You thought California, Illinois, and New Jersey were in bad shape? They’ve got nothing on Nevada. (via Paul Kedrosky)
AP:CARSON CITY, Nev. — Nevada’s budget is so far out of balance that by one account the state could lay off every worker paid from the general fund and still be $300 million in the red. The economic downturn has hit so hard that prisons may be closed, entire colleges shuttered and thousands left without jobs.
Against the backdrop of an imploding economy and an $881 million shortage, Gov. Jim Gibbons will try in an emergency “State of the State” address Monday to explain the depth of the state’s financial crisis and how fixing the gaping hole in the budget.
It won’t be pretty.
Nevada, with a heavy reliance on discretionary spending through gambling and sales taxes, has been especially hard hit by the recession as tourists and gamblers hold on to their money. The state’s unemployment rate has hit 13 per cent, and a once booming housing market that created thousands of high-paying construction jobs has gone bust, with Nevada topping the nation in foreclosures.
In his address, Gibbons plans to call the Legislature into a special session in late February and instruct lawmakers on areas they can focus on. It will be left to the state Assembly and Senate to tackle painful education and social services cuts.
“Nevadans need to get used to the idea of shrinking state government,” said Gibbons’ spokesman Daniel Burns.
Senate Majority Leader Steven Horsford, D-North Las Vegas, said Nevada faces “very, very ugly” options. Horsford will give the Legislature’s response immediately after Gibbons’ televised 6 p.m. speech.
Details of the governor’s address have not been released. But the first-term Republican who is seeking re-election has released pages of proposals for closing the hole in the $6.9 billion budget passed by the 2009 Legislature.
The governor has said he anticipates 234 state layoffs, and notices already are being sent to employees who must be given a 30-day warning.
Lynn Hettrick, deputy chief of staff, said the governor wants to try to avoid more layoffs because the state must pay the full cost of unemployment benefits for affected workers. Nevada is on track to borrow $1 billion from the federal government to meet jobless claims because its unemployment insurance trust fund has gone broke.
“When we lay somebody off, it doesn’t save us very much money,” Hettrick said. “Between that and taking the money out of the economy, it really doesn’t make sense for Nevada to lay off people.”
Still, budget cuts could result in thousands of layoffs with the shock waves reverberating for years.
While Gibbons has told state agencies to prepare for 10 per cent cuts, his proposals so far total only $418 million, less than half the deficit.
Assembly Speaker Barbara Buckley, D-Las Vegas, said balancing the budget would require 22 per cent cuts across the board. She said the state could lay off every worker paid from the state general fund – and still be $300 million short.
Gibbons, a staunch no-tax proponent, has said new taxes are not an option, and legislative leaders seem to agree raising taxes is unpalatable in the sour economy.
Eric Herzik, a political science professor at the University of Nevada, Reno, said the governor’s speech will set the tone for Nevada’s immediate future.
“This is a time for Jim Gibbons to either cling to his very limited vision of Nevada, or articulate a vision that is very different than the past. Everybody talks about a diversified economy, getting away from a reliance on gaming. But so far nobody’s done anything about it.”
Nevada’s education system could take the brunt of the blow.
Schools superintendents have pleaded for flexibility from mandates on class sizes and full-day kindergarten, and appealed for an emergency declaration to suspend collective bargaining agreements with teachers. They also proposed reducing the required 180-day school year. Each day eliminated would save about $13 million.
While most state employees beginning last July were required to take one day off per month without pay, teachers were essentially exempt because of their contracts.
Administrators say unless negotiations are reopened and teachers agree to salary cuts, layoffs are unavoidable.
Walt Rulffes, superintendent of the Clark County School District, the nation’s fifth largest, said without concessions, a 10 per cent budget cut would require him to lay off more than 2,000 teachers.
But Lynn Warne, president of the Nevada State Education Association, opposed cutting teacher salaries unless it was agreed to through collective bargaining.
“I must tell you that we all are tired of the hand-wringing and the seemingly rehearsed response, ‘There is no appetite for taxes,'” she said during a recent Interim Finance Committee hearing.
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