Nevada looking at $3 billion shortfall

Legislative leadership from both parties made it clear Wednesday they don't see much more room to cut the state budget if revenues continue to fall below projections.

But a spokesman for Gov. Jim Gibbons said she doesn't see him changing his adamant opposition to any tax increases.

The issue would come to a head if the revenue shortfall this fiscal year becomes so severe a special legislative session is needed. During a legislative session, lawmakers set their own agenda and can override a gubernatorial veto. But during a special session, Gibbons has the authority to set the agenda.

According to Chief of Staff Robin Reedy, it's unlikely that agenda would include any options to raise revenue, focusing instead on further budget cuts.

"What would you cut?" asked Senate Majority Leader Steven Horsford, D-Las Vegas, after emerging from a briefing with the governor and his financial staff on the budget and revenue situation. "We cut all we could possibly cut in the last session. There is no more."

He said the dilemma is the same as during the 2009 session.

"I believe we cannot cut and should not cut public education and services for our most vulnerable citizens," he said.

While he wouldn't go quite that far, Senate Minority Leader Bill Raggio, R-Reno, wasn't far behind Horsford. He said there were deep cuts proposed by the governor in the 2009 Legislature and that lawmakers "looked at the governor's proposals and added back what we thought were essential services."

"I would be hard pressed within legal areas to cut further," he said.

Raggio cited public education funding where he said costs are driven by negotiated teacher contracts that can't be ignored.

Reedy disagreed: "I wouldn't say there's nothing left to cut in the budget. I do think there are some things we could do."

She had no specifics to offer.

Horsford said lawmakers and the governor need to fix the state revenue system despite opposition from those who won't vote for any tax increase.

"I know it's going to take significant political will to do what is necessary," he said.

Raggio too acknowledged the shortfall the state faces, saying well over $2 billion in funding used to balance this biennial budget won't be available next time.

He said $781 million in tax increases will sunset, the stimulus funding will expire, there is no longer $300 million in the Rainy Day Fund, and $300 million in room tax revenues approved by voters will become public school money not available to the General Fund.

That, Raggio said is just part of the looming budget hole and doesn't include $1 billion or more in "roll-ups" - increased costs the state can't control including inflation, especially in health care - rate increases mandated by the federal government and contract increases such as office rent hikes.

Altogether, the total hole in the budget is expected to exceed $3 billion even if revenues come in as projected.

Removing the tax increase sunsets will likely be the first test facing the 2011 Legislature.

Assembly Speaker Barbara Buckley, D-Las Vegas, and Horsford both called on the Gibbons Administration to get the stimulus money Nevada has received spent to put people back to work.

"We urged the administration to get as many of the stimulus dollars down on the streets as soon as possible," Buckley said.

They pointed to nearly $100 million in funding for energy projects  tied up in the governor's Energy Office. They said money that could put people back to work has been available to that office since April.

Both the governor's office and lawmakers have said they won't know if or when a special session is necessary until they see first quarter revenue numbers at the end of November.