Revenue projected to plunge

CARSON CITY — With Nevada at least two years away from emerging from the worst recession in generations, the Economic Forum determined Friday that state government will have $580 million less in tax revenue to spend than what was put in the state budget last June.

Now Republican Gov. Jim Gibbons and a state Legislature dominated by Democrats must somehow put aside their differences and determine where they can cut spending during the remaining 17 months of the state’s two-year budget period.

The huge drop in tax revenue predicted by the forum, a group of five business leaders who by law determine how much the state can spend, guarantees Gibbons will call the Legislature back to Carson City for a special session, probably in February or early March.

“There are some difficult decisions ahead for the governor, the Legislature and the citizens of this state,” said Daniel Burns, Gibbons’ communications director. “Government will not be same. The governor expected this. Just drive down Sahara Avenue or Boulder Highway and see all the closed businesses.”

Burns refused to speculate on how Gibbons will propose balancing the budget, other than saying he will try to avoid laying off teachers, state employees and university faculty members. Details will come next week.

With salaries making up about 80 percent of state spending, Gibbons has no choice but to consider cutting pay as a way to avoid layoffs, he acknowledged.

Gibbons has reached out to legislators and wants their recommendations on what can be done to deal with the shortfall, he added. A Tuesday meeting with lawmakers has been scheduled.

State employee organization leaders and school officials said earlier that as many 3,000 employees might have to be laid off unless other ways were found to balance the state budget.

“We are going to have to work together to find ways to responsibly balance this budget,” said Senate Majority Leader Steven Horsford, D-Las Vegas. “We are going to have to find a way to protect vital services and education.”

Following a 10-hour meeting, legislative fiscal analyst Russell Guindon said the shortfall could be even higher than $580 million since the Economic Forum did not re-estimate all revenue sources.

Public schools by law directly receive a share of sales tax revenue, outside of what they receive from the Legislature, he pointed out. In better economic times, the Legislature has made up shortfalls in this source of education revenue.

Assembly Majority Leader John Oceguera, D-Las Vegas, said the shortfall could be closer to $900 million after everything is taken into consideration, including the rise in the number of poor people seeking free health care through Medicaid.

Oceguera expects the Legislature’s Interim Finance Committee will discuss the total shortfall in a Feb. 3 meeting and in subsequent meetings that will be scheduled next month.

He said lawmakers want to hear from anyone who can offer ideas on dealing with the problem. Some meetings will be held on Saturdays and during evenings.

Democratic leaders and Gibbons have engaged in verbal warfare for more than a year. Oceguera said he hopes the governor will work with them in a civil and nonpolitical manner.

“We need to focus on the immediate solution, not on his plans to further his re-election hopes,” he added.

Getting legislators and the governor to call a truce and work together may be difficult. Gibbons blamed Democratic legislators on Thursday for contributing to the shortfall, pointing out that, over his vetoes, they increased taxes by $1 billion.

Gibbons, however, did not veto a $200 million increase in room taxes, instead allowing the hike to go in effect without his signature.

The governor will set the agenda for the special session. Nothing he proposes can be approved without the support of a Legislature where Democrats control the Assembly by a 28-14 margin and the Senate 12-9.

In recent weeks, the administration had talked about the shortfall being about $450 million. Gibbons asked state agencies, schools and the university system to prepare lists showing how they would cut their spending by 10 percent between March and the end of June 2011.

Early in Friday’s meeting, state economist Bill Anderson said Nevada lost 118,000 jobs in 2009 and he expects that companies will cut out 90,000 more jobs in the next two years.

State Demographer Jeff Hardcastle added the state’s population — 2,711,000 last July 1 — could drop by 100,000 by 2015.

Anderson also said the state’s December unemployment rate of 13 percent could be even higher.

He said studies show the true unemployment may be 75 percent higher since many people have decided to quit looking for work and some people now working part-time want full-time jobs.

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

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