Nevada state budget (2008-2009)
- 1 Impact of budget woes
- 2 Budget background
- 3 Ideas about why the crisis occurred
- 4 Proposed actions
- 5 Budget transparency
- 6 See also
- 7 External links
- 8 Additional reading
- 9 References
In April 2009 Nevada officials said that the state was facing a budget gap of about $2.2 billion. Gov. Jim Gibbons' budget director said the total could approach $3 billion. Richard Bryan, former U.S. Senator, said he had never seen anything of this magnitude in his political life. In 2008, in response to the state's budget crisis, the governor withdrew $267 million from the rainy day fund; however, the funds were not enough to cover approximately $1.2 billion in cuts that were later made. In addition, Gov. Gibbons proposed a 6 percent salary cut for all state employees and a 36 percent cut for higher education for fiscal year 2010. However, some lawmakers called the approach "draconian" and emphasized that alternative approaches must be taken. Nevada legislators planned to use $600 million of the state's expected $1.5 billion in federal stimulus funds to help narrow the shortfall gap.
Impact of budget woes
- See also: State budget issues, 2009-2010
- Nevada's unemployment rate rose to 10.1 percent in February 2009 compared to 9.4 percent in January 2009. According to state records, the state's highest recorded rate of 10.7 percent was in late 1982. Casino-related leisure and hospitality hiring was down 1,000; hiring in professional business services was down 1,200; construction was down 500; manufacturing was down 200 and mining was down 100. However, government hiring was up 5,000; education-health services was up 1,000 and hiring in the financial activities sector was up 100.
- The Public Utility Commission of Nevada was considering a 16 percent rate increase for NV Energy customers on an annual basis. The increase would likely add anywhere from $20 to $30 a month for customers. The increase would be in addition to the already proposed rate increase for September 2009. "Seventy percent of this increase is due to the investments we have made in generating a facility here in the Vegas area," said Roberto Denis, Senior Vice President for NV Energy.
- In late March 2009 University of Nevada - Reno officials proposed plans should the school need to cut its budget 20.7 percent. If the cuts took place, the university estimated that the institution could lose two sports, 25 percent of classes and its planetarium.
- In Clark County the Service Employees International Union agreed to reduce its cost of living allowance increase from 3 percent to 1 percent and reduce the top range of merit raises by 1 percent for one year. “The economy is certainly not getting any better and when we look at the numbers, the numbers don’t look very promising,” SEIU Nevada President Al Martinez said. “Layoffs can happen and when the word was mentioned, we knew we had to do something about it. These are tough times and we want to do our part.”
Nevada relies heavily on gaming income for state revenue; 53% of the state's gambling income comes from the Las Vegas Strip. November 2009's state gaming report for September 2009 showed 21 consecutive months of declines. Nevada News Bureau reported, "State Budget Director Andrew Clinger had no real comment on the gaming report, saying other tax reports due by the end of the month, including taxable sales, would be examined before a decision was made on whether a special session of the Legislature was needed to keep the current budget in balance. 'We'll just have to see when the revenues come in at the end of November where we're at,' he said. Not only were many of the state's tax revenues coming in lower than projected, but the spending side of the budget was also an issue, Clinger said. Medicaid spending was much higher than budgeted, which he said was a greater concern than the revenue side of the equation."
The approved Nevada General Fund FY 2008 and FY 2009 biennium budget was $6.8 billion, but actual spending was $6.3 billion due to cuts made as revenue declined. Nevada does not have a state income tax. Thirty-three percent of general fund revenue for the FY 2008 and FY 2009 biennium came from sales tax and 27.5% from gaming taxes. Actual collections in August 2009 were down in total $25.8 million (6.9%); sales taxes were down 8.1% and gaming collections were down 4.7%.
- See also: Nevada state budget
Nevada operates on a biennium, covering two fiscal years at a time. For example, the 2009-2011 biennium consisted of year one, July 1, 2009 to June 30, 2010, and year 2, July 1, 2010 to June 30, 2011. Unlike the federal government, Nevada’s Constitution requires both that the state has a balanced budget and not deficit spend. Individual state agencies submit their budget requests along with past expenditures and revenue to the governor, who proceeds to issue a budget recommendation for the upcoming fiscal year to the legislature. Both the State Assembly and the Senate are required to make any necessary changes or adjustments to the budget until the bill is passed in both houses. When the legislature passes the bill, the governor approves the bill.
