Budget shortfall could approach $250 million
April 11, 2002
Lawmakers were warned Wednesday to brace themselves for a budget shortfall that may approach $250 million.
Gov. Kenny Guinn told the Interim Finance Committee the economic slump and lost revenue in the wake of Sept. 11 will cause revenues to fall $115 million short by the end of this fiscal year and another $129 million by the end of fiscal 2003.
To balance the budget, Guinn warned of serious cuts by all state agencies as well as the Supreme Court and the Legislature. But he said he wants to protect 4 percent raises state workers are expecting next year, as well as education and human services programs in the budget.
Guinn said he’ll be trying to make cuts from about a quarter of the total budget.
“We’re trying to do all the cutting in those one-shot areas,” he said. “But those who do not step up to the plate, I will step up to the plate for them.”
Budget Director Perry Comeaux and Guinn explained the bulk of the shortfall is in lost revenues to the state in gaming and sales taxes.
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“But we’re obligated, as you know, by law to make up the shortfall to the local school districts,” said Guinn.
Under Nevada law, if the 2.25 percent of Nevada’s sales tax dedicated to public schools comes in less than expected, the state is required to make up the deficit so that school funding doesn’t suffer. So when sales tax revenues are off, the state takes a double hit — losing revenue from its share of sales taxes and having to make up the accompanying loss to school districts.
In addition, “The total problem with the school districts is going to cost us about $38 million,” Comeaux told the commission.
They said, however, the state is finding some additional money to cover at least part of the shortfall. The state’s ending fund balance was $18 million more than projected June 30, 2001, and there is about $21 million that would normally go into the rainy day fund.
Comeaux’s office has collected or found ways to generate about $30 million more and Treasurer Brian Krolicki has said “sweeping” excess interest income out of a bond redemption fund will generate up to $10 million.
Krolicki also told them about his plan to contract with a private Wall Street investor, in effect selling the right to invest bond funds. That would generate about $20 million for the state.
When everything was added up, Guinn and Comeaux said they will still have to take about $65 million out of the fiscal 2002 budget and $78 million out of 2003.
Assemblyman David Goldwater, D-Las Vegas, questioned Krolicki’s idea. If interest rates rebound, he said, the state would effectively have traded away the ability to collect more interest on its investments.
Assemblywoman Chris Giunchigliani, D-Las Vegas, also said the budget plan may require legislative approval.
“You don’t have to do it,” replied Guinn. “It’s my decision and I will do it.”
To compound the problem, Guinn and Human Resources Director Mike Willden told lawmakers Medicaid and welfare costs are spiraling out of control since Sept. 11.
The welfare rolls have grown from 15,487 in March 2000 to 34,148 at the end of this past March.
Willden said the budget planned for a total of 125,000 total Medicaid recipients this year and, with the economic problems, that figure is already over 150,000.
By the end of fiscal 2003, he said, welfare will have a $2.9 million deficit and Medicaid could have a shortfall as high as $22 million.
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