Republican Gov. Brian Sandoval may be headed out the door, but he’s leaving his successor with a fully baked budget proposal that ramps up school safety spending, adds money to the weighted education funding formula and meets Nevada’s growing obligations to support Medicaid enrollees — all without raising taxes and while maintaining more money in reserves than ever.

Sandoval’s chief of staff, Mike Willden, shared details of the proposal with The Nevada Independent on Tuesday, a few days before the state’s Economic Forum is set to release its projection on how much revenue Nevada will collect in the next two years. Sandoval’s team is guessing the revenue projection will be about $8.8 billion — a substantial increase from the $8.1 billion budget in place now — but that much of it will be eaten up by the cost of maintaining programs and serving a growing state.

“Those are some of the things when people are asking, ‘Why does it take $8.8 billion?’ There are a lot of growth factors, a lot of rollups, a lot of significant changes, a lot of work still going on in education, and the governor hopes the incoming administration will have that same philosophy,” Willden said.

While proposing a budget is technically incoming Democratic governor Steve Sisolak’s job, Sandoval’s staff has put in major legwork over the last year and a half to ensure the proposal was fully developed and ready for whoever took the reins of the state in early January. Sisolak has the prerogative to tweak it, and the Democrat-controlled Legislature will spend the 120-day legislative session adapting it to their liking.

Sandoval’s plan calls for no new taxes. It also does not include funding for the Education Savings Account program and anticipates the state phasing out the use of a private prison.

Below are more specifics on the proposal.

REVENUE

Expiring tax credits, reduced tax rates

Willden said the $8.8 billion revenue forecast includes an extra $45 million a year that the state will no longer lose from the tax credits approved in 2014 for electric carmaker Tesla.

But Nevada will lose $43.5 million a year because of a so-called “buy down” of the modified business tax (payroll tax). A tax package lawmakers approved in 2015 called for permanently reducing tax rates if the Commerce Tax, MBT and bank branch excise tax overperformed projections by 4 percent or more. Willden said that the governor has not made a recommendation to the incoming administration about whether the Legislature should consider changing the buy down provision.

Nevada’s general fund will also lose $20 million in government services tax revenue collected from car registration fees; that money is reverting back into the highway fund where it was originally destined before the recession prompted lawmakers to pull money from the road construction account.

Re-routing marijuana tax revenue

Sandoval is also recommending that the state direct revenue from a 10 percent retail tax on marijuana, which passed during the 2017 legislative session and flows to the rainy day fund due to some last-minute political finagling, to state education expenses as Sandoval originally intended.

The tax has been generating about $4 million a month for the rainy day fund, which serves as a savings account for the state for use in an economic downturn. (Schools did not lose money in the shuffle; lawmakers used general fund money to backfill education budgets that were originally built around the excise tax.)

The state’s main education account, known as the Distributive School Account, will continue to receive revenue from the voter-approved 15 percent marijuana wholesale tax, which has generated about $27 million.

The wholesale tax is separate from the excise tax, which Sandoval proposed after voters already approved recreational marijuana sales in 2016. The excise tax produces about $50 million a year, but Willden said it could even end up generating somewhere in the range of $65 million to $70 million a year in the next biennium.

“It’s a growing revenue stream, no pun intended,” Willden said, adding that it can be tricky to predict the amount of marijuana sold. “We’ve only got a year and a half of experience on that, so it’s a little bit of a challenge to forecast what that looks like.”

“Rainy Day” reserve fund

In the interim, the additional $4 million a month from the pot excise tax has bolstered the state’s rainy day fund. Willden said the fund has about $229 million in it and that by the new year the fund should have close to $300 million in it, which he added will be the largest amount ever in the state savings account.

The rainy day fund will continue to grow through two mechanisms in state law: a 1 percent appropriations trigger, which means if one year of state spending is $4 billion, the state has to put $40 million into the rainy day fund; and an ending fund balance trigger that requires the state to put 40 percent of any leftover money in a budget year into the rainy day fund if the overage is greater than 7 percent.

Wilden said the governor is recommending that those two triggers remain in place to ensure that the rainy day fund grows year over year as the state’s budget grows, although he’s not recommending new allocations to that savings account.

“Nevada’s a big household, a big family, and families prepare for a rainy day,” Willden said.

SUPPLEMENTAL APPROPRIATIONS

The governor is recommending “supplemental appropriations” for several programs including the state’s Distributive School Account, Medicaid, the Division of Forestry and the Department of Corrections. Willden described supplemental appropriations as backfilling in areas where the state “missed the mark” and did not budget enough for the current year’s expenditures.

Willden said that the supplemental appropriations will not come from the $8.8 billion two-year budget but from surplus revenues in the current fiscal year, which are a product of both better-than-forecasted revenue and agencies that didn’t spend as much as they had projected.

“We’re pretty healthy in FY19 in our ability to deal with these supplemental needs,” Willden said.

Sandoval has recommended a $31 million appropriation to the Distributive School Account to cover for school district budget shortfalls, a $15 million appropriation to Medicaid to account for caseload growth and higher-than-expected use of services, a $9 million appropriation to the Division of Forestry for all of the fires it has responded to over the last two years, and a $5 million appropriation to the Department of Corrections for its employees’ higher-than-expected overtime costs.

