Lawmakers face tough choices on state spending

CARSON CITY -- The mood is grim as the Legislature prepares for its biennial session.

The budget has a hole of historic proportions as the national economy continues its free fall. The Republican governor has proposed budget cuts that could mean slicing state universities' funding in half.

Democrats, with a new majority in the state Senate and a strengthened one in the Assembly, face the tricky task of trying to avoid drastic cuts without alienating a state that's leery of taxes.

Optimists think the dire times will bring the parties together and squelch partisanship and squabbling, but pessimists are forecasting the ugliest, most difficult legislative session in decades.

Assembly Speaker Barbara Buckley is one of the optimists.

"I get the sense that it's going to be a lot less contentious than people think," she said last week. "The crisis has brought people together."

Buckley said she and state Senate Majority Leader Steven Horsford, D-Las Vegas, have spent a lot of time with legislators on both sides of the aisle, business groups, nonprofits and other stakeholders, and are finding a shared desire to buckle down and get to work in the face of the most serious budget situation in Nevada's history.

The last legislative session resulted in a $6.8 billion general fund budget. But shortly after the session concluded in June 2007, it began to become apparent that the state wouldn't have that much to spend.

As Nevada's economy declined, gradually at first, the state took in less of the sales and gaming taxes the budget relies upon, forcing economic projections to be scaled back again and again.

Gov. Jim Gibbons twice called legislators into special session in Carson City to trim the budget, in June and December 2008.

By now, about $1.5 billion has been trimmed from that 2007 budget: projects put on hold, state accounts swept for loose change, the Rainy Day Fund emptied, taxes collected in advance, a line of credit taken out.

Now there are no gimmicks left, and the revenue picture is worse than ever. Current projections say $5.8 billion will be coming in over the course of the 2009-10 fiscal years. Gibbons' budget office calculates that if the state were to provide the level of services budgeted in 2007 -- taking into account inflation, population growth and the ongoing overhead costs of existing programs -- more than $8 billion in general fund spending would be required.

Nevada's budget process starts with the governor, who presents his proposed budget as a framework for legislators to work from when he gives the State of the State address in mid-January. Gibbons last month gave lawmakers a $6.2 billion budget that he described as requiring sacrifices, but avoiding truly devastating cuts.

Gibbons' budget would cut state workers' salaries, including teachers', by 6 percent and increase the amount they pay for health insurance. It would slash 36 percent from the 2007 higher education budget, meaning if the Board of Regents does not increase student tuition, UNLV and UNR would each have their state funding cut by about half.

The cut to K-12 education in Gibbons' plan comes to less than 3 percent from 2007 levels. However, school district officials have said that the actual damage is more because of increased costs.

Other proposed trims include cuts to Medicare and a cap on the number of low-income children who can enroll in the Nevada Check Up health insurance program.

Legislators of both parties, the public and interest groups from college students to the Chamber of Commerce disagree with Gibbons' contention that the cuts are not drastic. But the only way to increase the amount of money the state can spend is to take more from taxpayers, never a popular prospect in this fiscally conservative state.

Gibbons believes tax hikes would only deepen the economic pain Nevadans are feeling and hurt the state's already struggling businesses.

His budget proposal includes one major tax increase, a 3-point hike in hotel room taxes in Clark and Washoe counties, which voters in those counties approved in a November referendum. (Gibbons makes an exception to his no-new-taxes pledge for voter-approved levies.)

That's not enough for Gibbons' many critics. He has challenged them to put up or shut up and criticized Democratic leaders for not offering an alternative to his proposals.

Assembly Minority Leader Heidi Gansert, R-Reno, doesn't agree with all of his proposals, but she said the governor deserves credit for coming up with a plan in difficult circumstances.

"The Democrats have been very critical of the governor's budget, but it is a balanced budget," Gansert said. "Everyone is criticizing the budget, but they don't have solutions. I keep hearing, 'We can't do this. We can't do that.' What can we do? The governor's budget is the place to start."

