Vol. 6, No. 2
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November 15, 2008
Nevada's Online State News Journal-- Serving Informed Nevadans Since 2003
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COPYWRITING
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Budget Woes Continue
To Inflict Misery
Some Are Calling For Increased
Taxes, Others For Service Cuts
Gibbons Calls For Voluntary
Salary Reductions
The 2008 elections are finally over, but the budget woes brought on by poor fiscal policies in the mortgage and banking industries, and a lack of congressional oversight are continuing, and many believe, will continue at least through 2010. As 2008 draws to a close, Nevada’s budget has been cut by more than $1.2 billion, the 2008-09 budget is being cut as you read this, and plans for the next biennial budget, to be developed during the 2009 legislative session are being sliced by at least another $1.5 billion.
There are no clear cut answers to the problem other than a constant working and reworking of the numbers. Governor Jim Gibbons says the next step, if it comes to that would be pay cuts across the board, including teachers. There are legal barriers to many of the cuts that were discussed by the governor, dealing with union and other contracts. Gibbons said he would be first in line for a pay cut. He pointed out that the holiday period is upon us, and it’s a time when people cannot afford a reduction in pay or to lose a job.
The governor had suggested voluntary reductions, but most state employee groups have said they oppose such a move. The leader of the teacher’s union agreed, and said there are legal points that would not allow for such a reduction. Gibbons said voluntary reductions in pay are far better than lay offs.
Tourism has fallen off dramatically, affecting both gaming taxes and sales taxes, and the state’s employment picture. The real estate market continues its tailspin affecting property tax collection, sales taxes, and employment. Only a fiscal recovery at the national level will have a large impact on Nevada’s economic picture in the months to come.
To compensate for the reduced state income, many are calling for higher taxes, among them the new leadership in the legislature. Both the Senate and the Assembly are now in the hands of a democrat majority. At a meeting between Governor Jim Gibbons, a republican who has said he will not support new or higher taxes, and the legislative leaders, the question of new taxes came to the surface. Gibbons was quoted as saying nothing is off the table, even regarding new or increased taxes.
Cutting the proposed 2009-11 proposed budget by $1.5 billion would reduce state services drastically, according to many, including the new Senate Majority Leader, Steven Horsford of Las Vegas. Senate Minority Leader Bill Raggio said the state’s survival is in question with that kind of budget reduction. While Gibbons is still very much opposed to new or increased taxes, it appears that he is listening to all sides in the debate, even accepting to a degree, the concept of new tax proposals.
The next legislature will convene in February, and Gibbons said he and the leadership will continue meeting prior to the session’s opening. At least one more meeting is scheduled for November 17. The next budget is expected to have about $5.7 billion available, but projected spending is at about $7.2 billion. If projections become worse over that two year period, even more cuts would become necessary. However, if the national economy began a rebound, if tourism picked up, if the housing and construction markets increased, there would be more tax money coming into the state’s treasury.
Those are the kinds of “ifs” that economists dream of but rarely discuss in public. Nevada’s highway infrastructure is falling behind in scheduled maintenance, many new programs have been put on the back shelves, and there is not much hope for help from Washington in the next congressional session. It would be the last session under the Bush Administration. The massive bailout of banking and mortgage institutions will probably not trickle down to a state level, according to most economists.
Banks are still being closed, the Federal Deposit Insurance Corporation (FDIC) has been very active over the last few months protecting the interests of those with accounts in failed institutions, and congress is still discovering just how deep this recession/depression is going to go. The nation’s unemployment rate has climbed to historic levels, the state’s unemployment figures are dramatically higher than in recent years, and the state’s tax structure is based on tourism and retail sales, two areas most affected by the fiscal problems.
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