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Blueprint for Nevada budget contains widespread pain
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Photos by John Locher/Las Vegas Review-Journal
Gov. Brian Sandoval delivers his first State of the State address Monday night in the Legislative Building in Carson City. Behind him is Assembly Speaker-elect John Oceguera, D-Las Vegas. » Buy this photo
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Gov. Sandoval's first State of the State speech
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2011-2013 Executive Budget
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Andrew Clinger, state budget director, stands near binders Monday containing Gov. Brian Sandoval's proposed state budget in Carson City. The proposal would make cuts in a variety of budgets and tap local government revenue to keep the state operating.
LAS VEGAS REVIEW-JOURNAL CAPITAL BUREAU
Updated: Jan. 25, 2011 | 8:13 a.m.
CARSON CITY -- Nevadans would pay no new taxes under the $5.8 billion 2011-13 budget proposed by Gov. Brian Sandoval on Monday, but a lot of key programs, including public schools and higher education, would suffer big spending cuts.
The proposal would slash a variety of programs statewide, including those for the mentally ill and for autistic children. It also calls for as many as 361 layoffs and 5 percent pay reductions for state workers.
The cure for the state's revenue malady also would hurt local governments by taking a big chunk of their revenues and forcing them to operate or pay for some programs now run by the state.
As he promised during his election, his two-year budget would bring state spending back to the levels in the 2005-07 budget period -- before the great recession hit the nation hard and Nevada even harder.
The governor proposes reducing general fund spending by 6.44 percent, $402 million, but he seeks $1.059 billion in additional revenue through creative financial measures -- not tax increases -- to keep from cutting spending more. The funds would offset about $450 million in increased Medicaid spending and $440 million in revenue that schools are losing because of property tax and sales tax declines.
The proposed measures include the following:
■ Taking $121 million in property tax revenue from Clark and Washoe counties and giving it to the Higher Education System of Nevada to support universities and colleges.
■ Changing a law that requires school districts to maintain a fund with at least one year's worth of the money they need to pay debt service on their bond issues. That would reduce the reserve fund requirement to six months' worth of bond payments. That would free up $425 million, which school districts can use to cover their operating costs. The funds would help replace the money schools are losing because of declines in local property taxes and sales taxes.
■ Taking $213 million in room tax revenue that would have gone to public schools and putting it in the state general fund, where it could be spent on education.
■ Securing $190 million by taking out a 4½-year bond, or loan, on the $240 million the state receives each year in insurance premium taxes. It would be paid off at $50 million annually.
The chances of Republican Sandoval pushing his budget plan unfettered into law appear slim to none because Democrats control both houses of the Legislature.
After the governor's speech, Assembly Speaker-elect John Oceguera, D-Las Vegas, said the Legislature might seek to increase taxes against Sandoval's will.
"This is the right time to shoulder our responsibility and do the right thing for our state," Oceguera said.
State Budget Director Andrew Clinger said Sandoval wants to bring fundamental changes to how budgets are prepared, setting spending priorities and requiring state agencies to meet performance indicators.
"We needed to overhaul the way we did the budget," Clinger said. "We aren't just taking what we spent last year and adding to it."
Whether agencies will be disciplined or lose future funds for not meeting the indicators "depends on the agency" and will be discussed by the administration during legislative hearings, he added.
Geoffery Lawrence, deputy director of policy for the Nevada Policy Research Institute, hailed Sandoval's move toward performance-based budgeting, a goal sought by his conservative Las Vegas think tank and a plan that saved Washington state $2 billion.
"The governor made a clear and compelling case that Nevada's government needs to be driven by the pursuit of results and that an emphasis on performance can produce equal or better results with fewer resources," he said.
PUBLIC SCHOOLS
The governor proposes cutting state worker salaries by 5 percent, saving $453 million, and reducing appropriations to public schools and higher education to force them to cut their employees' pay, too. He proposes continuing the two-year freeze on longevity and merit pay, saving $221 million.
State support for public schools would fall by 5.2 percent to $4,918 per pupil if his budget is approved.
Sandoval proposes letting school districts decide whether to continue class-size reduction, full-day kindergarten and other programs. Instead he wants to provide $325 million in block grants, $18 million less than these programs now cost, and let the schools use it as they see fit.
But Ruben Murillo, president of the Clark County Education Association, said that Sandoval's proposal is almost a 9 percent cut in state support to public education.
"I don't see how much more you can cut the school budget and be an effective school system," Murillo said. "Asking teachers to do more in the face of cutting salaries is just a slap in the face."
Carolyn Edwards, the Clark County School Board president, shared his concerns.
"Without any reductions in state aid, the Clark County School District was already anticipating a budget shortfall of $180 million," Edwards said.
HIGHER EDUCATION
The state's higher education leaders had trouble making sense of Sandoval's proposed cuts.
Sandoval said he was proposing a 7 percent cut to state support for higher education, which would increase to a 17.6 percent cut when adding in the federal stimulus money the system is losing.
