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State leaders near agreement on $300 million in spending cuts

CARSON CITY — While refusing to give details, Gov. Jim Gibbons and legislative leaders said Thursday they have nearly reached an agreement on a plan to quickly cut state spending by $300 million and balance the state budget with few layoffs.

After a two-hour closed door meeting in the Capitol, Gibbons, Assembly Speaker Barbara Buckley and Senate Majority Leader Steven Horsford, both D-Las Vegas, declined to say what their proposed solution will entail until it is completed. They will meet again Tuesday.

"This is not a Republican or Democratic problem, a north or south problem, but a Nevada problem," Gibbons said. "We can work together and we are moving to reach a final solution in the shortest amount of time."

"With cooperation and consensus we will get this done together," Horsford added.

The governor did not rule out the possibility that he might have to call a special legislative session in December to pass into law some of the proposals being discussed.

Gibbons did admit lawmakers are looking at a borrowing suggestion from state Treasurer Kate Marshall, who said the state might secure a $150 million line of credit through the state’s local government investment pool.

The governor, however, said that plan must be reviewed by lawyers to determine if the state can borrow to meet current state expenses. Traditionally the state borrows only to finance construction, highway and other long-term projects.

In response to questions, Gibbons added there also might be legal problems if he and legislators held a special legislative session now to implement a 3 percentage point increase in room taxes. Voters in Clark and Washoe counties backed the room tax increase in an advisory question on Election Day.

This proposal would bring in about $120 million a year, but Gibbons said it might not be legal to implement the increase now. The question called for a July 1 date for the tax increase.

Gibbons also said lawmakers are not looking at new taxes, but considering removing tax exemptions.

Gibbons also appeared to suggest he and legislators are looking at diverting to the state existing taxes now going to local governments.

"It depends on how you structure it," Gibbons said. "Some (taxes under consideration) are not revenue going to the state."

Gibbons added there already have been state employee layoffs, but lawmakers are trying to minimize additional layoffs and to avoid salary reductions.

Earlier in the day, state Budget Director Andrew Clinger said the state needs to cut $309 million in spending by the end of the fiscal year on June 30 because of declining tax revenue.

But after a new analysis late Thursday, Clinger said the state is $286 million short of balancing the current fiscal year budget.

That is a major improvement from the administration’s estimate of a $358 million shortfall last week.

Clinger, however, said the deficit may climb again next week when the Taxation Department reports on new monthly sales tax collections and quarterly collections of payroll and other taxes.

Nevada state government operates under a two-year, $6.8 billion general fund budget.

So far this year, Gibbons and the Legislature have cut state spending by $1.2 billion because of declining tax revenue.

The governor said recently that he expects there only will be about $5.7 billion in revenue available when he and legislators begin working on a new two-year budget in February. The Legislature begins its 2009 session on Feb. 2.

The state Economic Forum meets on Dec. 1 and will make estimates of state tax revenue that the governor by law must use in creating his proposed state budget for 2009-11.

The forum is a group of five business leaders.

Gibbons announced Wednesday that he will deliver his State of the State address to the Legislature on Jan. 15, four days earlier than normal. That will allow legislators and others to attend the inauguration of President-elect Barack Obama.

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

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