Agencies fear more cuts as shortfall grows

Educators and other agencies who already cut 4.5 percent from their budgets aired concerns Monday about the possibility of more cuts as revenue shortfall estimates neared $800 million.

The shortfall projected by mid-2009 would be four times what Gov. Jim Gibbons had originally expected. The shortfall had grown to more than $500 million mainly because of lagging sales tax and other revenue collections when the 4.5 percent cuts were imposed in January.

It's likely that Gibbons will soon look at more budget cut plans, and leaders of Nevada's K-12 public schools and university college systems are concerned because the January reductions are costing them nearly $151 million.

"With the first go-around, we pretty much exhausted all the easy-type cuts," said state public schools chief Keith Rheault. He added that more cuts could lead to reductions in staffing for athletics or other non-teaching programs.

Jim Rogers, chancellor of the state university-college system, said the system can't take more cuts because "at this point, we're standing on the ledge of absolute destruction and permanent injury."

"You can't close peoples' learning down," said Rogers. "The issue is much more fundamental than the amount of money. When are we going to stand up and do what's right?

Rogers favors a renewed push for a special legislative session to find new funding sources. That's something Gibbons, who ran on a no-new-taxes program in 2006, has repeatedly opposed. Senate Majority Leader Bill Raggio, R-Reno, has joined Gibbons in opposing a special session on taxes.

Howard Skolnik, director Nevada's prison system which had to reduce prison spending by $25 million under Gibbons' 4.5 percent cuts, said he hopes that a move to lease out the state's 500-bed prison in Jean will generate revenue that would help in the event of more cuts.

Without a viable lease in the coming fiscal year, Skolnik said a shutdown of some other institution "is the only way realistically to absorb additional reductions." He added that staffing cutbacks would create unsafe conditions for inmates and employees.

The state's Department of Health and Human Services had to cut about $82 million under the 4.5 percent plan, and Mike Willden, head of the big agency, stated Monday, "Certainly with additional cuts we would have to look at a possible reduction in present client services." He didn't elaborate.

In developing their shortfall projections, analysts for the governor and state lawmakers have tracked gloomy reports on major revenue sources, including a March 7 Gaming Control Board report showing a 5 percent drop in the casino win in January compared with the same month a year ago.

By the end of next week, a critical report on January sales is expected. The most recent sales report, showing a 1 percent decline in December, came out at the end of February. Taxes based on gambling and sales are the main state revenue sources.

Once the latest sales tax report is in hand, along with reports on the state's interest income and other revenue sources, Keickhefer said the shortfall projection will be finalized. As of Monday, he said Gibbons hadn't told agency directors to start planning for more cuts.

Besides gambling and sales taxes, an update at the end of February showed that insurance premium, real estate transfer and business taxes also are down.

In the July-December 2007 period, the insurance premium levy was down nearly 14 percent while the real estate transfer tax was down about 25 percent and the business tax was down about 9 percent compared with the same period a year earlier.

Despite the various reports, Gibbons has said he's hopeful that the state's economy will turn around. Economists say a new boom in Las Vegas megaresort construction could dramatically improve revenues starting in 2009.


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