Restoring state worker cuts off the table

Faced with rising costs that are more than eating up revenue gains in this weak economic recovery, Gov. Brian Sandoval has issued orders to the state Budget Division and agency heads that take back his promise to restore pay and other cuts imposed on state workers last session.His budget office in March issued an all-agency memorandum stating that cuts created by furloughs, pay cuts, suspension of merit pay and longevity pay would be added back. Sandoval himself said earlier this year that he intended to restore what had been taken from state workers by his administration and the 2011 Legislature.Gerald Gardner, Sandoval’s chief of staff, confirmed Friday that the new orders are to continue those reductions in the proposed 2014-2015 budget.“Because the law operates as another sunset on pay-related deductions, the reductions and furloughs had to be added back,” he said in a statement after being told three separate agency officials had confirmed the decision.But Gardner indicated the governor hasn’t given up on restoring the cuts suffered by state workers. He just doesn’t know if the money will be there to do so.“Despite a slight increase in state revenues, caseload growth in Health and Human Services as well as projected and mandated Affordable Care Act health care costs are simply much higher than anticipated,” Gardner said.The alternative is that Sandoval and lawmakers increase revenues, but the governor has consistently rejected the idea of raising taxes.Gardner said the final decisions on whether any or all of those reductions can be restored will depend on how much money is available after the state Economic Forum projects revenues for the rest of this fiscal year and the coming biennium.The reductions have been a sore point for state workers who complain that the cuts amount to a tax increase on them so that businesses in Nevada don’t have to pay more taxes.Altogether, restoring those cuts would require about $200 million during the next two years. They include a 2.5 percent pay cut for all workers and six unpaid furlough days each year for another 2.3 percent cut. Restoring those would cost an estimated $120.5 million. Restoring suspended step increases and merit pay would cost another $65 million over the biennium and adding back longevity pay about $7.4 million. The total of about $200 million doesn’t include the cost of restoring 2.5 percent cuts imposed on state funding to K-12 education, which will also be a substantial number.Sandoval gave the order because of huge increases in costs the state can’t control. Those include inflation, particularly in medical costs, federal mandates, court orders and caseload increases. The biggest issue on the list is the rising Medicaid caseload which, by itself, more than eats up the increases the state has seen in its primary revenue generator, the sales tax.But there are other costs the state can’t control as well, including the Clark County demand for the return of $102 million in property tax money taken from the county to help balance the state budget. The county has sued, arguing the Nevada Supreme Court’s 2011 ruling in the Clean Water coalition case applies to that money grab as well. The 2011 ruling required a big refund from the state to Clark County government entities.Sandoval in March put K-12 education — roughly $1.1 billion of the General Fund budget — outside the caps imposed on all other agencies. It wasn’t clear whether the governor’s new order also changes that.The news comes just 10 days before state law mandates the release of agency requests for the coming budget cycle. Those requests are reportedly coming in pretty much in line with the governor’s budget caps. Excluding K-12 funding, they cap the General Fund budget at a total of $3.96 billion for the biennium.Some, particularly small agencies, were harder hit than anticipated by the reductions in staff. Some increases to specific small agencies are expected to come through in the governor’s recommended budget.Numerous agencies have complained that, with the pay and accompanying benefit reductions, they are having a lot of difficulty hiring and keeping good staff. They say those workers often move into available local government positions that haven’t suffered the same reductions.Administration officials already have conceded they’ll have to maintain the $600 million worth of tax hikes used by the governor and 2011 Legislature to balance the current budget following the Clean Water Coalition ruling.The 2011 tax hikes included higher rates for the Modified Business Tax, keeping the short-term car lease tax in the General Fund, extending advanced payment of the net proceeds of mines tax and maintaining the higher Local School Support Tax along with the higher business license fees.Gardner indicated that keeping the sunsets on state worker pay cuts as well as the sunsets on the higher taxes and fees is still on the table depending on revenues.