It's critical for long-term financial health that local and state governments do just that quickly, experts say, because the crisis creates an atmosphere conducive to changes.

"If a government bureaucracy does not take advantage of the budget shortfall opportunity to retool itself, it will never retool itself," said William Robinson, an economics professor at the University of Nevada, Las Vegas.

"It's the perfect opportunity. This is the only time you really get to sit down and take a hard look at these things because in good times it's not going to happen."

Because of a downturn in the consolidated sales tax, which provides about half the revenue to the city's $547 million general fund, Las Vegas had to make up a 3.5 percent deficit this year, about $18.5 million. Forecasts predict shortfalls of $40 million in each of the next two fiscal years.

The plan to meet those deficits includes holding positions vacant, trimming operating hours and delaying capital projects and equipment and vehicle replacement.

At a recent budget hearing, council members called for a broader review of city business and said employee compensation would be on the table.

"When we hire employees in two years or five years, perhaps their expectations can be different than the expectations of our current employees," Councilman Steve Wolfson said.

Those expectations include a fully paid health insurance premium for the employee as well as 100 percent of the contribution to the Public Employees Retirement System. Union contracts also call for annual pay raises that include a "step" raise of 4 percent or 5 percent and a cost-of-living adjustment of 3 percent or 4 percent.

"No private-sector company could provide those benefits," said John Restrepo, an economic analyst who does consulting work for the city.

The city has 320 positions not represented by unions. Those workers will not receive merit increases or bonuses this year, although lower classifications still will receive a 3.5 percent cost-of-living adjustment.

Executive positions at the city of Las Vegas are not eligible for the cost-of-living raise.

Median wages in the Las Vegas area have increased about 2 percent or 3 percent a year since 2001, according to the Nevada Department of Employment, Training and Rehabilitation. From 2006 to 2007, they went up only about 1.1 percent.

Restrepo presented the council with statistics showing that since 1992, the average salary for a state or local government worker has been about 20 percent higher than the average pay for jobs in Clark County.

Robinson said that's not exactly an apples-to-apples comparison because more public-sector jobs require specific training or a college degree. But he agreed that Southern Nevada is in a unique situation.

"Traditionally, salaries in the public sector were lower than those in the private sector, and they made up for that with better benefits and job security," he said. "Over time, that salary gap appears to have closed."

A comprehensive salary survey of the city's unionized positions hasn't been done since the mid-1990s.

The city will decide in 30 to 45 days whether to update that study by comparing compensation packages in the region, human resources director Claudette Enus said.

"It's certainly an area we need to explore. We need the hard data," Enus said, noting that current collective bargaining contracts will be up for renewal in 2009 and 2011.

The survey would cost more than $300,000 and consume a lot of staff time. "It's a tremendous undertaking," Enus said. "We've got to take a look at our financial resources as well as our human resources."

Tommy Ricketts, president of the Las Vegas City Employees Association, said the union has a good relationship with city management and wants to continue to be included as budget talks continue.

"If we've got to make some tough decisions, that's fine," Ricketts said. "But we have to do it on the forehand, not when our backs are against the wall."

The LVCEA is the largest of four unions representing city employees.

"We've always tried to follow through and make concessions when needed," Ricketts said, but he added that city employees struggle with the same challenges as everyone else.

Restrepo has figures showing that when adjusted for inflation, wages for all workers have remained basically flat for two decades.

"That's a constant around the country. Wages have been stagnant for many, many years," he said, which means spending power has stayed about the same.

But "the difference in Southern Nevada is that the cost of living has changed dramatically," and those changes are unlikely to be reversed.

All public agencies are struggling. At the state level, officials have gone through several rounds of cuts to meet what is now a $914 million budget shortfall.

That shortfall is partly responsible for shrinking revenue in the Clark County budget. While the cities of Henderson and North Las Vegas aren't in the same boat as Las Vegas, officials report that coffers are strained as well.

Restrepo said the city could consider other responses.

"Do the local cities and counties do as much outsourcing as they could?" he asked. "Would that be less expensive? There's a school of thought that says if the service is offered in the phone book, you should use the private sector."

Cities could also look at what's known as "home rule," which moves taxing power from the state to the local level. That's a long-term debate, and a change would require revising the state constitution.

What also needs to be looked at, several people noted, is whether the Las Vegas Valley's image is different now.

In the early 1990s, growth in the valley ratcheted up demand for government services, but it was a "good news, bad news" situation, Restrepo said.

"We have great jobs here, but we have the stigma of living here. The school situation, the gaming industry, the Sin City image.

"We had to attract people to Southern Nevada to have the governmental centers to support the population and employment. That required wages to be higher than they would've been otherwise."

Directing city staff to start reviewing employee benefits to see what items could be addressed in future bargaining sessions, Mayor Oscar Goodman said he also wanted to see whether the stigma still exists.

"I think this image of Las Vegas being 'Sin City' has dissipated over the years," he said. "People, I believe, want to come here rather than resist coming here."

Robinson agreed, noting that UNLV doesn't have the recruiting problems it used to.

"We don't have people turning us down for jobs anymore because of where we are. We hire people from the best schools, and they don't have any problem coming here.

"The justification for the benefit packages may not be there anymore."

Contact reporter Alan Choate at achoate@reviewjournal.com or 702-229-6435.