State revenue shortfall $881 million, lawmakers told

CARSON CITY — It's official. The state government revenue shortfall that legislators and the governor must eliminate through spending cuts later this month is $881 million.

State Budget Director Andrew Clinger said today that the shortfall has been formally calculated at $881.4 million, which would necessitate a 20.2 percent cut in state spending between March and June 30, 2011.

But Clinger said not all cuts can be implemented by March, which means even a higher percentage in cuts will be required to reach the required level.

He told members of the Legislature's Interim Finance Committee that the state will fall $707 million in the red by June 30, 2011, the end of the state's two-year budget period, if nothing is done. By law, Nevada's budget must be balanced, and also include at least a 5 percent reserve.

Gov. Jim Gibbons on Monday will deliver a televised speech in which he will outline his plans to cover the shortfall. At that time he will announce when he will convene the Legislature into a special session at which legislators will approve spending cuts. That special session is expected the week of Feb. 15.

Legislators so far have not said where they want to reduce spending. They are scheduled to meet with Gibbons' staff later today, when they will be given the governor's proposed list of cuts.

So far, Gibbons has announced publicly he will support no more than a 6 percent cut in state employee salaries, a 10 percent reduction in public education spending, and layoffs of 300 state employees. He also wants to temporarily suspend collective bargaining rights for school employees and to close the Nevada State Prison in Carson City.

During today's Interim Finance meeting, Jeremy Aguero, a principal for Applied Analysis, and Steve Holloway, of Associated General Contractors, expressed concern that further layoffs in the construction industry might result if local governments do not spend already collected revenue for building projects.

Aguero said $4.2 billion is available in Clark County for construction of schools, roads, sewer and water facilities and expansion of McCarran International Airport. Some of these funds come from voter-approved bond issues.

He said one construction job is lost for each $115,000 in revenue that remains unspent.

"Not using it could inhibit our ability to recover as a state," Aguero said.

There has been speculation that the state or local governments will take this construction money to cover their current operating deficits. Gibbons said earlier this week he would not seek to raid these funds.

"I am not looking to steal it," said state Sen. Randolph Townsend, R-Reno. "But why is $4 billion in available funding for construction projects not being used?"

Some of the funds will be spent in coming months as work continues on projects such as the new terminal at McCarran, Aguero said.

"We need to get these projects out to bid to private construction companies and create jobs," Holloway said.

Contact Capital Bureau Chief Ed Vogel at evogel@reviewjournal.com or 775-687-3901.