Gov. Brian Sandoval said Tuesday that his proposed budget for the next biennium will prolong taxes and fees that had been raised to balance the current budget.
He said the alternative would be an unacceptable cut to education spending.
"I am not going to cut education," he said in a news conference after Tuesday's Board of Examiners meeting.
The taxes and fees are among those that had been scheduled to end automatically, or "sunset," on June 30, 2013.
Sandoval said that while revenues are coming in a bit ahead of projections used to build the current budget, a rising Medicaid caseload is pretty much eating that up. Medicaid is funded jointly by the federal and state governments.
"Medicaid is increasing dramatically," Sandoval said, adding that the state will also face extra costs as a result of the new health care law, the Patient Protection and Affordable Care Act. "I'm not going to reduce services to the most vulnerable," he said.
Sandoval hedged on exactly which taxes and fee increases would be extended, saying some of that depends on the economy.
The list of taxes and fees includes the Local School Support Tax increase, Business License Fee, Modified Business Tax hike, sales tax commissions, slot fees and government Services Tax. Those revenue streams add up to a total of $696.7 million in the current two-year budget.
He didn't say whether he planned to continue counting the 3 percent voter-approved motel-hotel room tax as part of the state's K-12 budget. That allowed the state to reallocate $226.4 million in General Fund money from the school budget this biennium.
Sandoval said that the details haven't yet been worked out and that there are other issues on the table, including state worker pay and furloughs that are also scheduled to automatically sunset in June 2013.
"One consideration is to end the furloughs," he said.
The monthly unpaid furloughs and the 2.5 percent pay cut imposed on state workers account for $364.6 million in savings, which was used to balance the current biennial budget. In addition, the suspension of merit pay increases, worth an additional $204.8 million over the biennium, will sunset unless the law is changed.
Sandoval's staff will hold the first major budget briefing for state agencies Thursday in the legislative building, rolling out instructions for the new performance-based budget. Sandoval said agency heads will be told to essentially keep their total spending flat for the next budget cycle.
"I've instructed the Cabinet not to ask for 5-8-10 percent more, like they have historically," he said.
Asked what he expects from the conservative candidates running for legislative seats who are already saying government needs to cut more, Sandoval pointed out that spending on K-12, higher education, human services and public safety make up more than 90 percent of the General Fund budget, with education accounting for half by itself.
"If anybody's going to propose significant cuts, it will have to come from K-12 education," he said.
Senate Democrats applauded Sandoval's decision to protect education from further cuts but said that doesn't fix the problem.
"What we need are long-term solutions to resolving our budget problems, not postponing them for another two years," said Democratic state Sen. Mo Denis.
Other unavoidable costs that must also be included in the next budget include at least $80 million to begin repaying unemployment loans from the federal government. In addition, a number of one-time revenue sources may not be available again. When everything is added together, the potential hole in the next budget cycle would be about $1.6 billion.
Conservatives were also among those reacting to Sandoval's announcement.
"After breaking his 'no-new tax' promise to voters at the end of the 2011 legislative session, it is extremely disappointing for taxpayers to see Governor Sandoval break his promise again, 10 months before the legislative session even begins," said Geoffrey Lawrence of the Nevada Policy Research Institute.
Senate Republican Leader Michael Roberson said he supports Sandoval's plan to lift the sunsets because it means the governor and lawmakers won't have to impose new taxes on Nevadans to balance the budget. He added that he, too, objects to any further cuts to education.
