Special session convenes to cover a nearly $1.2 billion fiscal 2021 budget deficit

The 31^st special session of the Nevada Legislature convened just before 10 a.m. Wednesday, charged by Gov. Steve Sisolak with cutting almost $1.2 billion from the fiscal 2021 budget

Senate Majority Leader Nicole Cannizzaro, D-Las Vegas, said she expects the special session to take two to three days. She said, however, bill drafts to implement the cuts are already being drafted.

In his message to lawmakers, Sisolak said after taking care of the budget shortfall he and lawmakers should take action to move Nevada forward on a path that will make the state much less vulnerable to future economic downturns.

Because of the Silver State’s huge reliance on gaming, tourism and hospitality, Nevada is one of the nation’s hardest hit states in the economic shutdown forced by the COVID-19 pandemic.

The governor and lawmakers have already made numerous reductions, transfers of reserves and other maneuvers to cover the $812 million deficit the economic shutdown caused in the final 3.5 months of fiscal 2020. The largest piece of those decisions was to sweep the entire $401 million in the Rainy Day Fund.

One of the first votes taken Wednesday was to adopt the special rules for this special session, including one allowing lawmakers to attend, participate and vote remotely.

Cannizzaro said that resolution would apply only to this special session but is necessary to protect the health and safety of lawmakers, staff and others in attendance.

Senate Minority Leader James Settelmeyer, R-Minden, objected to the resolution saying the Nevada Constitution clearly requires members to meet and vote at the seat of government in Carson City. He was joined by the other seven Republican members of the Senate but the special rule was approved 13-8 on a party line vote.

The Assembly adopted the same special rule for that house over the objections of Assembly Minority Leader Robin Titus, R-Wellington.

After adopting rules governing the operation of the two houses, both the Senate and Assembly resolved themselves into a Committee of the Whole to receive staff and expert testimony on the budget and the cuts proposed by Sisolak.

That eliminates several requirements that could add several days to the process.

Finance Director Susan Brown told lawmakers in both houses the latest projected shortfall expected for fiscal 2021 is $1.16 billion. She said that total includes a General Fund shortfall of $838 million plus another $490.8 million the state will be required to make up in the K-12 account that provides per-pupil funding to the districts. Those numbers were offset somewhat by other proposals.

Brown listed a total of $934.5 million in proposed actions to address that deficit, the largest of which is $542.79 million the General Fund would reap by doubling the share of the Governmental Service Tax it now takes from 25 to 50 percent. She said that would be just for one year. The other half of the GST goes to the Highway Fund.

In addition, the list includes $72.6 million in cuts and cancellations of Capital Improvement Projects.

The plan would get $51.7 million by imposing a day-a-month unpaid furlough on state workers, including classified employees in the system of higher education.

A long list of other programs including the Charter School Loan Program that helps new charters get off the ground, the Promise Scholarship, School Remediation Trust, Education Trust and other categorical programs would be tapped.

However, education leadership said were pleased the governor isn’t asking the per pupil funding be cut.

K-12 education was given a target of $183 million to cut, the details of which were contained in the finance office presentation.

The system of higher education was asked to cur $109 million in state General Fund spending from its budget. Chancellor Thom Reilly said the system will suffer an additional $129 million in lost revenues from other sources including reduced residence hall revenues and athletic revenues.

He said they have implemented a hiring freeze that should save some $24 million along with $7.4 million in operating and travel reductions.

Reilly said regents have approved a $6 per credit surcharge for university undergrads, $5 for community college classes and $8 per credit for grad students.

But a big chunk of the reductions is being covered by the $50 million the system is using from its Market Fluctuation Account, something Ways and Means Chairman Maggie Carlton, D-Las Vegas said she wasn’t aware existed. Reilly and system finance vice chancellor Andrew Clinger said that account was created in 2010 to house all of the system’s financial accounts and invest them to generate interest that could then be directed back to the various campuses. In this case, Clinger said the account is being drained to cover at least part of the budget cuts the system is required to make.

He said the only financial accounts not in that account are the endowment accounts that are mostly restricted for specific uses.

In addition to school programs, there were cuts to the Prison Ranch, Prison Industries and the Inmate Welfare/Store Fund. The Inmate fund would be hit for $8 million.

The Public Employee Benefits Fund would lose $12 million from its three different reserve accounts and the Healthy Nevada Fund would lose $16.8 million.

Altogether, those sweeps total $69.8 million.

Brown emphasized that the vast majority of the proposed actions on the list were those put forward by the agencies themselves.

The plan would get $54.5 million by making the state’s mines pay two years of the Net Proceeds of Mines tax in 2021 — this year’s at the normal time this fall and pre-pay next year’s.

The Interim Finance Committee would lose a total of $26.2 million in contingency funds currently restricted for specific projects, sweeping those funds back into the General Fund.

Health and Human Services director Richard Whitley said his department, the state’s largest, is looking at a $233 million General Fund reduction. He said fortunately, the percentage of the Medicaid costs paid by the federal government has gone up, and HHS has more ability to use CARES Act money to offset reductions than most departments.

At this point, he said they don’t know what that enhanced percentage will actually bring to Nevada because the bills for Medicaid costs don’t arrive for up to 90 days.

Whitley said the top priority is to protect services.

As evening arrived, Senators introduced the first two bills of the special session. SB1 implements the cancellation or reduction of numerous Capital Improvement Projects as outlined in the Finance Director’s report. SB2 grants the regents permission to give Millennium Scholarship recipients a break on grade point requirements and eligibility requirements because the pandemic forced closure of university and community college campuses.

The special session resumes Thursday morning.