CARSON CITY — Anticipating a significant strain on state budgets caused by the new coronavirus, Gov. Steve Sisolak is telling state agencies to start planning for cuts that could total nearly $700 million over the next two years.
In a memo sent Friday to state agency directors and administrators obtained by the Review-Journal, the Governor’s Office of Finance said that due to an “expected decline in revenues,” the governor is considering a recommendation for departments to cut up to 4 percent of their budgets for fiscal year 2020, and between 6 and 14 percent for the fiscal year 2021 budgets.
Those proposed cuts could total up to roughly $687 million over the two-year budget, according to a spreadsheet of the reductions posted on the state website Friday.
The memo noted that the recommended amounts, which aren’t finalized, could change depending on the severity of the economic disruption caused by COVID-19.
In a separate letter sent to agency heads, Sisolak wrote that the “the unimaginable has happened, and the magnitude of the COVID-19 public health crisis could not have been anticipated.”
“I wish we weren’t facing the reality of this crisis, and I wish I didn’t have to write this letter. However, as all Nevadans — including family households, small businesses, and even our largest employers — are looking at their finances and budgets differently right now, so should the state of Nevada,” Sisolak wrote. “All Nevadans will be making cuts to their budgets, and we need to as well.”
In his letter, Sisolak said that he and his staff will be “surgical and thoughtful in our approach to this problem” and that while there are targeted percentages, there won’t be a strict percentage cut across the board for all state budgets.
Sisolak also said that the state will not cut the budgets of any agency that provides “necessary resources for those on the front lines of the COVID-19 response.”
“We must prioritize our resources so that we can effectively address, mitigate, and resolve this crisis as soon as possible and return to social and economic normalcy. We cannot accomplish this mandate if we cut the vital areas needed to execute an effective COVID-19 response,” Sisolak’s letter reads.
The letters come two weeks after Sisolak ordered a closure of casinos and all nonessential businesses in the state in an attempt to curtail the spread of the virus.
Those closures carry with them significant economic consequences for the state. Sales and gambling taxes combined account for more than 46 percent of Nevada’s general fund income, according to the Guinn Center.
With Nevada’s economy heavily reliant on gaming and tourism, the state’s economy and job market are expected to be among the hardest hit in the nation.
An analysis released this week by IHS Markit said that Nevada will experience the highest rate of jobs lost due to economic strain caused by COVID-19, with employment predicted to drop 9.8 percent by the end of the year.
Those economic impacts will trickle down to local governments, as well. Las Vegas City Manager Scott Adams said last week that the city could be facing a budget deficit as high as $100 million in its $600 million general fund budget.