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Can Southern Nevada governments act fast enough to avoid bankruptcy?

For the City of Las Vegas and most governmental bodies in Nevada (especially Southern Nevada) 2008 will have been the year elected officials either took the prudent road and cut spending in anticipation of the coming economic storm of 2009, or they did nothing and risked bankruptcy.

By all accounts, 2009 will be a very difficult year for the private sector and the public sector in Southern Nevada. The private sector has already tightened its belt, as anyone who reads the Las Vegas Review-Journal can see. Thousands of jobs have already been trimmed in the tourism industry, to name one. Employee benefits and other costs are getting hard looks from private sector management across the city. These are all difficult measures. But the private sector knows that if revenue dips, say, another 15% over the downturn of 2008, the whole franchise could be in trouble.

Good managers don’t stand by and do nothing and risk bankruptcy. They make the cuts now to give them the best shot at getting through 2009 and, perhaps, better times in 2010.

The public sector should have done the same months ago.

Now comes the city of Las Vegas telling department heads to prepare for a 5% cut in staff. And public employee unions are already resisting any bend in contracts.

Here’s the hard truth: Barring some enlightened leadership at the city and with public employee unions, public entities won’t have the time to spend on protracted negotiations to change union contracts. Revenue is dropping faster than our politicians can (or want) to move.

And here’s the second hard truth: A 5% trim in city workforce won’t be nearly enough. Cities will need to radically and quickly change union contracts to save money and increase efficiency, or cities will have to eliminate 10 to 15% of their workforces. Maybe more.

This is a Titanic-like economic downturn. It’s been so for more than a year and smart businesses have already made changes to negotiate the rough seas filled with icebergs. Government can successfully get through the storm. But politicians will have to act fast and resist baby-steps — like rearranging 5% of the deck chairs.

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