Budget falling short as demand for welfare and Medicaid rises

Nevada is being hit with a double whammy that could put the state in the red by $65 million, Gov. Kenny Guinn told lawmakers Tuesday.

While tax revenues are nearly $38 million below what they should be, the demand for Medicaid, welfare and related services has jumped sharply in the past five months.

"What we're looking at today is not only a lowering of revenue streams but driving up of (temporary assistance to needy families)," he said. The assistance program replaced Nevada's welfare system.

Even so, Guinn urged the Interim Finance Committee not to reduce funding for those support programs.

"This is not the time to cut back on funding for CHIPs (the children's health insurance program) and Medicaid," said Guinn. "I'm not going to be part of that and I don't think you will either."

Budget Director Perry Comeaux told members of the Senate and Assembly money committees Nevada is $6.8 million below projections in sales taxes from July through November. Collections for the local school support tax are even lower -- important because the state is legally required to make up any shortfalls to the school system.

Between gross revenue and casino entertainment taxes, the state's gaming receipts are more than $23 million below projections used to build the budget, and business license taxes are off $201,772.

Altogether, Comeaux said this comes to $37.8 million as of the end of November. He said if the revenues don't recover, the red ink could total more than $65 million by the end of the fiscal year in June.

He said, however, there are hopeful signs the downward spiral won't be so bad.

Comeaux advised lawmakers the executive branch has already saved at least $17.6 million more than anticipated for the state's ending fund balance. And he said the governor's austerity measures -- primarily delaying new hires or holding vacant positions open instead of filling them -- can be expected to save even more to offset the revenue shortfall.

"Revenues are coming back, but it's still going to be a long time before it gets back to what was projected," he said.

To compound the state's growing budget woes, Human Resource Director Mike Willden said demand for the major programs serving the poor and unemployed has risen sharply -- especially since Sept. 11.

Temporary aid to needy families had 18,058 recipients at the end of December 2000. Willden said the caseload was 30,427 this past December and that most of the increase occurred because of layoffs and other problems following the terrorist attacks. In fact, at the end of August the caseload was 21,330.

Willden told lawmakers, however, they are expecting more applicants in all programs because culinary union benefits ended with the new year for many of those laid off in September and October. The resort industry put 11,500 people on the street because of lost business during that period.

He said if the program keeps rising to 40,000 recipients by year's end, the state will have a shortfall this fiscal year of almost $20 million.

Medicaid, he said, could cost the state even more. He said total Medicaid figures saw a similar jump, rising from 126,775 at the end of August to 141,029 Dec. 31.

"The Medicaid growth is almost exclusively related to families and children coming onto the program," he said.

The increase, he said, produces a $36 million shortfall this fiscal year.

Nevada CheckUp, the insurance program for children of Nevada's working poor, is already $4.5 million short this year. A third of that -- about $1.5 million -- comes out of the state's coffers.

Willden said the shortfall in Medicaid can be made up from the $26 million in the intergovernmental transfer fund, which exists to pay Medicaid needs. Since the money would be matched by federal funds, a total of $54 million in shortfalls could be covered this year.

He said the governor has also ordered some new programs delayed anywhere from three to six months to save some money. But Willden emphasized that, at this point, no programs are being cut and none will have their number of recipients capped.

He said, however, that could happen if the economic picture doesn't improve because, "at this rate, by next February to March, we're going to be through our reserves and have spent all our allocations."

Guinn's Chief of Staff Marybel Batjer said she hopes it won't come to this.

"These are horrible decisions," she said. She pointed out that improving a long list of social services programs was one of Guinn's top priorities during the 2001 Legislature. She said the governor intends to protect those programs if possible.