Bill would create line of credit to cover Nevada budget shortfall |

Bill would create line of credit to cover Nevada budget shortfall

The Nevada Senate chambers on the first day of the 31st Special Session of the Nevada Legislature in Carson City, Nev., on Wednesday, July 8, 2020. (David Calvert/The Nevada Independent)
Senate Chambers

Prompted by the pandemic’s impact on state revenues, Nevada Treasurer Zach Conine has introduced a bill that would give the state a way to cover a fiscal emergency by opening a short-term loan backed by the state’s future revenues.

SB4 would give the state Board of Finance several ways of essentially establishing line of credit to cover an existing, legislatively-approved debt if it was temporarily unable to pay that bill.

He told the Senate Committee of the Whole that it’s “a tool, which we hope to never use.”

He said without the tools that SB4 would provide, “there is literally nothing the state is able to do to fund short-term operating expenses.”

He said if something happened right now, he could be in a position where he had to sell some other securities before maturity, which could cost the state a significant amount of money.

“My job is to make sure when you tell us to write a check, we have the money to write the check,” he said.

He said the bill restricts the use of a line of credit or loan so it can’t be used to construct a building or fix a road.

“This is to pay for something we’ve already committed to pay for,” he said.

The money would be transferred to where needed within the General Fund and would have to be repaid within a short period of time — like three years.

He said while the bill would allow up to $150 million in short term funding, he doesn’t anticipate using the process anytime in the next year. He said this would be for emergency situations only.

Conine pointed out that short term funding is often much cheaper than long term funding like general obligation bonds.

Those notes would be secured by “the pledge of security interest in and first lien on certain money and revenues.” That includes unrestricted revenues including taxes that now go to the General Fund, reserves and interest revenue.

The treasurer would make payments to redeem those bonds, notes or debentures, the interest on them and any administrative expenses

Asked if the bill would harm Nevada’s bond rating, Conine said that actually having these tools to cover a short-term emergency would be considered prudent by bond rating agencies.

The Senate took no action on the bill, which Minority Leader James Settelmeyer, R-Minden, said could be taken up in detail during the regular 2021 session next year.