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Raggio says Gibbons’ call for budget cuts premature

CARSON CITY — Senate Majority Leader Bill Raggio said Thursday that the governor should not immediately cut university, mental health and child welfare spending and wait for the Legislature’s consent before reducing state government agency budgets.

"In my opinion, this is not the time for bluster or political jabs or making partisan ink," said Raggio, R-Reno, long regarded as one of the state’s most powerful lawmakers. "We should work together to be both fiscally responsible and try to reduce, insofar as possible, the impact on important services and programs."

Assemblywoman Sheila Leslie, D-Reno, echoed Raggio’s view.

"It is too soon to be talking about cuts," Leslie said. "People are getting in a panic over these cuts. Everyone needs to calm down and wait."

It would be prudent to delay cuts until at least early December, when more information will be available on whether sales, gaming and other tax revenues are still declining, she said.

In response to revenue shortfalls, selected state agencies, including higher education, were asked by Gov. Jim Gibbons two weeks ago to prepare priority lists on how they would cut their budgets by 5 percent, or a combined $184 million. The lists must be submitted to the governor by Monday.

Gibbons exempted public education, the prison system and public safety agencies, such as the Nevada Highway Patrol, from any cuts.

Chancellor Jim Rogers earlier Thursday said the Higher Education System of Nevada should not have been asked by Gibbons to reduce spending by $64 million over the next two years.

Raggio agreed. He said the higher education system "is as important as K-12" and should not be required to make cuts at this time. Gibbons did not ask for any reductions in public education, or kindergarten through 12th grade spending.

The senator said mental health and child welfare programs also are "critical" and should be spared any cuts.

If Gibbons must cut, Raggio said he should look at delaying the start of educational empowerment programs and the expansion of full-day kindergarten.

He called on Gibbons to prepare a plan on cuts for the Legislature’s Interim Finance Committee to review at its Nov. 14 meeting.

"The Legislature should be willing to work with the executive branch to recommend temporary adjustments or reductions where it is deemed appropriate," Raggio said.

Melissa Subbotin, Gibbons’ press secretary, said the governor had not heard Raggio’s statements, but that he was looking forward to sitting down with him and other legislators to discuss the state’s economic problems.

A state report released Wednesday showed that taxable sales declined 5.7 percent in August compared with August 2006. It was the biggest monthly drop since September 2001, the month of the East Coast terrorists attacks.

Gaming and sales tax revenues for the first two months of the fiscal year that began in July, were off nearly $35 million from what was projected when the state’s two-year budget was approved in June. The two taxes made up 60 percent of the revenue going into the state’s $6.8 billion budget.

But Raggio said Thursday that legislative fiscal analysts believe the shortfall in sales tax revenue might not be as severe in coming months.

"I remain hopeful that revenues may improve and that it will not be necessary to cut anywhere near 5 percent," he said.

Although a state law directs him to comply with requests by the governor, Rogers has refused to prepare a cut list and railed against the governor’s move to cut higher education spending.

He said Thursday that Gibbons instead should make up the shortfall by tapping into the state’s $300 million rainy day fund.

"If your revenue starts to drop in business, the worst thing to do is cut the size of business," Rogers said. "If you have a saving account, you go into that saving account. We have $300 million in a savings account."

Andrew Clinger, the state budget director, said a state law prevents the use of the rainy day funds unless the revenue shortfall reaches $165 million by the end of the fiscal year, on June 30. He said that will not be known before September 2008.

To use rainy day funds, the governor and the Legislature would have to declare that a fiscal emergency exists, he added. Unless Gibbons calls a special session, the entire Legislature does not go into session until February 2009.

Clinger attributes the slump in state tax revenue to declining home sales, coupled with the drop in purchases of furniture and other goods homeowners would buy for new homes. It may be 2009 or 2010 before the residential housing market rebounds, he said.

Reports on real estate and business tax revenue will not be available before November, Clinger said.

However, he added that it is likely that there will be a big reduction in real estate sales tax revenue.

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

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