Sides say deal close on budget

Carson City -- Reaching across a vast political divide, Republican Gov. Jim Gibbons and Democratic legislative leaders said they hoped to agree today on a breakthrough deal that would fill an $887 million budget gap.

Under the developing plan, the special session would largely adopt Gibbons' initial proposal to balance the budget but restore at least $60 million for education and $50 million for social services.

The two sides remained at odds late Friday on exactly how to raise extra revenue to make up the difference, although new mining money was a sure thing. Democrats were balking at a couple of last-minute Republican ideas while gaming remained a holdout.

"You are absolutely wasting our time," Sen. Randolph Townsend, R-Reno, said after gaming and other business lobbyists told the Senate they couldn't bear additional taxes or fees. "You have to be at the table now. I live here. I love it here. I don't want to see it unravel."

Behind the scenes, legislative leaders were crafting a budget deal that didn't rely on major new revenue from casinos even as Senate Majority Leader Steven Horsford, D-Las Vegas, said he would persist.

"Thirty-million is three $10 million high rollers," Horsford said, referring to an annual new gaming revenue target that's part of the Democratic plan. "I'm challenging them to keep talking to me."

Most of the talk on Day 4 of the special session was behind closed doors with lawmakers trying to find a bipartisan path toward balancing the $6.9 billion, two-year budget through June 30, 2011.

"Republicans and Democrats need to work together and we need to put the state's needs first," said Assembly Speaker Barbara Buckley, D-Las Vegas, who is at the heart of two rounds of intense budget talks Friday in her office.

Horsford, who has shown past frustration with the governor's 'no new taxes or fees' mantra, sounded optimistic.

"It's the first sign we've seen that the governor is engaged," Horsford said after the second set of talks with Gibbons and the Democratic and Republican leaders in the Assembly and Senate.

Gibbons met with legislative leaders on Thursday and then twice on Friday for a total of more than six hours, holding out an olive branch after nearly four years of political warfare.

"We have some challenges and issues but we are working well together," Gibbons said late Friday. "There's still some hang-ups, but we're working our way through it."

The governor and lawmakers were scheduled to begin meeting at 8 a.m. today after a night of crunching budget figures.

The hang-ups centered on how to collect more revenues and how much to cut kindergarten through 12th grade and higher education spending.

Gibbons initially proposed cutting state spending on K-12 and higher education by 10 percent, but said on Friday he would be willing to accept a smaller cut. The Democrats were shooting for 5 percent, but have now said they're also willing to accept perhaps 7.5 percent. (Because public schools also receive local and federal funding, a 10 percent cut in state funding would reduce overall K-12 funding by more than 3 percent, and higher education funding by more than 4 percent.)

The difference in state spending levels for education would be large: a 10 percent cut would save about $250 million, a 7.5 percent cut nearly $190 million and a 5 percent cut only about $125 million.

Education is the only major spending issue left to resolve.

On the revenue side, the picture is more complicated.

The mining and banking industries will be tapped, while casinos might escape contributing any revenue after the industry balked at higher fees. The state also may get more revenue by aggressively scooping up uncollected taxes and through a tax amnesty program.

An angry Horsford publicly raked the gaming industry for refusing to go along with the proposal to raise $32 million a year by making casinos pay for Gaming Control Board regulation.

"How will you find your next generation of educated workers?" Horsford said in a fiery speech delivered before the Senate opened for business Friday. "How can your businesses grow if you have to look outside the state for college graduates?"

Horsford acknowledged that about half of all state government revenue comes from gaming taxes. But without the additional contribution from casinos, he said 800 teachers would be laid off.

Billy Vassiliadis, representing the Nevada Resort Association, said if the gaming industry had to pay $32 million in fees to cover regulatory costs, 1,000 workers would be laid off. That's in addition to 34,000 gaming workers who already have lost jobs since the onset of the recession and the industry's $6.7 billion loss in the past fiscal year.

"We believe the job of a Culinary worker or a dealer is just as important as any other job," Vassiliadis said.

The mining industry has agreed to pay an additional $100 million in revenue to the state general fund. Although Gibbons isn't fully on board yet, he's expected to agree in the end, sources said.

Tim Crowley, president of the Mining Association, said the industry will back a temporary $125 additional fee on mining claims, which raises $25 million, and prepay $20 million in mining taxes.

In addition, mining companies will pay $50 million to $60 million more in taxes than was anticipated when state government calculated tax revenue for all industries last May. That's because the price of gold has skyrocketed past $1,100 an ounce.

As for banks, lawmakers may increase foreclosure fees for lending institutions to raise another $30 million to $40 million.

Gibbons and other Republicans want the Democrats to consider two other potential revenue-raising ideas, but so far Democrats have said they're too risky and amount to borrowing against the future.

Under one GOP plan, $91 million could be raised by allowing private investors to tap into a revenue stream from the state's unclaimed property funds.

An additional $250 million could be raised by leasing state buildings to investors, who then pay rent on them for 20 years, after which the titles revert back to the state. Gibbons opposes the plan, proposed by Raggio who got the idea from Brian Sandoval, one of the governor's Republican election challengers. This idea appears all but dead, according to sources.

In the end, if Gibbons doesn't agree to a budget deal, Democrats in the Senate must get at least two Republicans to go along in order to gain the two-thirds vote needed to override the veto.

So far, Raggio and Townsend have been the two key swing votes, and a couple of other moderate Republicans might agree as well.

Other major pieces of the revenue plan may include:

■ $62 million in clean water fund revenue from Clark County.

■ $25 million donated to the state by the Clark County School District to reduce the number of teachers who would be laid off.

■ $12.5 million by reducing the number of contracts the state makes with private companies.

■ $8.5 million from increased fees that will be charged by Secretary of State Ross Miller to companies incorporating in Nevada.

Contact Laura Myers at lmyers@reviewjournal.com or 702-387-2919.