$3 billion plus shortfall next budget cycle

The Gibbons administration and lawmakers used every trick in the book to fill the $805 million hole in the current budget.

But that shortfall pales in comparison to what they will face when the 2011 Legislature meets to prepare the next state budget. A review of figures provided by the Legislative Counsel Bureau and the Budget Office shows that the current budget contains $3 billion in revenues that just won't be there in 18 months.

Start with the American Recovery and Reinvestment Act (stimulus money). A total of $763.3 million worth of federal money is in the current budget and, unless the federal government creates another stimulus program, won't be there for the 2012-2013 budget cycle.

Fully half that total is in Medicaid and related entitlement program funding.

But the biggest single piece of revenue which, under current law, will not be available for the next budget is in the "revenue adjustments" - tax increases - approved by the 2009 Legislature. Almost all of those increases are scheduled to "sunset" June 30 2011. They total $571 million this fiscal year and $579 million for Fiscal 2011 - a total of $1.15 billion.

Another statutory change approved in the 2009 session was the state's furlough plan designed to reduce state salaries 4.6 percent by making employees take an unpaid day off each month. It too is scheduled to sunset, which will add about $300 million to the total revenue shortfall faced by the state.

Among those revenue sources is the $219.8 million in room tax hikes approved by voters. Under terms of that ballot question, those revenues go to K-12 Education next budget cycle, not to the state. The $83 million business license fee revenue, $345.7 million from the higher Modified Business Tax also sunset unless lawmakers decided to continue them. While the same applies to several other levies raised by the 2009 Legislature, the largest remaining hike on that list is the temporary increase in the portion of the sales tax dedicated to public schools. Raising the rate from 2.25 percent to 2.6 percent for this budget cycle only is expected to generate $275 million over the biennium.

When those impacts are added together, they come to more than $2.2 billion in funding the state would have to find in order to continue existing programs without further reductions.

Director of Administration Andrew Clinger confirmed those numbers, but said that doesn't include what are called "roll-ups" - increases in expenses the state faces which aren't within its control. He said the total there is uncertain at this point but that the last two cycles, roll-ups have come to just about $1 billion.

The largest are tied to caseload growth in entitlement programs ranging from Medicaid and Welfare to the prison population to public school enrollment. This budget cycle, caseload growth cost the state $469 million.

Another cost is medical and healthcare inflation which results in federally ordered increases to Medicaid and other rates - a $52 million hit this budget cycle.

That inflation also hit mental health programs and prescription costs in Nevada's prisons for several million apiece.

When everything is added together, the total is just under $3 billion. Whether the final number goes higher or lower depends first on how quickly Nevada's economy begins to recover.

Contact reporter Geoff Dornan at gdornan@nevadaappeal.com or 687-8750.