Sandoval positive about state budget

CARSON CITY -- An upbeat Gov.-elect Brian Sandoval spoke confidently Tuesday about balancing the 2011-13 state budget on existing taxes, though figures from the state budget director indicate it might require spending cuts of at least
16 percent.

"I am very optimistic," said Sandoval after a 90-minute closed-door meeting in the Capitol with state Budget Director Andrew Clinger, their first meeting since his election as governor.

"The numbers look very good in terms of our being able to cut. It is not going to be a one-size-fits-all (cut). This is going to be a thoughtful discussion, a thoughtful approach in balancing the budget," Sandoval said.

Gov. Jim Gibbons has invited Sandoval to help put the budget together.

Sandoval said he doesn't know how much of a spending cut is needed to balance the state budget. And he gave no indication where he will cut spending, or whether he will keep or expand the current furlough program that requires employees to take one unpaid day off per month.

But hours before meeting with the governor-elect, Clinger predicted the state will have to cut general fund spending by at least $1 billion if Sandoval intends to fulfill his goal of balancing the budget without increasing taxes.

Clinger expects state general fund tax revenues will be about $5.3 billion during the two-year budget period that begins July 1. On top of that, he anticipates about $70 million in unspent current revenue, or reversions, can be used to fund the next budget, bringing the total to about $5.4 billion.

But current general fund spending is about $6.4 billion.

Cutting slightly more than $1 billion would be equivalent of a 16 percent across-the-board cut to all state agencies.

Because nearly 55 percent of current state general fund spending goes for public schools, colleges and universities, an across-the-board cut would mean they would make do with
$550 million less -- $400 million less for public schools and $150 million less for the higher education system -- in the next two-year budget period.

Public schools now receive $2.6 billion in state support. and the higher education system receives $1 billion.

Such cuts wouldn't be easy.

Higher education officials already resisted Gibbons' recent request for a budget proposal with 10 percent cuts. On Sept. 1, the regents submitted a proposal calling for a slight increase in the
$1.6 billion budget to cover state-mandated raises. About 72 percent of that money would come from the state and 27 percent from tuition and fees from students.

They also warned they would need a
25 percent increase in state funding just to make up for the loss of almost $200 million in federal stimulus money used to plug a hole in the last budget.

And during the special session earlier this year, Clark County School District Superintendent Walt Rulffes warned legislators that more than 2,300 district teachers faced layoffs if the 10 percent reduction in state support then proposed by Gibbons was approved.

Put another way, cutting $1 billion from the general fund would be the equivalent of doing away with the Nevada Highway Patrol, the entire state prison system, all spending by agencies led by elected officials and all commerce and business agencies.

When one counts revenue from all sources, including federal grants and gas taxes, total state spending is about $18 billion. General fund revenues come from sales, gaming, business, insurance, mining and other taxes.

Sandoval was not buying the assumption that a minimum cut of 16 percent will be needed.

"I don't know if I agree with your 16 percent number," he told reporters about the amount derived from Clinger's figures. "Today was the first time I talked to the budget director. Clearly there are going to be reductions."

Some legislators, however, are projecting a revenue shortfall not of $1 billion, but $3 billion. That is based on the assumption that the state needs to spend $8 billion in general fund revenues if it is going to cover all existing expenditures, the loss of temporary tax increases, social service caseload growth and the end of furloughs and wage freezes.

Clinger noted that $600 million in federal stimulus funds plugged into the current total state budget no longer will be available.

Another $500 million in tax increases will expire June 30 unless reauthorized by the Legislature. The furlough program and salary freezes imposed by the current Legislature also will end unless reauthorized. The cost of ending furloughs and wage freezes would be about $460 million.

In addition, the budget director expects the state will spend $200 million more in the next two years to cover increases in the Medicaid caseload. Medicaid is the program to provide free health care to the poor, blind, handicapped and some of the elderly.

If these costs are added in, the shortfall would be $3 billion.

Senate Majority Leader Steven Horsford, D-Las Vegas, has said the state budget is $3 billion short, and it would take $1.5 billion in cuts and $1.5 billion in new revenue to balance the budget. He also has said he wants to see the actual budget proposal before he makes any comments on the need for additional tax increases.

During the campaign, Sandoval vowed to cut state spending back to the 2007 levels, noting that Nevada's population has dropped by 2.6 percent, or 71,000, people, and public school enrollment is up by only 3 percent since then.

But the budget approved in 2007 actually was $5.8 billion, or over $400 million more than the revenue expected to be available in the 2011 budget.

He said he discussed returning to 2007 spending levels during his meeting with Clinger.

Sandoval was accompanied to the meeting by his transition team of former Assembly Minority Leader Heidi Gansert, R-Reno, and Dale Erquiaga, a former Clark County School District and secretary of state official. Erquiaga said Sandoval will announce more of his appointments today .

The governor-elect said he has not yet spoken with Gibbons, whose term ends Jan. 3. He said he is working well with Steve Robinson, Gibbons' transition director.

Gibbons spokesman Dan Burns said Monday the governor wants a smooth transition and approves of Sandoval working with Clinger on the budget.

Burns added Gibbons was not welcomed when he took office from Gov. Kenny Guinn in 2007, and he wants Sandoval to be free from his interference.

"Ideologically the governor and governor-elect basically agree on issues and are not too far off in their views about the budget," Burns said.

Sandoval will be sworn in as governor and deliver the inaugural address outside of the Capitol on Jan. 3.

The new governor must submit his proposed budget to the Legislature on Jan. 24. Traditionally he would make his State of the State address on that evening, although he could decide to make it a few days earlier.

The 2011 legislative session will begin Feb. 7.

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