Buckley and Horsford last week said they plan to build their budget alternative through two months of intensive legislative committee hearings that they say will create openness and transparency.

First they hope to set essential spending targets for major budget areas such as education, health care and public safety. If more revenue is needed to meet those goals, they say, they will first re-examine tax breaks currently on the books before looking for new tax money.

State Sen. Warren Hardy, R-Las Vegas, was not critical of the Democrats for refusing to propose their own budget alternatives until April.

"I think that is prudent and wise," Hardy said.

"We don't know what the economic stimulus package (from the federal government) will be or what the Economic Forum will do. The landscape could shift by then for the better, or for the worse."

Preliminary indications are that the $800-billion-plus bill working its way through the U.S. Congress would provide more than $1 billion directly to the state's coffers, some of it designated for education and other specific uses.

Gibbons, whose budget conservatively estimated just $108 million in help from Washington, has said such a cash influx would make some of his proposed cuts unnecessary, and legislators are counting on it.

Hardy agreed with the idea that serious times may make serious business the order of the day in Carson City, rather than the knock-down, drag-out battle the Legislature went through in passing the largest tax increase in state history in 2003.

"We had two special sessions that were fairly nonpartisan," he said. "There wasn't a lot of posturing. There was an effort to work together. This session is going to be like that. I think Steven (Horsford) and Senator (Bill) Raggio deserve a lot of credit for that. Both have done everything right about putting out a bipartisan spirit."

Horsford ascended to majority leader after two incumbent Republican state senators were defeated in the 2008 election, giving Democrats a 12-9 majority in the upper legislative house. However, to pass any tax increases, a two-thirds vote of at least 14 senators is required. If all the Senate Democrats are on board, they will still need two Republicans to join them. Democrats, with two-thirds of the state Assembly, wouldn't need Republican support there.

In addition, if Gibbons vetoes a bill containing a tax increase, as he has said he would do, a two-thirds vote would again be required to override the veto.

Moderate Republican state senators such as Raggio, Hardy and Randolph Townsend of Reno have not come out and said they favor taxes, but they have signaled they are open to all options and want to avoid Gibbons' proposed cuts.

"It was the governor's job to deliver a balanced budget. It is our job to take it forward and make some sense of it," Hardy said. "The higher education cuts are really not workable."

Even the normally staunch anti-tax Las Vegas Chamber of Commerce has declared an openness to unspecified new taxes on the condition that parts of its long-desired agenda of reforms to public employee benefits are enacted.

University of Nevada, Las Vegas political scientist David Damore said the devil will be in the details and he would not be surprised to see it get ugly.

"You have ambitious people (politicians) and strong partisanship, and a governor who doesn't have many allies," said Damore, who is a registered Democrat. "Everybody has their own little pet program. Everybody has a constituency that is going to want something. If there is a huge infusion of federal money, there will be a little more wiggle room," but the session will likely be a long, hard slog.

On the other hand, Reno-based Republican lobbyist Pete Ernaut, a former assemblyman, said he believes consensus has been building as the situation has been worsening.

"I might be the most optimistic person in Nevada, but I actually think there is going to be a very collegial tone between the parties and houses in the Legislature. There's no way you can cut enough to fix this problem, and there's no way you can raise enough taxes to fix this problem," so compromise will be the only way.

Ernaut said legislators will not have a lot of options.

"The universe of ideas is so small that it's not going to be a long fight," he said. "The smart legislators have come to grips with the depth of this problem (and seen) that it's a time for serious solutions and consensus-building."

State Sen. Bernice Mathews, D-Reno, said everybody is going to have to be prepared to give a little.

"When it comes to the bottom line, all of us are going to make compromises, big compromises. I think this session will go well. The people of the state are not going to stand for anything else. ... We are working to find a solution, and it is going to be a bipartisan solution."

Contact reporter Molly Ball at mball @reviewjournal.com or 702-387-2919.