Awaiting the coming budget train wreck

Who says there's no plan in Carson City?

Yes, the Legislature's Democratic leaders have declared Republican Gov. Jim Gibbons' two-year budget dead on arrival. And yes, those same Democrats have offered no specific proposals of their own, even though the session is seven weeks from adjournment.

But lawmakers most definitely have a plan to come up with the new taxes and tax increases needed to cover their spending problem. It goes like this:

-- Continue bombarding the public with bogus numbers and made-up "deficits."

-- Keep holding hearings on trivial and insignificant legislation until May 1, when the nonpartisan Economic Forum provides lawmakers with a binding revenue estimate for 2009-11.

-- Fire up the coffee makers for a three-week, back-room, tax-hiking bonanza that gives the public and businesses no opportunity to remind lawmakers that Nevada's weakened economy can't afford the government it has now, let alone a bigger one.

-- Pass record tax increases and a fattened general fund budget by May 22, just before the Memorial Day holiday. Await Gibbons' anticipated veto.

-- Override the governor's veto, adjourn in the wee hours of June 2 and lament all the "Draconian cuts" enacted, even though the state's general fund will actually be larger than the current one.

Of course, Gov. Kenny Guinn had a plan back in 2003, and we all know how that turned out.

Guinn wholeheartedly supported record tax increases and put forth a slew of new revenue proposals before the session started. One special session led to another, as well as a disastrous intervention by the state Supreme Court. In the end, Guinn got the money he wanted, but not some of the specific taxes he suggested.

If you thought that summer of drama was a political train wreck, just wait until next month. Assembly Speaker Barbara Buckley and Senate Majority Leader Steven Horsford still have not identified an exact dollar figure for what the Democrats euphemistically call the state's "essential services." And of the more than 900 bills that have been rolling through Assembly and Senate committee hearings, only a handful involve tax revenues (the voter-supported hotel room tax hike and a freshly killed prostitution tax among them).

The Legislative Counsel Bureau, the legal and administrative arm of the Legislature, has no working documents on additional new taxes and tax increases, how much money they might bring into the treasury and what kind of economic and employment impacts they would have on the private sector. There is literally no formal documentation of any explicit idea to provide the kind of money Democrats have been clamoring for.

Here are the budget basics:

The Legislature passed a $6.8 billion, two-year general fund in the summer of 2007, before the economy began its free fall. Tax collections have come up about $1.5 billion short.

But by raiding savings accounts, borrowing and cutting "one-shot" expenses, lawmakers have been able to preserve about $6.3 billion of that spending plan, meaning the current general fund is still about 7 percent larger than the $5.9 billion budget passed in 2005.

In December, the Economic Forum projected the state's current tax structure, which relies heavily on sales and gaming taxes, would generate $5.7 billion over the 2009-11 biennium. Gibbons was required to build his budget off that figure. Including the hotel room tax increase and some federal stimulus funding, he proposed spending $6.2 billion.

It has been the position of some of the governor's staff and the Legislature's big-government boosters that this somehow constitutes a $1.8 billion "deficit" because state agencies would prefer to spend about $8 billion over the next two years. This figure, we're assured, represents what the state needs to "maintain current service levels" -- even though population growth, public school enrollment and college and university enrollment have leveled off.

The state's economic news has been getting worse by the week, with gaming bankruptcies, layoffs and tax revenue and home value declines. Everyone in Carson City is holding their breath until May 1, when the Economic Forum will provide the first crucial, firm number around which the Legislature can begin rebuilding a budget. Most people in the Capitol expect the panel to project a two-year revenue total of just more than $5 billion -- which would inflate the state's nonexistent "deficit" to $3 billion.

Using the word "deficit" allows lawmakers to imply that they have huge, unfunded obligations, and that even if the 2009-11 budget ends up growing to, say, $6.5 billion, they will have made $1.5 billion in "cuts."

Watching legislative hearings related to the budget is a maddening exercise in code-cracking. You have to track down multiple fiscal experts to determine whether lawmakers and state employees are talking about actual cuts from current spending levels, or cuts from the pumped-up amounts they say they need. Thus, what one politician or bureaucrat will decry as a 14 percent "cut" is really a 2 percent net spending increase.

And this whole budgetary mess is going to be resolved in three weeks, between May 1 and May 22?

The 2003 session sunk because Guinn never had the votes he needed -- two-thirds support from both the Assembly and Senate -- to get his budget and tax increases passed. That's not the case today. This time, the votes are there. Democrats have a 28-14 supermajority in the Assembly. Although their majority is only 12-9 in the Senate, Minority Leader Bill Raggio, R-Reno, and most of his current charges backed the 2003 tax hikes.

The political reality for 2009 is that big tax increases are coming. Buckley has admitted at least that much.

But Democrats need broader Republican support -- more than two votes in the Senate -- to allow them to label the tax and spending plan a "bipartisan" effort, which would provide them with a thin layer of protection in the 2010 campaign. The greedier the Democrats get this year, the greater the election risk next year.

The waiting game is nearly over. The numbers game is just getting started.

It's all part of the plan.

Glenn Cook (gcook@reviewjournal.com) is a Review-Journal editorial writer.