Nevada lawmakers have voted to accept Gov. Steve Sisolak’s initial plan to address an $812 million hole in the state’s budget, including $88 million in cuts, a major step to address the financial damage of the COVID-19 pandemic and related business shutdown.
The vote came during a Friday meeting of the Interim Finance Committee, which directs financial operations of the state while the Legislature is not in session, and split down party lines with all Republicans on the board opposing the motion over transparency concerns.
Outside of a few technical adjustments, the plan adopted by lawmakers largely followed what Sisolak’s office unveiled on Tuesday. Plummeting tax revenues from the COVID-19 related nonessential business shutdown helped lead to an $812 million shortfall in the state's $4.4 billion fiscal year budget, leading Sisolak to declare a “fiscal emergency” last month and take drastic steps to address the budget hole.
The plan adopted by lawmakers included a combined $88 million in cuts to executive branch agencies and reversions of dollars appropriated for one-time use. It also relies on $401 million taken out of the state's “Rainy Day” budget reserve fund, federal reimbursement through the CARES Act and a host of other transfers. Nevada is constitutionally required to have a balanced budget, unlike Congress, which can spend from a deficit.
Susan Brown, director of the Governor’s Office of Finance, said more specific details about state agency cuts would come during the committee’s next scheduled meeting on June 25. She also said that lawmakers will also have the opportunity during that meeting to go over another $107 million in potential cuts and savings identified by the budget office, including bond and interests payments and $25 million in construction funds for a UNLV medical school.
But Republican lawmakers on the committee said that the plan provided by the governor’s office and adopted Friday ignored potential input and collaboration with the legislative branch and gave too much power and oversight to the governor’s office.
Republican Sen. Ben Kieckhefer said he understood and agreed with many of the proposed reductions in spending, but said he was frustrated with the “one-directional” and not collaborative process in addressing the budget shortfall.
“The notion that this is a step in the process and then we're going to do what the governor tells us to do next is not the way I want to go about this process,” he said. “I don't think it's healthy.”
Republican Senate Minority Leader James Settelmeyer said he was also concerned about transparency and said state leaders should have begun preparing the budget cut process back in March when the initial business shutdown began and tax revenue from the casino industry dried up.
“I appreciate the fact that we have an emergency,” he said. “But I think that emergency could have been made a lot softer, if we would have done this planning and cuts sooner.”
But Democratic Assemblywoman Maggie Carlton, who chairs the committee, said that lawmakers had to deal with the situation as they could and this budget cut plan was one of several steps that lawmakers will take to deal with the budget issues.
“I believe that this committee has a responsibility to fulfill its duties to address the shortfalls that are happening in this fiscal year, knowing full well that it's not going to all happen at one time,” she said.
Several lawmakers also raised concerns that the funding plan would leave the state’s main budget account below a five percent ending fund balance — something not required in state law but traditionally done because it affects the state’s bonding capacity and fiscal health. Brown said that the current fiscal year would leave the state about $50 million short of that five percent figure, and much closer in the 2021 fiscal year.
Carlton said that it would be desirable to get to that ending fund balance figure, but that she and other policy makers were not willing to make additional cuts to core services just to hit a certain percentage.
“I think every state in the union is in a position to where they're not sure where their ending fund balances are going to actually be,” she said. “Something that I've said many, many times in the Legislature is that you don't put money in your savings account if you can't afford to feed your kids.”
Lawmakers and budget officials are somewhat limited in what kinds of cuts they can consider outside a full legislative session. All of the cuts approved on Friday came from the state’s authorizations budget bill, which includes language allowing budget officials to make cuts of no more than 15 percent from individual agencies.
But making other cuts or changes to the state’s budget — an idea floated by some Republican lawmakers — would likely require a special legislative session.
State leaders have made it clear that a special session to address ongoing budget issues, as well as some potential criminal justice reforms, is on the horizon.
If and when lawmakers do meet, they’ll likely have to focus on squaring an estimated $1.3 billion revenue shortfall in the state’s upcoming fiscal year, which begins in July. Already, Sisolak has announced budget cutbacks including monthly furloughs and merit pay freezes for state workers, as well as about 50 anticipated layoffs.
Although Friday’s meeting was focused on dealing with the budget woes for the current fiscal year, most of the public comment for the meeting was dominated by discussion about the furloughs and effect on the state’s workforce.
Many individuals and groups said that state lawmakers should try to balance out the cuts with increases in tax revenue elsewhere; the Nevada State Education Association called for a one-to-one match of any spending cuts with new revenue.
Harry Schiffman, president of AFSCME Local 4041, said that lawmakers need to ensure that state employees (newly empowered with the right to collectively bargain after the 2019 Legislature) cannot go through the same prolonged salary freezes and years of furloughs that occurred during the last economic downturn.
“Every time our state falls on hard times, state employees are always on the menu,” Schiffman said. “Now, we demand a seat at the table.”