CARSON CITY — Concerned Nevada’s economy is getting even worse, Gov. Jim Gibbons announced Tuesday that he wants state agency directors to prepare lists showing how they would reduce their spending by as much as 10 percent beginning in March.
Just two weeks ago, Gibbons asked all state agency heads to develop two lists, one showing how they would reduce spending by 1.4 percent, the other by 3 percent. Now he wants lists showing how they would make 6 percent, 8 percent and 10 percent cuts. And he asked agencies to prepare to implement at least some cuts in March.
“We may decide some agencies don’t need or cannot make various level adjustments and others can make those or even greater reductions,” Gibbons said. “It is critically important that the state of Nevada live within its means.”
But Democratic leaders say it’s premature for the governor or them to consider such large cuts.
They say fiscal analysts predicted that tax revenue would be down in the summer period, so the decline is not unexpected.
“What is he going to do? Lay off teachers?” asked Senate Majority Leader Steven Horsford, D-Las Vegas. “We knew these would be the worst months. We need additional information before we make any cuts.”
A state budget office report released by Gibbons shows the shortfall in tax revenue for the July through September period was not $50 million as estimated last week, but $67 million.
Every source of state taxes, except real estate taxes, has declined from the same period in 2008, according to the budget report.
Real estate taxes were up just 0.2 percent from a year ago after plunging dramatically during the two previous years.
But Assembly Majority Leader John Oceguera, D-Las Vegas, added legislative fiscal analysts expect revenue will improve in 2010, which might eliminate the need for state agency budget cuts. Oceguera added tax receipts for the summer quarter were only 1.7 percent down from legislative projections.
He praised Gibbons for planning for possible reductions if state tax revenues continue to fall. But he added the governor was “causing panic” among state employees by presenting such a bleak picture.
“As the leader, he needs to be as positive as he can,” Oceguera said.
Sen. Bob Coffin, D-Las Vegas, says there is a political motive behind Gibbons’ request.
The governor realizes he trails former U.S. District Judge Brian Sandoval in the Republican primary and his talk about spending reductions and no new taxes will play well with his Republican constituency, according to Coffin.
Higher Education System of Nevada Chancellor Daniel Klaich does not see how he could reduce spending by $40 million to $65 million, as contemplated by Gibbons’ request.
“I am still kind of reeling from those numbers,” Klaich said. “We already have a stressed budget. The effects of this on higher education would be extremely unpleasant.”
Klaich told Gibbons last week he could not cut higher education spending even by 3 percent because professors have approved contracts and students have signed up for next semester’s classes. Student tuition has been increased by 20 percent over two years.
Some of the spending proposals under review by Gibbons would require legislative approval and force him to call the Legislature into a special session before March. The next regular session of the Legislature is in February 2011.
A 6 percent spending reduction, if implemented in March, would reduce state government expenditures by $261 million between then and the end of the two-year budget period on June 30, 2011.
An 8 percent spending reduction would come to $350 million; a 10 percent reduction, $436 million.
Gibbons wants state agencies to report by Jan. 5 on how they would make these reductions.
He also wants the Economic Forum — the group of five business leaders that by law determines how much tax revenue will be available for the state to spend — to come up with a new forecast of tax revenue by Jan. 19.
He added state government must reduce spending and not raise taxes because tax hikes would be a burden on business owners and force more layoffs.
But Gibbons said any reductions will affect Nevada’s ability to provide services.
“The choice may get down to whether we can afford to keep the wait time in DMV lines 30 minutes,” Gibbons said. “It might have to be 90 minutes or an hour.”
Gibbons sent an e-mail message to every state employee Tuesday seeking their ideas on how to reduce spending.
Among other things, he asked whether the employees would consider a four-day work week, a pay decrease or more furloughs.
They also were asked to identify wasteful spending. Gibbons even asked whether they favor some kind of state charge on a proposed garbage dump near Winnemucca that would take waste from San Francisco and other Northern California cities.
Any idea furnished by employees will be considered, Gibbons said.
“People down in the trenches make day to day decisions,” Gibbons said. “They know where savings can be accomplished.”
Contact Review-Journal Capital Bureau reporter Ed Vogel at firstname.lastname@example.org or 775-687-3901.