Agencies seek $1B more than cap allows | NevadaAppeal.com

Agencies seek $1B more than cap allows

State agencies have submitted requests to the governor for nearly $1 billion more than the law capping growth of the state budget will allow.

That cap was created by the 1979 Legislature, and limits growth of the state budget to the growth of the state’s population and inflation. Because of the rapid growth of the state over the past 27 years, neither the governor nor Legislature has ever had to worry about the cap.

Until now.

According to Director of Administration Andrew Clinger, the cap for the coming two-year budget cycle will be $7.065 billion.

While that is $1 billion higher than the base budgets submitted by state agencies, most of the difference will be eaten up by “roll-ups” – increases caused by inflation, higher utility costs, growing caseloads in areas such as education and human services and things like payroll commitments over which the state has little control.

Budget requests submitted by executive branch agencies – including those roll-ups – total $6.69 billion.

According to calculations by the budget division, it will take nearly $172 million in new money just to handle growth in Nevada’s public schools over the next two years and another $87.4 million for growth and an adjustment to the formula which funds the university system.

It will cost the state an estimated $119 million more to cover the increasing cost of health insurance for state, university and public school employees.

Once those and other similar items such as Medicaid inflation are added in, there is enough money left for the 2 percent per year cost-of-living raise Gov. Kenny Guinn wants to give state workers.

But after that $210 million is added, the total proposed budget will be just $62.65 million under the cap

The bottom line: The $1.1 billion executive branch agencies have submitted in enhancements, if added to the total, would put the budget $1 billion over the cap.

And Clinger said Friday some of those “enhancements” are things the state probably can’t avoid. A total of $27.9 million in requests are the result of new or expanded federal mandates. Nearly $6 million of that amount is because of court orders involving the state.

Under the 1979 law, the governor must submit a proposed two-year general fund budget which fits within the cap. That law does, however, allow the Legislature to exceed the cap if they believe higher spending is justified.

Problems with the cap, however, may arrive even before the 2008-09 budget cycle. Total spending for this budget cycle is only $86 million below the current cap. Gov. Kenny Guinn has already warned that, if supplemental budget requests exceed that, the state could hit the cap this fiscal year.

Agencies have applied for just $25.9 million in supplemental requests thus far but there’s still almost nine months remaining in the fiscal year.

Guinn warned in June that the situation may not be under the state’s control. He said health-care costs are increasing much faster than overall inflation. In addition, if the federal government makes even small changes to formulas for funding entitlement programs such as Medicaid, the state could find itself committed to spending increases that push the budget higher.

There is extra money in the state treasury – at least $265 million this fiscal year and probably much more than that in each of the next two years. But the cap won’t allow it to be spent on governmental services. Money above the cap can only be spent on four things: the rainy-day fund, new buildings, roads and highways, or a rebate to taxpayers.

Guinn is already considering requests to use some of that money to jump-start major highway projects in Southern Nevada, where, he says, the need is critical.

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