State budget shortfall projected $1.2 billion for FY 2021

Gov. Steve Sisolak Monday issued a fiscal report estimating the budget shortfall for the 2021 fiscal year at $1.2 billion.

The new numbers are based on the most recent tax collections in a laundry list of revenue streams including the sales tax that provides the largest percentage of General Fund revenue.

The governor and Legislative Interim Finance Committee have already used all available surpluses to cut $812 million from the fiscal year that ended June 30.

That makes the total projected shortfall just a hair over $2 billion for the biennium.

In a statement released at 5 p.m., Sisolak said his proposals are designed to preserve as much funding as possible for essential priorities including health, education and the state workforce.

The proposals include more than $500 million in cuts to agency budgets, cuts to one time appropriations as well as reversions from restricted contingency funds, transfers to the general fund and furlough days for state workers.

Sisolak concluded that to cover the difference, leadership will need to consider any option for increasing revenue should be limited to augmenting existing major revenue sources rather than trying to create new revenue sources.

He said it’s unknown what, if any, additional revenues or federal assistance will be available to help cover the shortfall.

However, he said his plan for the special session includes the flexibility to quickly augment funding for lost revenue if new money doesn’t materialize.

He pointed out that the state economy is currently being supported by federal CARES Act funding that is adding $600 a week to the unemployment benefits received by workers left jobless by the pandemic. Without congressional action, those added benefits as well as business grants and loans will soon begin to end.

Without federal action, Sisolak said Nevada and other states will have to take even deeper cuts in services.

“Without federal assistance, states will be forced to make impossible decisions including whether to cut funding to education or health and human services programs so desperately needed at this time,” he said.

Sisolak said that if more federal financial support materializes or if state revenues recover more quickly than expected, his priorities will be to restore services in health programs, education and state workers.

The fiscal plan released by Sisolak Monday evening calls for a $24 million reduction in one-time appropriations, including the public safety radio system and computer upgrade at the gaming control board.

They include moving $26 million in restricted contingency funds including the case management system for the Nevada Supreme Court.

He proposes transferring money from other sources to the general fund, including some $84 million including the Tax Bond Account, Bond Redemption Account and Health Nevada Fund.

It cancels the tax amnesty program approved a decade ago that waives penalties and interest for businesses that owe taxes. Those taxes must be paid to avoid the penalties and interest.

It claims $11 million in attorney general settlement funding.

It once again redirects governmental services tax money to the general fund, raising the percentage of that revenue taken to 50 percent for this biennium only.

The plan still includes the one-day a month unpaid furlough for state workers as well as freezing merit salary increases and holding some 700 state positions vacant.

The Nevada System of Higher Education will lose about $190 million.

K-12 education isn’t spared, either. K-12 will lose $166 million in general fund money along with cuts in one-time appropriations, including $156 million in categorical funding.

That includes $6 million from class size reduction and $3.1 million from Read by Grade 3, $4.5 million from teacher supply reimbursements and $8.4 million from school safety facility improvements.

Health and Human Services will take a $233 million cut, but officials there say the reductions won’t hurt devices. There will be no changes in eligibility for Medicaid or Nevada Check-Up, primarily because the federal share of those programs is going up because of the loss of statewide revenue.