Gibbons asks for budget cut plans

CARSON CITY -- Gov. Jim Gibbons asked state agency heads Monday to propose ways to reduce spending by 5 percent a year if necessary because tax revenues have fallen below expectations.

Gibbons wants state agencies to prepare proposals that would trim $184 million out of the state's $6.8 billion two-year budget. State government last cut spending in 1999.

State Budget Director Andrew Clinger said after a Gibbons Cabinet meeting that there will be no layoffs or spending cuts at this point.

It appeared that the Nevada System of Higher Education and the Department of Health and Human Services, which handles the Medicaid program, would have to absorb most of the spending cuts.

Clinger emphasized that the administration wants suggestions on how to trim as much as $184 million, but it has not yet identified a specific figure on how much spending should be reduced.

He said he expects Gibbons will have an actual figure on what should be reduced during the week of Oct. 29.

A panel of state agency heads, including Clinger, then will look at spending reduction proposals and, with Gibbons, make the cuts.

Assembly Speaker Barbara Buckley, D-Las Vegas, said it is "a bit premature" for Gibbons actually to cut state spending. She said the state has only limited information about tax revenue declines for the fiscal year that began July 1 and it should wait before making drastic changes.

"You have to be prepared," she said. "But usually you have a little more data to go on. I presume he (Gibbons) will consult with the legislative leadership."

Buckley said a 5 percent cut could be dramatic for a small state agency. If the state cut mental health funds, then she said it only would throw more people on the streets and they ultimately would clog up the emergency rooms of hospitals.

The governor has exempted public education, the Department of Corrections and the Department of Public Safety from potential cuts.

The Department of Transportation and Department of Motor Vehicles also will not face any reductions. They are funded through highway taxes, not sales, gaming, real estate or other taxes that pay for general government programs.

The administration has requested the university system propose cuts of $64 million and Health and Human Services consider reductions of $96 million over the next two years.

"We can't do it," said university system Chancellor Jim Rogers. "I know if they don't have the money, they can't write the checks. But I don't see how we would be able to do it."

Rogers said the private sector has offered funds for some programs on the stipulation that the Legislature match its donations. If the system is forced to cut, then Rogers said it could lose donations.

Since the Health and Human Services Department is the largest in state government, agency spokesman Steve George said it is reasonable that it face the largest cuts.

He said staff members likely will look at reductions in the state Medicaid program, the free health care program for the poor, blind and disabled. The program serves about 200,000 Nevadans.

George said welfare grants will not be affected. The Temporary Assistance for Needy Families program would not be affected by any cuts since it receives only federal funds.

Clinger said spending cuts might be necessary because sales, gaming and other tax revenue is not meeting the expectations set by the state Economic Forum, a group of five business leaders.

The forum predicted in May that state revenue would increase by 5 percent during the current fiscal year and 6 percent during the next fiscal year. Its projections are binding on the governor and Legislature in creating the state budget.

But sales tax revenue in July alone was $10 million less than the Economic Forum estimated. Gaming revenue figures for August were down 4.4 percent from a year ago.

The Nevada Gaming Control Board reported gaming taxes from the first three months of the fiscal year were $15 million below estimates.

Lorne Malkiewich, administrator of the Legislative Counsel Bureau, said the administration at this point cannot use rainy day funds to cover the tax revenue decline. Under state law, revenue must fall at least 5 percent below projections, or the governor or Legislature declare an economic emergency, to use those funds. More than $300 million has been placed in the fund.

If an emergency were proclaimed, funds could not be released without convening the Legislature in a special session.

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