Not all those changes were specified in the budget information released by Gibbons Thursday; lawmakers said the figures came from the Legislature's fiscal analysts.
"Is this the direction we want to go as a state?" Buckley asked. "... Does it make sense to cut education further? Does it make sense to close the doors of opportunity for our children to attend our universities? Do we want to overcrowd our emergency rooms with the mentally ill again because we shut mental health clinics?"
Most legislative observers take for granted that the Legislature will refuse to go along with most of the cuts the governor proposed and will, in the end, look for new tax revenue to support a bigger budget.
Buckley, who is thought to be a potential gubernatorial contender in 2010, didn't go into specifics of how she would prevent "Draconian cuts to education and public safety," but she said legislators now will begin "a thorough, detailed review" of Gibbons' proposals and come up with better ideas.
Gibbons' speech Thursday gave a rundown of the stark realities that led to this situation. Tourism has declined as people have cut back discretionary spending. The credit crisis has halted construction projects. Mining of copper and other materials has even declined, Gibbons claimed, though he did not mention that the price of gold, the No. 1 product of Nevada mines, has climbed.
Unemployment in Nevada, once lower than the rest of the country, has doubled in the last year and is now above the national average. Last year, 42,000 Nevadans lost jobs, while others lost wages, hours and benefits.
Buckley and others say the fiscal crisis the recession has created for the state proves that the whole tax structure Nevada relies on -- which includes no across-the-board individual or business income taxes -- needs to be overhauled to provide more stability.
Gibbons explicitly rejected that argument.
"Our existing tax system brought us record job growth and prosperity for decades," he said. "And quite frankly, I have yet to see an example of any state that has a tax system that brings growth during good times and remains stable during downturns."
Gibbons' main argument against tax reform was that any new taxes would hurt the already wounded economy further.
In explaining his proposed 6 percent cut in state salaries, Gibbons said it was a way to avoid "massive layoffs." Budget Director Andrew Clinger said earlier that without the cut, 9,000 to 11,000 state workers might have been let go.
Gibbons noted that he is taking the same salary cut and promised to restore salary levels when possible.
In addition to the Spending and Government Efficiency, or SAGE, Commission that Gibbons created to recommend ways to trim state government, he said he will propose a permanent Sunset Commission to continually examine the use of government funds.
The governor noted that the state has faced "major economic challenges" in the past, though the examples he cited would be little comfort to anyone born since the 1930s.
"Nevada faced worse problems during the mining depression of the 1880s and '90s and during the Great Depression," Gibbons said.
During his speech, it was mostly Republican lawmakers who applauded. The Assembly Republicans, who make up just 14 of the lower chamber's 42 members, issued a statement saying they "appreciate that the Governor was able to develop a balanced budget in these very difficult times for our state."
Senate Majority Leader Steven Horsford, D-Las Vegas, said it was "unfathomable" that Gibbons is proposing such extreme higher education cuts.
In a news conference following the State of the State address, Horsford and Buckley said legislators did not plan to abide by much of the governor's proposed financial framework.
"Mark my words, there will be significant changes," Buckley said.
Legislators will begin next Thursday to review Gibbons' budget proposals and set spending priorities. Buckley said they hope by May 1 to have determined where changes can be made and how much revenue Nevada needs.
Gibbons, in a news conference later, disputed Democrats' claim that his budget would eliminate the state agency devoted to fighting Yucca Mountain. Though its staff would be reduced to two and transferred into Gibbons' office in the Capitol, the Nuclear Projects Agency would still get $6.9 million per year, Gibbons said.
Asked why he is backing the room tax increase when he says taxes hurt the economy, Gibbons said he was following the wishes of the people of Clark and Washoe counties, who approved such an increase in an advisory question on the November election ballot.
Senate Minority Leader Bill Raggio, R-Reno, the state's longest-serving lawmaker and a longtime advocate of the state's higher education system, did not attend the State of the State as his wife was undergoing surgery in Las Vegas.
"I am not committing to any of these deep cuts," said Raggio, who watched the speech on television. "The salary cuts will be difficult to get any support for."