Gov. Kenny Guinn says he will build whatever tax increases he decides are necessary into his proposed 2004-05 budget.
Until recently, Guinn has talked about building two budgets: one based on current taxes and revenues, including the cuts necessary to make that plan balance, and one that would include revenue increases needed to maintain or expand state services.
He says now, however, the "existing revenues" budget would simply force too many cuts, chopping vital services throughout state government to an unacceptable point.
He said he is convinced his administration has shown voters a strong effort to make state government more efficient and reduce costs by eliminating waste.
He and other finance experts have said repeatedly that Nevada's phenomenal growth through the 1990s masked serious structural problems in its tax system. With the economy slumping and the impact of 9/11, those problems are now responsible for a budget shortfall expected to reach $370 million by the end of this fiscal year.
And those experts say the problem won't just go away.
Guinn said he and his staff will present lawmakers with a two year budget proposal that includes not only spending for needed services but how and where to get the necessary revenue.
He made it clear that the size of the tax increases he will recommend and the needs of state government are tied together in the process of building that budget.
"You're going to have to build this budget on increased revenue," he said. "Otherwise, how do you take a growing state, not get any new money and still balance your budget?"
Guinn pointed out that his first year in office, the surplus was more than $500 million and in 2000 it was $478 million.
But the amount of new money had dropped to $278 million in 2001, he said, and "this year, we're looking at zero or maybe even a shortfall."
Guinn said everything that can be done to stretch existing funds has been done while rising costs such as health benefits and utilities are increasing demands for funding.
"That flexibility is gone and we can't get it back," he said.
Guinn, who returns to Carson City Monday after two weeks off following prostate surgery, said that means skipping the parallel "existing revenue" budget and building a realistic spending plan which includes some new revenue.