Gibbons calls special session to deal with $330 million shortfall

Gov. Jim Gibbons said Tuesday he will call the Legislature into a special session Dec. 8-9 to pass laws needed to deal with a $330 million state budget shortfall.

After a two-hour, closed-door meeting, Gibbons said he and legislative leaders of both parties have reached a tentative agreement on a plan to handle the shortfall.

"The changes we are making are neither pretty or easy," he added.

The plan includes:

— Securing a $150 million line of credit from the Local Government Investment Pool. State Treasurer Kate Marshall first proposed this idea last week. State government would pay back this loan at an interest rate of about 2.5 percent.

— Sweeping out any money remaining in state budget accounts that is not needed for ongoing expenses.

— Cutting some state agency budgets by 1.5 percent for the January through June period. Education, health and human services, public safety and corrections would be spared from any cuts.

But Senate Majority Leader Steven Horsford, who attended the meeting by teleconference in Las Vegas, said a final agreement has not been reached, particularly on the budget cuts.

"This is a draft proposal," Horsford, D-Las Vegas, said. "There were several options that were considered, but not across-the-board cuts to agencies. There was some discussion about it."

Nonetheless, Horsford said the tentative plan includes items that will require legislative approval and he does not oppose the special session, as long as legislative staff has sufficient time to prepare for it.

Gibbons maintained the reductions would lead to layoffs of fewer than 100 state employees. Salaries of state employees and teachers would not be reduced.

"Businesses make these kinds of decisions every day," Gibbons said. "This is the first time in my lifetime that I remember state government having to do it."

Since January, Gibbons and legislators have cut state spending by $1.2 billion, including $275 million during a one-day special session in June.

Nevada state government operates under a $6.8 billion, two-year budget. The governor earlier said he expects that only $5.7 billion will be available during the next two-year budget period. State tax revenues have been declining for the first time in at least 30 years.

The changes he and legislators will make only will carry state government through the fiscal year that ends next June 30.

"I am trying to avoid tax increases at all costs," Gibbons said. "I think we can do it."

Not listed on their tentative agreement was a proposal to increase the room tax by 3 percentage points. Voters in Clark and Washoe counties backed the proposal in an advisory question on the election ballot.

A legislative analysis for the fiscal year 2006-07 found the tax would bring in about $130 million a year, all but $1.6 million, from lodging in Clark County.

State Budget Director Andrew Clinger said the administration now believes that state revenues will be $330 million short in the fiscal year budget that ends June 30.

Just last week he estimated the shortfall at $286 million. Since then, the Gibbons' administration has received updated figures showing a continued decline in sales and other taxes.

Clinger is concerned that the state Economic Forum, which meets Monday, could put the shortfall as high as $360 million. The forum is a group of five business leaders who by law determine how much tax revenue is available for state government to spend.

The estimates it makes Monday will be binding on legislators and the governor as they prepare the 2009-11 budget.

Following the Economic Forum meeting, Gibbons said he and legislative leaders again will discuss spending options and try to hammer out a final agreement that can be adopted at the special session.

He added he expects a two-day session will be necessary since newly elected legislators must be sworn into office by Supreme Court justices. Legislators elected during the Nov. 4 election will serve during the special session.

In the long term, Gibbons said he still hopes to save state worker jobs through voluntary pay reductions.

"I don't like to see people lose their jobs," he added.

His plan to cut pay, including his own, has been met with antipathy by employee unions. Gibbons earns $141,000 a year as governor.

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