Gibbons: More cuts but no layoffs; Budget shortfall hits $913.7 million | NevadaAppeal.com

Gibbons: More cuts but no layoffs; Budget shortfall hits $913.7 million

Cathleen Allison/Nevada AppealGov. Jim Gibbons, second from left, announced a plan for more cuts in state spending Wednesday at the Capitol. From left, State Budget Director Andrew Clinger, Gibbons, and legislative leaders including Senate Majority Leader Bill Raggio, R-Reno, Assembly Speaker Barbara Buckley and Assemblyman Morse Arberry, both D-Las Vegas, were involved in the reduction plan.
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The bad news is the discovery of another $15.5 million shortfall in the Division of Child and Family Services, pushing the total state shortfall to $913.7 million.

The good news? The governor and legislative leaders managed to cut that much without asking state agencies for new operational cuts or layoffs.

Agencies were worried the new round of cuts would force layoffs and do serious damage to programs. In fact, Gov. Jim Gibbons warned last week new cuts might force him to ask for up to 3 percent more from agencies other than education and prisons.

“We were actually able to reduce spending without cutting operational budgets,” said Gibbons on Wednesday.

Gibbons was joined in making the announcement by Senate Majority Leader Bill Raggio, R-Reno, Speaker Barbara Buckley, D-Las Vegas, Ways and Means Chairman Morse Arberry, D-Las Vegas and Senate Minority Leader Dina Titus, D-Las Vegas.

Buckley said it was important not to take further cuts to public schools, higher education and health programs.

Although they avoided doing so, Raggio said, “there’s certainly a lot of heartburn in this.” And he warned that, if things continue to get worse, more cuts may be necessary.

“We just hope we’re not going to be doing this again in three months,” said Arberry.

Gibbons and lawmakers agreed on most of the major new cuts Friday, including taking $185.7 million out of Capital Improvement budgets, draining the rest of the $267 million Rainy Day Fund and cutting $40 million out of NDOT and $10 million from excess employee benefit program reserves.

The benefits program cuts will be taken by making July a premium holiday, which Director of Administration Andrew Clinger said not only saves the state that amount but lets state workers out of their monthly premium as well.

While operating budgets aren’t on the list, the new cuts do dip into many pots of money all concerned had tried to protect from reductions, including the Public Health Trust Fund, which has grown to $32 million over the past decade from tobacco settlement money.

Current statute allows only the interest to be granted from that fund for health programs. The new cuts will take $10 million of that money but must wait until legislation allows it. The tobacco money in the healthy Nevada Fund is also being cut by $10 million under the joint plan.

In addition, the cuts will claim $17.5 million of the money put toward pre-funding the liability for retiree health benefits, which is estimated at well over a billion dollars. Clinger said Nevada put money toward that debt after the federal government ordered states to count it as a liability on their books, which could damage the state bond rating.

Clinger said the state is also taking back the $2.1 million put toward a White Pine County Juvenile Detention center and the special $4 million pot of money to help agencies with unanticipated utility price hikes. Clinger said agencies that run into trouble can ask the Interim Finance Committee for contingency fund money to cover any shortages.

Most of the money for deferred maintenance projects around the state is also being cut, as is a special $36 million fund set aside in the event the state loses its appeal in the California Edison tax lawsuit.

Appropriations for a number of small projects in Sparks, Fernley and Caliente were cut as well as the near half million dollars set aside for grants to help develop small airports in rural Nevada.

Of the $913.7 million total shortfall, about $643 million is the revenue hit directly on the general fund from reduced tax collections. In addition, the state must kick in $194 million to cover the sales tax shortfall to Nevada school districts, which is required by statute, $60.7 million to Medicaid because of higher than expected caseloads, the $15.5 million shortage in the Division of Child and Family Services and a $280,000 shortage in welfare services.

Agencies already cut their budgets by 4.5 percent in January. That included more than $200 million in operational and program reductions out of a total of $564.7 million in first round reductions.

– Contact reporter Geoff Dornan at gdornan@nevadaappeal.com or 687-8750.