Lawmakers in Nevada are slated to gavel into a special session Wednesday morning to address a looming budget crisis. According to a report released by the Governor’s Office, Nevada is looking at a $1.2 billion deficit in the state’s general fund.
It’s likely to cause major disruptions in state services, including worker furloughs and cuts to one-time appropriations, among others. KUNR’s Michelle Billman spoke with reporters Paul Boger and Lucia Starbuck to learn what led to the budget shortfall and what state leaders plan to do about it.
Billman: Lucia, Nevada’s general fund is facing a shortfall of $1.2 billion, how did we get here?
Starbuck; Governor Steve Sisolak shutdown non-essential businesses near the end of March in an effort to curb the spread of COVID-19, but that has created catastrophic impacts on the state’s economy.
The state’s budget is largely dependent on sales tax, which has already seen a 30 percent decrease in revenue, property tax and gaming and tourism-related taxes. And tourism has completely diminished. Visitor volume was down about 97 percent in April of 2020. There was also a 99 percent decline in gaming revenue in May 2020.
Additionally, unemployment is the highest it has ever been. In late February, the state’s unemployment rate was about 4 percent. At the peak of the pandemic, it shot up to about 30 percent. It’s since come down a little, but it’s still well into the double digits.
Billman: What are the governor’s proposed cuts?
Boger: So, on Monday evening, Governor Sisolak’s Office released a 40-page report that outlines what steps they’re taking to cut roughly $1.2 billion dollars from the current biennium. That’s the two-year period covering fiscal year 2020 and 2021 that lawmakers appropriated for during the previous legislative session.
Under the proposal, the governor recommends more than half-a-billion dollars in cuts to state agencies and one-time appropriations. That includes at least 12 furlough days for all state and Nevada System of Higher Education workers. It also includes up to 50 layoffs and hiring freezes across the state.
[As a note of disclosure, KUNR staff members are employees of the State of Nevada since the station's license is owned by the Board of Regents to the Nevada System of Higher Education.]
The governor's plan would also redirect more than $180 million from special funds into the general fund. For example, he’s proposing that a portion of the revenue generated from the governmental services tax, which is typically earmarked for state’s highway fund, will now go to the general fund instead.
Billman: What about the state’s biggest line items: K-12 education and healthcare?
Starbuck: First, education is the state’s largest expenditure. In total, it accounts for nearly half of the state’s annual budget, so just like everything else, schools will take a hit, but state leaders have made it clear they that K-12 funding is a priority.
In his proposal, Sisolak leaves the state’s base per-pupil funding static, meaning it’s untouched; however, his plan calls for cutting $156 million from supplemental K-12 programs, including: class size reduction initiatives, school supply reimbursement funding for teachers, college and career readiness programs and school safety.
The state’s second-largest expenditure is health and human services. On that front, the governor’s plan cuts spending by $233 million by eliminating numerous programs for Medicaid recipients, including homelessness services, a cap on dental services, limits on physical therapy sessions and hospice services.
It’s also important to mention there is a proposal to roll back the reimbursement rate they pay healthcare providers to see Medicaid recipients.
Billman: We’ve talked a lot about the cuts that are likely to come. What does the governor suggest lawmakers do to increase revenues? How can the state offset some of the loses?
Boger: At this point, it’s clear state leaders are really hoping for some sort of federal aid. And while there is some debate on whether Congress will approve another round of federal aid packages, that’s likely weeks, if not months, down the road.
The second option is obviously increasing taxes, and while the governor didn’t specifically recommend that, he did signal that he isn’t opposed to the idea. One thing he did stipulate was that any tax increase would have to be within the state’s current tax structure. There will be no new taxes right now.
Billman: Paul, before we go, what should we expect from this special session? Will lawmakers take up any other issues outside of addressing the budget?
Under the governor’s proclamation which was released Tuesday night, lawmakers are fairly limited in what they can take up. This time around, it’s strictly about the budget. However, in a statement released Tuesday night, Sisolak says he may issue another proclamation allowing lawmakers to take up other issues at a later date.
This story was produced in partnership with This Is Reno.