Nevada lawmakers voted along party lines to approve transferring the entirety of the state’s ‘Rainy Day Fund’ reserve budgetary account to plug massive holes in the state’s budget.
Members of the Interim Finance Committee (a committee of lawmakers that oversees and approves state spending during the interim period between legislative sessions) voted to approve moving the reserve funds during its meeting on Monday morning — a process that began last week with the declaration of a “fiscal emergency” and estimation that the state was facing between a $741 million and $911 million budget shortfall for the fiscal year ending on June 30.
Susan Brown, the head of the Governor’s Finance Office, said the state was anticipating cash flow problems and could possibly run into difficulties making payments on important public programs including K-12 education, higher education and Medicaid without tapping into the reserve budget account or using federal CARES Act dollars to plug budget holes. But she said use of the reserve dollars plus future expected budget cuts meant the state was in a “pretty solid” position for the current fiscal year.
Democratic lawmakers, who compose 13 of the 20 members of the committee, voted to transfer the entirety of the budget reserves to the state’s general budget account, saying that any delay could cause uncertainty and compared it to transferring money from a bank savings to checking account.
“We, for the first time, put money in the Rainy Day Fund in 2017 for this exact purpose, and thank God that we did,” Assembly Speaker Jason Frierson said. “But we have this money in a rainy day fund. And I don't think you stop paying your power bill because you don't know what's gonna happen next month.”
But Republican lawmakers on the committee balked and voted against the motion, saying they wanted more details on the state’s plan to balance the budget before approving a transfer of the entire Rainy Day Fund, raising concerns that it could affect the state’s credit rating and bonding capacity. Several lawmakers suggested either taking out a portion of the funds now and taking more out later, or using federal CARES Act funds to make those payments if necessary.
“I certainly don't question the ultimate need for this money to be used this fiscal year to help us come up with a comprehensive solution to close our budget deficit,” Republican Sen. Ben Kieckhefer said. “But the argument that's being made that we need to pay our bills doesn't seem to carry water when we have cash in the Treasury to cover our bills.”
Because the Legislature is constitutionally limited to meeting once every two years, state lawmakers are required to approve budgets on a two-year cycle, which means expected revenues and spending were set back in June 2019.
But expected revenues have cratered amid the emergency shutdown orders issued by Gov. Steve Sisolak to slow the spread of COVID-19, which has led to massive holes in the current $4.5 billion budget that heavily depends on sales and gaming taxes. In early April, Sisolak’s budget office asked state agencies to prepare for potentially large budget cuts — up to $171 million for the 2020 fiscal year and $687 million over the two-year budget cycle.
Brown, the head of the governor’s budget office, said the office was finalizing a plan that included agency budget cuts, eliminating one-time spending allocations and other options, but did not delve into specifics.
“We are working through proposals that were put forth by agencies and we will be coming forward with a plan to IFC to capture those savings that have been identified by those agencies,” she said.
But Republican lawmakers said they wanted to know more details about plans to balance the budget, from potential employee furloughs to budget cuts, before spending all of the state’s reserve funds.
“I know everybody's just going crazy,” Republican Assemblyman Jim Wheeler said. “This is a true emergency. But, you know, give us some idea, other than we are looking at things and I think they're going to be okay for (Fiscal Year) 2020.”
Several lawmakers suggested that the state use its portion of the federal CARES Act funding ($1.25 billion for Nevada) to help make payments due at the end of the month. The U.S. Department of Treasury has released a guidance allowing states to use funds from the program to meet any “necessary expenditures” incurred as a result of the COVID-19 pandemic.
But committee chair and Democratic Assemblywoman Maggie Carlton said doing that would take COVID-19 response funds away from other assistance programs and ways the state could help people affected by the coronavirus, and that the state would ultimately still be on the hook to make up those payments to the school district and to balance its budget.
“If we do use those for our cash flow issues, then they're not available to help the Nevadans who are truly in need right now,” she said. “So I believe we would be put in a tough position of making that choice, whereas we do have money in the savings account right now to help us get through and figure out how to get all these bills paid off.”
Members of the Interim Finance Committee will meet again on Thursday to discuss creating and naming members to a new subcommittee designed to oversee and advise the state’s use of federal COVID-19 relief funds and grants.