Reid tells Sandoval not to expect federal bailout

Gov. Brian Sandoval will have to solve Nevada's budget crisis himself, U.S. Sen. Harry Reid said Tuesday in delivering a tough message that the federal government won't come to the rescue.

Instead, the Democratic leader of the Senate suggested the new Republican governor should reconsider his campaign pledge not to raise taxes as he tries to fill a two-year budget gap of at least $1 billion.

"I think most of the solutions for state government will have to come from state government," Reid said.

His comments came during a Las Vegas news conference in which he laid out his legislative agenda for Nevada. It didn't include another round of U.S. stimulus funding, which propped up state government with $2.8 billion in the past two years.

In November, Sandoval visited Reid in Washington to seek federal help to pay for a growing Medicaid caseload in Nevada and unemployment benefits that have been extended to 99 weeks. The request came before Sandoval took office and as he sought ways to cut future spending with only $5.3 billion in revenues expected over the next two fiscal years.

Reid said that if it were up to him and his Democratic caucus, he "would get it done fairly easily," but he doubted Republicans who opposed the stimulus spending before would go along with more special U.S. aid to states.

"I personally am in favor of doing something to help with the Medicaid problems," Reid said in response to a question about whether he would grant Sandoval's request. "I'm personally in favor of helping in any way I can ... but I need the votes to do that."

Reid's reluctance to step in and help Sandoval balance the state budget is part of a larger political tug-of-war between Democrats and Republicans at the state and national levels. Most GOP governors, who now lead 29 states, are stuck in the same position as Sandoval, trying to deal with budget shortfalls while keeping promises not to tax people more.

"Reid has political reasons to help Sandoval out, but he's also got to force the Republicans to kind of hurt themselves," said Dave Damore, a political science professor at the University of Nevada, Las Vegas. "They're going to force the Republican governors to go to (President Barack) Obama and ask for help. They'll probably get some sort of patch" for the budget later in the year.

Reid suggested Sandoval might need to generate more revenue despite his no- new-taxes pledge.

"I think people better step back from their pre-election statements and realize that things have changed and we're going to have to work to get things done," Reid said, without mentioning Sandoval by name.

Asked whether he was calling on Sandoval to back off his no-tax pledge, Reid smiled and said, "I answered the question."

Reid praised Sandoval, noting he helped get the Republican appointed a federal judge. Sandoval resigned from the job to run for governor against Reid's son, Rory, a Democrat who promised no new taxes during the campaign.

"I think that Brian Sandoval has the capacity to be a good governor," Reid said. "I like him very much. He's a fine leader. And I know he wants to do that right thing. But wanting to do the right thing and doing the right thing are two different points."

Sandoval's office said he had no comment on Reid's remarks.

The new governor has sent his proposed 2011-13 budget plan to the printer. He is scheduled to reveal its details on Monday during his first State of the State address to lawmakers in Carson City. It comes two weeks before the Nevada Legislature starts meeting for 120 days to consider the budget and other matters.

Democratic leaders, who control both houses in the Legislature, have said they do not see how the state can balance its budget without new revenues unless the government guts programs and does not spend enough to improve the education system They see a potential budget deficit of up to $2.7 billion if services are maintained with some improvements.

Sandoval has said he can cut spending by consolidating government programs, allowing the university system to raise its own tuition and fees, and shifting more responsibility for social services onto cities and counties.

More difficult to control is the Medicaid health care program for the poor. It costs the state nearly $500 million a year, and that is expected to increase $100 million a year as more people qualify for the program. Under the formula, 64 percent of Medicaid costs are paid for by the federal government, but that rate is scheduled to fall to about 55 percent.

Now, more than 276,000 Nevadans get Medicaid. That number is expected to reach 311,000 by June 30, 2013.

On unemployment benefits, Nevada has borrowed more than $500 million from the U.S. Department of Labor. The state expects to increase that debt to $825 million by the end of 2011 as it suffers the worst jobless rate in the nation at 14.3 percent. Sandoval had been hoping the federal government would forgive or postpone interest charges on the debt of $105 million over two years.

Most states are having similar problems as the nation starts to recover from three years of recession. But at the federal level, there is a move to trim spending and reduce the nation's record debt.

U.S. Sen. John Ensign, R-Nev., said he, like Reid, wouldn't support more federal aid to states. But he backed Sandoval in holding to his promise not to raise taxes.

"Washington can't afford to continue borrowing from foreign governments to bail out the states," Ensign said in a statement. "Nevada is going to crawl out of this economic downturn by remaining a business-friendly state, and for this reason I support Governor Sandoval's pledge to not raise taxes. I wish that Washington had the courage to make the hard decisions that Nevada is forced to make to balance its budget."

Other members of Nevada's congressional delegation did not respond to requests for comment, including Reps. Shelley Berkley, D-Nev., Dean Heller, R-Nev., and Joe Heck, R-Nev.

Reid, at his news conference, said his legislative priorities for Nevada are all aimed at making the state more competitive. He said he wanted to create more high-paying clean energy jobs in the state, improve the education system to train a stronger work force, modernize the transportation system and invest in small businesses .

"We need to help small business to compete," Reid said, speaking inside a solar panel warehouse for Bombard Electric, a company that has been involved in dozens of projects in the state. He said that 85 percent of the nation's jobs come from small companies such as Bombard. "We have to do more to create small-business opportunities," he said.

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