- The General Fund was a significant source of revenue for the state, accounting for 37 percent of total projected revenue. Federal funds accounted for almost one quarter, 21 percent, of the state’s projected revenues. Other revenue encompassed a variety of items, from private gifts and donations to various fees, assessments and taxes.
- The two main sources of the state’s General Fund revenue were gaming taxes and sales taxes, together accounting for almost two-thirds of the total projected General Fund revenue.
The following table provides a history of Nevada's expenditures and gross domestic product (GDP).
|Fiscal year||Expenditures (billions)||GDP (billions)|
- NOTE: The figures for FY 2009 had not been finalized at the time this data was compiled.
Ideas about why the crisis occurred
- In February 2009 Nevada experienced its 14th month of declining revenue. According to a report by the Gaming Control Board, Nevada casinos pulled in $830.9 million in revenue for February, an 18.1 percent drop from 2008. Las Vegas Strip gaming revenue was down 23.5 percent in February, while resorts on Lake Tahoe's south shore posted a 26.8 percent decrease.
- Nevada lawmakers said on March 31, 2009 that projections for state revenue for fiscal years 2010 and 2011 were down by at least 30 percent, $500 million less than estimated just five months prior, compared with the current biennium. The 2008-2009 budget, as approved in 2007, was $6.8 billion. After budget cuts earlier in the year, spending stood at about $6.3 billion. The $5.1 billion in revenues would represent revenue shortfalls of 25 percent in relation to the approved budget, and about 19 percent in relation to actual spending. In December 2008 it was estimated the state would see a total of $5.6 billion in tax revenue.
- Some lawmakers were criticizing pay increases for the governor's staff during a budget crisis. The pay increases placed the staff's salary at nearly nearly twice what lawmakers had approved. However, the governor said that the increases were possible because he now had 17 staff members, fewer than the legislatively approved 27. A 1999 state law allows governors to set pay for their immediate staff at any figure if the total salary budget for the office doesn't exceed what was set by the legislature.
Governor Jim Gibbons
In light of the state's growing budget gap, Governor Gibbons proposed a nearly 36 percent cut in higher education. Additionally, the governor recommended a 6 percent salary cut for all state employees in his $6.2 billion budget recommendation. However, despite necessary cuts, the governor said that he would not consider tax increases. In 2008 the governor withdrew $267 million from the rainy day fund in order to avoid making budget cuts; however, approximately $1.2 billion in state budget cuts were made later.
Even with a large looming budget gap Republican lawmakers said that they weren't content with the governor's proposed budget cuts. Sen. Bill Raggio called the cuts "draconian." Assembly Minority Leader Heidi Gansert proposed an alternative bill with an aggressive forced savings plan. Gansert suggested earmarking significant portions of money that come in over projections for the rainy day fund. "It's important so we can get out of this peak-and-valley revenue stream," she said.
Democratic legislators said that, like the Republicans, they too believed that the governor's cuts were too large. The governor's reluctance to discuss tax increases, said lawmakers, was unreasonable. "Gibbons knows there are 28 (Assembly) Democrats, and we can pass new taxes," said General Assemblyman Richard Segerblom. "We aren't going to raise new taxes willy-nilly, but we won't fire half the university staff."
However, going to gaming for more tax dollars should be a last resort, Segerblom said. He listed establishing a corporate income tax, gross receipts tax, or increasing the payroll tax, as better alternatives. Segerblom was also among the Democrats supporting Assembly Speaker Barbara Buckley's position to first eliminate some existing tax loopholes and other incentive programs that may be abused."
Economic stimulus package
Nevada was expected to receive $1.5 billion from the $787 billion dollar economic stimulus. All told, the federal stimulus plan would create or save 34,000 jobs in Nevada, based on White House estimates. However, like some governors, Gov. Gibbons said that he would not accept $77 million in unemployment funds because it would require an expansion of coverage to some people not previously eligible. Additionally, the governor added that he felt taking the money would be a threat to the state’s sovereignty. But, on March 25, 2009, Gibbons decided to accept the funds. Gibbons was quoted in The New York Times saying:
"We have the responsibility to do everything we can to help our unemployed workers get through these difficult times, even if that means passing legislation that we would not necessarily approve during prosperous times."
