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EDITORIAL: Don't put it on the credit card

Using bonds to balance budget a very bad idea

Bad times inevitably lead to a bounty of bad ideas from elected officials. But the state's worsening budget outlook has at least one Nevada politician considering the grand whopper of poor fiscal policy: going into debt to fund operating expenses.

Gov. Jim Gibbons has already ordered about $400 million in cuts to the planned rate of growth for the state's public schools, public safety agencies and welfare and social programs. Those spending reductions were met with calls from some state lawmakers for immediate tax increases to spare government from the kind of belt-tightening going on in households and businesses from Boulder City to Battle Mountain.


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  • On Friday, the Department of Taxation announced statewide sales tax collections for January were down nearly 5 percent from the same month a year ago. So a new round of budget cuts, expected to include layoffs, is expected in the weeks ahead. Officials now estimate that the two-year, $7 billion budget passed last year will wind up almost $900 million in the red by next summer.

    Senate Minority Leader Dina Titus, D-Las Vegas, wants alternatives to more across-the-board budget cuts. Among her ideas: floating bonds to cover part of the revenue shortfall.

    That's the equivalent of putting general fund expenditures on a giant credit card.

    And what can be said of every person who carries big credit card balances from month to month without paying them off? They're living beyond their means.

    Nevada is not alone in addressing a budget deficit. About half of the states have revenue shortfalls as a result of the stalled economy and a housing market that apparently has not hit bottom.

    But the two states with the worst budget problems have one thing in common: billions and billions of dollars in bond liabilities. California and New Jersey have borrowed money to balance their budgets in good times and in bad, and unlike school and welfare spending, these expenses can't be made to go away with the stroke of a pen. Debt payments must be accounted for before new budgets are funded.

    California Gov. Arnold Schwarzenegger, facing a $16 billion budget deficit that could reach $20 billion, is slashing Medicaid and education spending -- tens of thousands of teachers and other school workers could be laid off.

    Those measures are necessary, in part, because the state has more than $100 billion in outstanding and unissued bond debt, including a $15 billion bond approved by voters in 2004 to "balance" California's budget. New Jersey Gov. Jon Corzine, addressing a $3 billion revenue shortfall and more than $30 billion in bond debt, wants to boost tolls on the state's highways to cover most of the costs. Both states are considering park closures as well.

    California and New Jersey have learned the hard way that issuing bonds to prevent program cuts doesn't prevent pain, it prolongs and amplifies it. If Nevada makes the mistake of going into debt to put off the shrinking of bureaucracies today, lawmakers will doom the state to brutal cuts when the next slowdown rolls around.

    Sen. Titus frequently complains that Nevada has scores of needs. She should imagine trying to prioritize and fund those needs knowing that millions of dollars of each year's available revenue must first be set aside to cover the financing costs of reckless spending in years past.

    Unlike California and New Jersey, Nevada's economic prospects are promising. Tens of thousands of new jobs will be created on the Las Vegas Strip in just the next few years. Because of Clark County's resilient resort industry, Nevada tends to emerge from economic downturns faster than its neighbors.

    Assembly Speaker Barbara Buckley, D-Las Vegas, said there was no discussion of a special legislative session or tax increases during Monday's budget meeting. Good. Gov. Gibbons will meet with lawmakers again next week to discuss how to bridge the state's remaining budget shortfall. They need to weather this fiscal storm by cutting spending -- reduce operating expenses, delay the construction of new buildings and lay off nonessential personnel.

    Debt must remain off the table.

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    David Johann wrote on April 01, 2008 10:08 PM: The sad thing about "tim" is that he does not even know what he does not know.


    tim wrote on April 01, 2008 07:47 PM: david you just described yourself in your fourth paragraph. way to go,its about time.


    tim wrote on April 01, 2008 07:45 PM: i have an idea,lets eliminate dina titus as an elected official.money saved by her overpaid income and money saved by not having her spend more of our money on her dumb ideas.john f.when dont you ever stick up for anyone in gov? oh yeah when its our gov.you keep saying you never worked in government,i doubt that.


    David Johann wrote on April 01, 2008 04:27 PM: I know where we can save a lot of money: further cutbacks in the Nevada State staff that surveys endoscopy clinics and nursing homes.

    On the national level, we can do away with laws regulating the issuing of mortgages. Should save a lot there as well.

    And the hotels are far too burdened by fire inspections and complying with fire codes.

    It's amazing capitalism can even survive with all of these California-style, left-wing, communist, socialist, collectivist, nanny-state hindrances.

    Are ya' with me now, AM radio listeners?


    Jon H. wrote on April 01, 2008 01:36 PM: John F.

    In a word many poster are experiencing:

    Schadenfreude

    noun

    Definition: gloating at somebody else's bad luck: malicious or smug pleasure taken in somebody else's misfortune.

    It is likely caused because of the class war between the Private sector and the Public sector that has developed over the last twenty years, due to the inequities of wage, job security and benefits between the two groups.

    The public sector continues to raise the specter of a class war between the rich and poor, but in fact, I suspect this is in fact simply a red herring, to hide the real “brewing” class war.

    So, John F., your arguments are sound . . . but are falling on deaf ears.


    John F wrote on April 01, 2008 11:57 AM: "They need to weather this fiscal storm by cutting spending -- reduce operating expenses, delay the construction of new buildings and lay off nonessential personnel."

    Let's start by laying off the RJ editorial board and sending their salaries to Carson City.

    It's a very easy thing to say let's eliminate someone else's job, isn't it?

    Lay people off and we save the cost of their salaries while having to pick up the cost of their unemployment, their welfare, etc. We also lose the benefit of the services they provide. Do the editors believe that the medical facilities inspectors we don't have are non-essential employees? Is not having them saving us money or costing us money right now? This medical situation has left the people of Nevada strapped for services and will probably keep good doctors from ever coming here while sending malpractice rates through the roof. More frequent inspections may have averted this entire mess. The costs of doing without government services may not be apparent, but as the Colonoscopy Center scandal shows, they can be real and very damaging.


    Lee wrote on April 01, 2008 11:13 AM: The police demand more and more money, but the gang problem just gets worse. Obviously, they aren't effective. But they still love to give working people traffic tickets.


    ZZ wrote on April 01, 2008 10:48 AM: Cops have a surplus of tax payers money. Why don't they use that. After all we are paying for it..


    John F wrote on April 01, 2008 09:36 AM: I agree with the editors that we shouldn't be borrowing money to pay for the needs of today. Where does that leave us, though? Our Governor steadfastly refuses to do anything that would increase revenues.

    That would be fine if our current revenues were up to the task of meeting our needs. We know, however, that current revenues do not meet our needs. Certainly we don't have enough money to adequately fund highway construction. We don't have enough money to adequately fund inspection of medical clinics. We don't have enough money to adequately fund education. We don't have enough money to....you get the idea.

    Since the raising of fees or taxes is a non-starter with the Governor, Senator Titus can hardly be faulted for exploring the possibility of different sources of revenue. The choices are clear and stark. The consequences of doing nothing, as the Governor proposes, will be far worse for the long-term health of our state than acting now to make up this shortfall.


    Fafner wrote on April 01, 2008 09:24 AM: Well, if we need to lay off nonessential personnel, we could start with the governor.


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