But the numbers in the actual budget show a 22.3 percent cut in state support. With the lost stimulus money, the overall cut would be somewhere near 25 percent.
The proposed cuts would follow three years of cuts already made to the system.
The governor justified the cuts by saying the Board of Regents could increase tuition and fees to help make up the gap. Tuition and fees in Nevada are lower than regional and national averages.
But higher education leaders said such cuts would devastate the system. They said there is no way to make up the gap with a tuition increase.
Chancellor Dan Klaich said the system would have to restrict access, raise tuition and maybe restructure entirely if the cuts went through.
He said a 70 percent or higher tuition increase would be needed to make up the gap, especially if 15 percent were set aside for scholarships, as Sandoval indicated he wanted.
James Dean Leavitt, chairman of the Board of Regents, said, "It's going to be very, very difficult" for the system to survive the cuts without parts of it collapsing.
Neal Smatresk, president of the University of Nevada, Las Vegas, said previous cuts have seen the university eliminate departments and freeze jobs.
"I think it's pretty clear that cuts of that magnitude are devastating," he said. "They will assure that not every Nevadan who wants to can get into higher education."
LOCAL GOVERNMENTS
Local governments might be the biggest losers in the Sandoval budget.
Besides taking county taxes to fund higher education, Sandoval wants to keep about $20 million a year in property tax revenue that normally would go to a county indigent care fund for accident victims. About half of this money would have gone to University Medical Center, the county's public hospital.
Sandoval also wants to eliminate funding for the Spring Mountain Youth Camp, close 22 beds in the Rawson-Neal Psychiatric Hospital in Las Vegas and reduce about $20 million in other state payments to counties.
He expects the counties to pay about $80 million to cover costs of youth parole and emergency medical services, mental health courts and other programs that state will continue to provide. If the counties balk at paying these costs, or don't take over the programs, then they will be eliminated by the state.
Clark County Commissioner Steve Sisolak, a former regent, said Sandoval wants the county to funnel "an enormous chunk of money" into state higher education while having no power to determine policies or programs.
"It's shifting of the dollars and not having any control over how those dollars are spent," Sisolak said.
The governor is taking a "Band-Aid approach" instead of tackling the real problems of the state relying too much on gaming and sales taxes, he said.
HUMAN SERVICES
Even by pushing costs to the counties, Department of Health and Human Services Director Mike Willden said he still must cut his costs by $277 million, particularly in mental health programs and in a program to help autistic children.
"There isn't enough money to go around, but it doesn't mean these people won't be receiving services," he said.
Willden said typically there are five or six programs available for the mentally ill and three for autistic children. While they might lose one program, the others still will be available to them.
He also insisted the elimination of some programs will not lead to more mentally ill, homeless people on the streets. The homeless problem might increase because of the poor economy or other factors but not because of the elimination of social service programs, he said.
But Sandoval restored a $60 million program to provide personal care attendants for 6,600 disabled and elderly people. Gov. Jim Gibbons had proposed ending this program.
MEDICAID
The biggest social service expenditure is on Medicaid, the free health care program for the poor, disabled, handicapped and some elderly in which 275,000 Nevadans are enrolled. The number is increasing by 3,000 to 4,000 each month.
Physicians would see a 15 percent cut in the rates the state pays them to see Medicaid patients. Inpatient hospitals, specialty hospitals and psychiatric hospitals would have their Medicaid reimbursement cut by 5 percent. Kathy Silver, UMC's chief executive officer, said Medicaid reimbursements have fallen by 25 percent since 2006 and don't come close to covering the cost of care.
"What it will essentially do is increase the amount of unfunded care the hospital provides to people without resources," said Brian Brannman, the hospital's chief operating officer.
UMC lost $72 million in 2010.
"This is just going to make a bad situation worse," said D. Mitchell Forman, president of the Clark County Medical Association. "With these reimbursement rates, fewer physicians will be available to those without resources. There's no doubt that the number of physicians seeing Medicaid patients will drop.
Dr. Ron Kline, president of the Nevada State Medical Association, said Nevada is last in the United States in its reimbursement rates, and even the territories of Guam and Puerto Rico pay more.
"And that means people who need health care the most will lose access," he said.
Contact Capital Bureau Chief Ed Vogel at evogel@reviewjournal.com or 775-687-3901. Review-Journal reporters Paul Harasim, Ben Spillman, Jim Haug, Scott Wyland and Richard Lake contributed to this report.
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Don't gore my OX! Gore his!
Gbigs, you did not answer my question about South African mining profits. I take the answer as support for the foreign corporation. My response is America Love or Leave It. We have no room for anyone that cares more about South Africa than the Red, White, and Blue. Pack your bags. See ya. Mining Profits first and foremost is Nevada's, not South Africa. Tax Em and the budget is balanced. Your posts are meaningless when you side with a foreign entity.
Why aren't more people leaving Nevada? If you work construction your job isn't coming back in the next ten years, we already have a glut of homes, commercial properties, and casinos. There are states that are better off, move to one of them.
