Agencies told to plan cuts

CARSON CITY -- If state officials thought this year's budget cuts hurt, they got an inkling Wednesday they ain't seen nothing yet.

Gov. Jim Gibbons told heads of state agencies to come up with ways to cut as much as 14 percent from anticipated budget levels for 2009-2011, cuts that officials said might make layoffs and program shutdowns unavoidable.

Budget Director Andrew Clinger said agencies will have until July 1 to craft budgets for the state's upcoming two-year spending plan using $600 million a year less than they had expected to receive.

Once the bare-bones budget is assembled, Gibbons and lawmakers can begin to build on that, adding back any projected tax revenue growth to pay for more school students, Medicaid recipients or inmates, Clinger said.

The new budget will begin July 1, 2009, a little more than 13 months from now.

Clinger said he expects the state will ultimately have about $7 billion to spend on the next budget, depending on revenue projections set by the Economic Forum on Dec. 1. That's up from about $6.8 billion originally approved for the current budget, or a 3 percent increase.

State spending, however, normally increases 15 percent to 20 percent from one budget cycle to the next to keep pace with demands for services in a rapidly growing state. Growth continues, but the planning is needed in case the revenue isn't there to pay for expanded services.

Assembly Speaker Barbara Buckley, D-Las Vegas, said budget cuts of the size proposed by Gibbons are simply impossible to implement.

"If we were to cut across the board 14 percent then medication clinics for the mentally ill would close," she said. "School districts would probably have to reduce teacher pay and increase class sizes or eliminate arts or sports."

Buckley asked Gibbons what alternatives he was considering to fill the budget gap at a briefing last week, but "didn't get a good answer," she said.

The Assembly speaker said she has met with the Nevada State Teachers Association and gaming industry representatives to see whether an agreement can be reached on new tax revenues to avoid such cuts. This would be in exchange for teachers abandoning a proposed gaming tax increase ballot measure, she said.

An advisory question could be put on the ballot to get around the governor's no-new-taxes pledge.

"The situation is dire," Buckley said. "A significant portion of our budget goes to education, health care and prisons. These are not areas we can cut in a fast-growing state."

In a memo sent late Wednesday to Nevada public school leaders, state Superintendent of Schools Keith Rheault said the targeted amount for K-12 reductions is $188.7 million each year of the biennium.

"It would equal a reduction of $434.89 for each of the 433,885 students currently enrolled in Nevada this school year," Rheault said.

Clark County School District Superintendent Walt Rulffes said such reductions in future budgets would "wreak havoc" on local schools, forcing the kind of extreme measures that so far have been avoided.

"We might have to contemplate asking the Legislature to reduce the school year," Rulffes said. "That would reduce our costs for transportation, food services, custodial services and salary. With cuts of this magnitude, there's no easy answer."

Increasing class sizes is the convenient way to save millions of dollars, but it's not something Rulffes wants to do. Local public school classes are already considered too large, Rulffes said. And increasing class sizes won't produce higher student achievement.

As the state's financial situation worsens, Rulffes said he's thought about going to principals and asking them to present teachers with a question: Would they rather forgo their annual cost of living increases or deal with increased class sizes?

"In the context of these kinds of cuts, those are the questions we're going to have to ask," Rulffes said. "We're already a district struggling with conditions that we have no control over."

Ben Kieckhefer, spokesman for Gibbons, said the smaller budgets will provide "what if" scenarios to use in preparing a final budget for the next biennium.

"What we receive back is not necessarily what we are going to base our budget around," he said. "But it is a guideline we can use. ... We have to have them on the table to know what the dollar figures are."

Clinger said Gibbons and lawmakers may not choose to impose the 14 percent cuts across the board. But the information provided by agencies will be used to weigh which programs should be saved, which may receive some of the anticipated increased revenue and which should get the ax.

There were no numbers Wednesday on what such cuts could mean for programs or state employment levels. But the target numbers will be daunting for every agency and program.

The Department of Health and Human Services, which includes Medicaid, must cut $151 million a year from anticipated budget levels.

The Department of Corrections will have to slice nearly $42 million a year.

The Nevada System of Higher Education will have to reduce spending by nearly $97 million a year.

University system Executive Vice Chancellor Dan Klaich said the cuts were "breathtaking in their amount." They "signaled a much deeper and more permanent cut in all services in the State of Nevada, including education," he said.

The cuts would directly affect the higher education system's ability to deliver education to students, he said. "I can't imagine making cuts of this size without making significant cuts in staff, programs and potentially campuses," he said.

The higher education system would have only 45 days to implement cuts in staffing for the 2009-10 fiscal year. Faculty must be given notice one year in advance if their contract won't be renewed, according to Klaich.

Clinger said the governor's no-new-taxes pledge makes any budget decision a zero-sum game. If money is added to pay for or expand one program, it will have to be taken from someplace else.

The 4.5 percent cuts implemented by Gibbons for the current budget trimmed a small amount off of virtually all programs, Clinger said. This time around, the reductions will more likely eliminate entire programs in some cases, he said.

"I think that is what you are going to be down to in a scenario like this," Clinger said.

Review-Journal writers Lawrence Mower and Lisa Kim Bach, and The Associated Press contributed to this report.