According to preliminary reports, Nevada was expected to receive:
- $84 million towards Medicaid
- $77 million for unemployment
- $201 million for road construction
- $32 million to fund energy efficiency improvement projects
Nevada Open Government is the website that hosts the state's searchable online database of financial data. The site was created by Governor Jim Gibbons's executive order and became functional on January 15, 2009.
The following table is helpful in evaluating the level of transparency provided by a state spending database:
|State database||Searchability||Grants||Contracts||Line item expenditures||Dept./agency budgets||Public employee salary|
|Nevada Open Government|
Limitations and suggestions
As the table above notes, the site was not searchable as of 2009 and lacked information on grants, contracts and state employee salaries.
Economic stimulus transparency
- The Economic Recovery and Reinvestment Act of 2009 designated $787 billion to be spent throughout the nation. Of that $787 billion stimulus package, it was estimated that 69%, or over $541 billion, would be administered by state governments.
- Nevada was expected to receive an estimated $1,052,020,435.
Independent transparency sites
The Nevada Policy Research Institute developed its own transparency website, TransparentNevada.com. This site focuses primarily on local transparency, complementing the state's site, which focuses primarily on state spending transparency.\
Public employee salary information
- See also: Nevada state government salary
- Nevada Policy Research Institute
- Nevada Taxpayers Association
- Nevada Open Government, official website
- Nevada Division of Budget and Planning, Department of Administration
- Model transparency legislation from the American Legislative Exchange Council is available at this link.
- Associated Press,"Lawmakers discuss budget problems," April 2,2009
- Las Vegas Sun, "Gibbons shunned by state lawmakers," February 13, 2009
- RGJ,"Nevada lawmakers debate how to save," February 24,2009
- Las Vegas Sun,"Gibbons shunned by state lawmakers," February 13,2009
- Associated Press,"Nevada jobless rate climbs," March 20,2009
- KVBC,"NV Energy proposes 16 percent rate increase," April 6,2009
- US News and World Report,"University of Nevada-Reno Plans for 20.7% Cut," March 31,2009
- Las Vegas Sun,"County, employee union agree to cut pay increases," March 30,2009
- Nevada News Bureau, "Statewide September Gaming Win Down 9 Percent for 21 Months of Straight Declines," November 10, 2009
- Las Vegas Review-Journal, "'SINE DIE': Legislature finishes quietly," June 2, 2009
- Nevada Division of Budget and Planning Web site, accessed October 31, 2009
- Nevada Open Government: Budget Summary, "2009-2011 Biennium: Governor's Recommended Budget," 2009
- State of Nevada,"Introduction to State Budgeting," October 2007
- US Government Spending,"Nevada State and Local spending," accessed April 7,2009
- Associated Press,"Sector Snap: Casinos fall on Nevada revenue drop," April 7,2009
- Associated Press,"Nevada revenue shrinking," March 31,2009
- Las Vegas Review Journal,"Budget forecast looking worse," April 2,2009
- MSNBC,"Nevada governor defends pay increases for office staffers," March 24,2009
- Las Vegas Review Journal, "State Budget Crisis takes center stage," February 8, 2009
- American Recovery and Reinvestment Act,"Impact," accessed April 7,2009
- The New York Times,"Nevada Governor Retreats on Unemployment Stimulus Funds," March 25,2009
- Associated Press,"Nevada getting about $84 million in stimulus funds for Medicaid," April 7,2009
- KOLO-TV,"Stimulus Funding for local roads," April 7,2009
- Las Vegas Sun,"Nevada gets $32 million in stimulus grants for energy efficiency projects," March 26,2009
- National Taxpayers Union, "A Letter to the Nation's Governors: Ensure Transparency and Accountability by Posting Stimulus Expenditures Online," March 10, 2009
- New Transparency Website Launched, Nevada Policy Research Institute, September 8, 2008