Gov. Kenny Guinn has ordered state agencies to cut another 3 percent from the rest of their two-year budgets, even if it means layoffs.
Chief of Staff Marybel Batjer and Director of Administration Perry Comeaux laid out a shortfall by the end of fiscal 2003 that could exceed $275 million.
They said cutbacks, hiring freezes, program delays and other budget changes, including a major hit on the state's Rainy Day fund, can take care of all but about $40 million.
To balance the budget, Comeaux said the governor has asked general fund agencies "to reduce their budgets by the equivalent of 3 percent."
"That is going to produce around $40 million in budget savings," he said.
Batjer said agencies have three weeks to come up with a plan.
Asked if that could include layoffs, she said: "There might be."
"There will be changes in service delivery," she said. "We just can't meet all the needs when you don't have the money to do it."
Social programs providing services to the poor, disabled and others least able to care for themselves could be strongly affected because the services they provide are so staff driven, Batjer admitted.
In fact, she said, some of the long awaited improvements in human services -- key parts of Guinn's 2001-2002 budget plan -- will not happen until the state's revenue woes are solved.
"The state is in terrible shape," she said. "We are trying our best to sustain those programs that are priorities for the governor."
She said whether the cutbacks mean layoffs depends on the plans submitted by each agency.
"When the services you provide are just people, the fear is there may be some layoffs," she said.
The problem, she said, stems from damage done to Nevada's tourism economy by the terrorist attacks of Sept. 11. Since then, sales taxes and gaming revenues -- which are heavily dependent on tourist spending and comprise more than 85 percent of Nevada's general fund revenues -- have been far below the projections used to build the budget. In fact, sales taxes have been below projections every month since September except one.
Comeaux said they expect Nevada to get back on track, growing normally this fiscal year. But, he said, "We're starting that growth on a much lower base." He said even if the state's growth returns to normal, it would take monthly increases of 8 percent and more this fiscal year to erase the economic damage caused by the recession and Sept. 11.
"That's not going to happen," he said.
General fund revenues that fell $83.6 million below forecasts used to build the current budget in fiscal 2002 will be another $78.8 million low in fiscal 2003. Add to that another $45 million sales tax shortage in the money guaranteed to Nevada's public schools, and the shortfall is more than $207 million.
Comeaux said skyrocketing Medicaid costs -- in part also spurred by the economy -- will cost Nevada another $26 million and, because of the impact of cuts on existing state agencies, the budget's ending fund balance will be $42 million short of what was projected.
The grand total: $275 million must be cut from state general fund budgets between now and June 30, 2003.
Offsetting that, Comeaux said the state had several windfalls and savings last year totaling about $38 million, another $30 million generated by Treasurer Brian Krolicki and a $12 million reversion from money that was to help agencies with skyrocketing utility bills.
He said Guinn this past week "approved the elimination of one-time expenses in this biennium of $57 million." That, he said, included remodeling and expansions, a number of large maintenance projects and purchases such as new computers, vehicles and other equipment buys that can be delayed.
Altogether, the moves cut the shortfall to about $138 million. Guinn plans to hit the state's Rainy Day Fund for $100 million of that, which Comeaux said will leave about $35 million in the fund in case something else happens.
He said the remaining $38 million to $40 million shortfall must be covered by further cuts in the state's general fund agencies, including core government services, prisons and much of Human Resources.
The only good news is that a large portion of the state budget is unaffected by the general fund problems. Those agencies which depend on the highway fund, federal money and other sources of revenue like the Department of Transportation, Motor Vehicles, Highway Patrol and fee-supported agencies that charge for services are not in trouble. Their revenues are coming in much as projected.
Guinn has formed a Tax Task Force to develop long-term solutions to fix the general fund's vulnerability to economic swings and the fact that revenues aren't growing at the same pace as the demands for state services. The task force will make recommendations -- which are expected to include tax increases -- for Guinn to take to the 2003 Legislature in February.