N7V, It's obvious that you nothing about mining. The current mines are harvesting the tougher areas for gold. They left the gold near the surface to get later when the price goes down, so to keep their profits up. The total cost for an ounce of gold with all expenses is just over $200 an ounce. That fact is from the mining companies themselves. Current price of gold is over$1,400 an ounce. Source is from the Gold Exchange. Total profits are over $8 billion a year after all expenses. Lesson learned. Raise the taxes on mining and they will leave is laughable. I guess they could go mining in Mississippi. The gold is here, Duh. Pay the tax increase or leave. Someone will come and mine here for a good profit even with a little higher taxes. There is no defense for a corporation reaping un-god-like profits at our expense. No go back and enjoy listening to your favorite college dropout druggie, Rush.
Mining is one of the few industries where we have natural, competitive advantages. You'd think maybe *someone* in Carson City could provide a cogent defense of it?! The folks who attack Mining are the ones who scream loudest about "diversifying" our economy. What do they propose to replace it with? Organic lobster fishing?
Do you have any idea what it costs to bring a mine into production? No divining rods here. It's like oil exploration. Satellite imaging, test drilling, geological analysis, etc. Hit or miss.
After you've expended all that money to finally prove a site you have to invest a FORTUNE to extract the mineral. Specialized earth moving equipment, processing machines (refining a whole other issue), trained personnel, OSHA compliance; I think firms often have to build their own MegaWatt power generating stations on-site. It's the middle of nowhere. You can't just plug into a wall outlet.
At anytime the commodity price could COLLAPSE, causing you to abandon your entire investment. The last thing these firms need is the uncertainty caused by Communists who threaten to nationalize their profits -- Castro style -- after they've already invested hundreds of millions of dollars in fixed assets.
I do not own any shares in natural resource companies. I do not work for the industry. I oppose BIG government and the high taxes necessary to pay for it.
Gov Sandoval slashes money to public education...won't affect his kids they go to private school (maybe I can get a voucher)...slash funding for medicaid...he has great insurance...slash mental illness programs...his family has been spared this issue....destroy the pension system....he has bigger plans folks and plans on a federal retirement (senate...maybe pres)...this is the height of irony
seems some are still living under the assumption that daddy govt takes everything, and then hands it out according to whoever is in power, wants.
THIS ALL ENDS NOW. we are out of gas. slam dunk. if you still want to spend my tax money on YOUR idea of altruism, you will have to do it in a balanced budget from here.
Republican point of view: We must live within our means. Balance our checkbook. Don't spend what you don't have. So, Those Republican live in a small house. The conservatives can't generate enough money to pay the bills. Their spending is more than they bring in. The Republicans let some foreign guy dig on their land. He takes the rocks he found and sells them. When the foreigner returns he gives the Republicans a brand new twenty dollar bill each. They are happy as now they only have cut some more from their budget, like food. The foreigner returns home on his private jet. He goes back to his mansion and spends money on all his friends. The foreigner proceeds to fund all services in his city from the proceeds on sales of rocks on the Republicans land. Never once did the Republicans think of taxing the foreigner. They just thought of cutting their spending. The revenue for a better Republican life was right in front of them. They were too stupid to see it.
My budget responds to the [ObamaCare] legislation passed by Congress last year. I firmly believe that many aspects of the law are unconstitutional, and I will continue to fight to have them overturned. In the meantime, however, the law imposes many deadlines, and we cannot wait until litigation is resolved.
The Budget includes $19.6M total funding ($2.25M in General Fund) to subsidize many of the items required to prepare for implementation of [ObamaCare], for bureaucratic mandates such as "studies, surveys, and the design and implementation of an eligibility system to assist in determining if citizens are eligible for Medicaid or to participate in the healthcare exchanges."
What a complete waste. Sandoval should just refuse to implement (nullify) the law. If Washington threatens to stop our HHS reimbursements then Sandoval should threaten to enact Legislature to ban Medicare withholding in this state (or else put it in escrow).
Of course he won't do anything of the sort. Sandoval believes in a large, powerful federal government. It's as though he was dispatched here from Washington like a Roman prefect.
Here is a question that no Republican poster has ever answered here. Facts: Nevada mining pays about $ 20 million in taxes. The net profit is $8 billion. Four of the five top mines are owned by South African corporations. That means the majority of the profits leave Nevada and the country. It's obvious the State of Nevada Government is allowing the mining to pay a minimal tax due to century old laws. Why do the Republican Governor and his Repuplican Legislators refuse to change the tax system on mining? Remember those profits are not used in Nevada. This is a state matter I am asking. Harry Reid is a federal official and does set policy as a governor or in the state legislature. Answer Republican posters. You can't I know. It's hard having to say that it is stupid letting South African corporations steal revenue from Nevada. It's hard saying raise taxes on mining because it's the right thing to do. Those revenues would balance the budget without cuts. Go ahead and answer anyway.