State of the State: Gov. Brian Sandoval calls for $1.1 billion in additional revenue

Gov. Brian Sandoval on Thursday laid out a $7.3 billion General Fund budget that includes more than $1 billion in new revenues and extensions to the existing temporary increases balancing the current budget.

Chief of Staff Mike Willden told reporters before the State of the State speech the plan includes a $352 million increase in the Distributive School Account during the biennium.

When all the other K-12 funds are added together, the total is $3.48 billion in proposed education funding, an increase of $782 million over the current budget.

Sandoval said in both his inaugural address a week ago and in Thursday night’s speech his second term will be dedicated to improving education in the Silver State.

“I am therefore proposing a broad-based solution that asks Nevada business to invest in our education system,” Sandoval said.

To pay for the education increases, Sandoval asked the legislature to permanently extend the temporary “sunset” taxes first approved by the 2009 Legislature. Those taxes — set to expire June 30 — include higher payroll taxes, a 0.35 percentage point sales tax increase and a $100 annual increase in the business license fee. That would raise an estimated $580 million over the next two years.

In addition to extending those sunsetted taxes and revenue diversions worth nearly $600 million, Sandoval proposed converting the existing Business License Fee of $200-a-year per business entity to a tiered system that would charge more depending on the size and gross receipts a business makes. Altogether, that would generate more than $430 million to pump up state revenues.

Combined with increases in what mining companies pay in Modified business Taxes, making the largest slot route operators pay significantly more and increasing the cigarette tax from 80 cents to $1.20 per pack. Sandoval’s plan would generate more than $500 million more for a total of about $1.1 billion in added revenue.

With the $6.6 billion in revenues projected by the Economic Forum, that raised the total the governor has to spend this coming biennium to more than $7.6 billion.

Most of the increases, Willden said, go to K-12 and Higher Education.

A significant chunk of the education increase would go toward covering increases in enrollment over and above what was expected and budgeted for in this current biennium.

The university system also will benefit, Willden said, from $76 million more in new revenue and $24 million in added bonding money to fund both construction of the UNLV Hotel College building that has been on hold for more than two sessions. That was made possible by rising property taxes that increased the available bonding capacity of the state from $65 million to about $105 million this year. In addition, the budget plan funds $9.3 million for the start-up of a new Southern Nevada medical school.

After education, the biggest share of General Fund cash will go toward Human Services needs including Medicaid. While Medicaid was originally expected to add at least $400 million to the total state budget, Willden said new enrollments have been flattening, most likely indicating most eligible Nevadans are now signed up for the program.

That is followed by Public Safety, the biggest cost there being operation of the Department of Corrections.

By comparison, total General Fund money in the current two-year budget is just more than $6.5 billion, including the sunsetted taxes.

General Fund, however, is far from the only spending in the state budget. When federal funds, highway funds and other revenues are added in, the current budget totals more than $20 billion. The budget plan revealed Thursday comes to $23.5 billion with the largest spending in the Human Services arena, which comes to a total of $9.88 billion.

Legislative money committees get a more detailed explanation of what’s in the budget in a week-long series of hearings beginning Tuesday.

The path to approving Sandoval’s budget likely won’t be easy when the Legislature convenes on Feb. 2. The governor will need support from two-thirds of the Republican-controlled Legislature to pass any taxes. “Current job, economic and population growth has revealed a disconnect between our evolving economy and the current revenue structure for the state,” he said.

“This must change.”