ONE SHOT APPROPRIATIONS

In addition to supplemental appropriations, the state also makes one-off expenditures in the forthcoming budget known as one shot appropriations. The governor is recommending that the state spend $4.5 million to buy the Division of Forestry a new helicopter, $1.5 million for new firefighting equipment for the division, a couple million to the Department of Corrections for new buses and vans to transport, $8.6 million to the Washoe County School District to compensate for the improper accounting of students who enrolled in online schools rather than attending the school they are zoned for, and $13 million for new Nevada Highway Patrol vehicles.

There are also several information technology-related one-shots Sandoval is recommending, including $42 million for a new accounting and human resources system for the state called Smart 21, $17 million for the Child Support Enforcement system, and $4 million for the Department of Corrections. Willden said that there will likely be 10 to 12 major IT system upgrades in total over the next biennium.

All of the one shot appropriations will be funded out of the state’s surplus from the current fiscal year.

ONGOING EXPENDITURES

Nevada's K-12 education system faces a number of routine budget increases, including projected 1.3 percent enrollment growth that's expected to cost $134 million over the biennium.

Beyond that, the state expects to pay $168 million more in teacher salaries as educators climb the pay scale, and $37 million more over the biennium to cover the rising cost of school staffers' health care.

In addition to those, Sandoval's staff revealed other targeted budget goals.

Weighted school funding

Sandoval proposes nearly doubling the amount the state spends on its weighted school funding formula, from $36 million to $70 million each year. The “weights” are an effort to move from a 50-year-old school funding formula to one that allots more money to students who are struggling.

In the current biennium, schools receive an additional $1,200 for each student who is performing in the bottom 25 percent of students statewide. Current spending covers all such students who are in a 1- or 2-star school, and some of those in a 3-star school, while the additional money will ensure all low-performing students are covered by the weights even if they’re in a high-performing school.

The weights are in addition to programs such as Zoom Schools that assist schools with a high population of English language learners and Victory Schools, which support schools in the state's poorest ZIP codes.

Sandoval plans to continue those initiatives he started, and add another $22 million to his Read by Grade 3 program so schools can employ learning strategists. The initiative will soon require children repeat 3rd grade if they cannot read, with some exceptions.

School safety

After convening a school safety task force and soliciting recommendations from it, Sandoval is calling for $78 million in new resources to help prevent school shootings or other tragedies.

Of that, $16 million will go to hire more school-based social workers to promote a positive campus climate and combat bullying. The state has about 200 social workers on the field now as a result of a 2015 Sandoval initiative, and the new money will support another 100.

Another $8 million will help hire additional school police officers, and $25 million will support a grant program that schools can use to improve their security infrastructure, such as fences and locks.

The proposed school safety spending is supported by marijuana excise tax revenue.

School choice

Sandoval wants to continue funding Opportunity Scholarships, which allow students who are from low- to middle-income families to attend private schools. Funding comes when businesses donate to scholarship agencies, and receive tax credits in return.

Sandoval is proposing $20 million more for the program in the upcoming biennium, although he is not including that through his budget and instead is seeking a separate bill to allocate the money. Willden said that the governor is not proposing additional funding for the state’s Education Savings Account program, a more sweeping and controversial school choice program that would have drawn money from the state instead of donations.

Millennium scholarship

The governor wants to sustain the Millennium Scholarship program, which supports students who have a G.P.A. of 3.25 or higher in high school and attend a Nevada institution. The program has been on unstable footing because it was originally backed by a diminishing pot of money from a massive settlement with tobacco companies.

Sandoval is calling for $31 million to keep the program afloat for the next biennium. Willden said he also wants to preserve a half-dozen other scholarship programs, including the need-based Silver State Opportunity Grant and the last-dollar Nevada Promise Scholarship for community college students.

Pre-Kindergarten

Sandoval is applying $36 million to pre-kindergarten programs. Nevada expanded its offerings to 3- and 4-year-olds with help from a federal preschool expansion grant, but amid uncertainty about whether it can land such funding again, Sandoval’s allocation will sustain some 3,000 preschool slots.

Higher education

The budget plan includes $22 million a year to cover growing enrollment at Nevada’s public colleges. There will also be another $40 million over two years to support “capacity building initiatives” through which colleges are launching or expanding programs in strategic fields of study such as health care.

Sandoval wants to add an additional $14 million over two years to fund growing student enrollment in the nascent UNLV School of Medicine. He’s also applying nearly $16 million to a pilot program aimed at expanding summer school programs to help students in critical-need fields to finish school on time.

Medicaid

One of the biggest budget issues facing the state’s Medicaid program over the next two years is the slow, continued reduction of federal dollars toward the program. When Nevada opted to expand Medicaid to cover low-income childless adults under the Affordable Care Act in 2014, the federal government initially agreed to cover 100 percent of the cost of the program; but those payments began titrating down in fiscal year 2017 and will reach its final rate of 90 percent in fiscal year 2020.

To adjust for those changes, the state is projected to need to allocate an additional $41 million in 2020 and $73 million in 2021 toward the program. Sandoval is also recommending that the state spend $47 million in 2020 and $60 million in 2021 to account for increased growth in Medicaid’s caseload.

Enrollment in the program has been steadily climbing in the state over the last few years though it’s evened out in the last few months, with about 660,000 on Medicaid and 28,000 children covered through Nevada Check Up, a Medicaid-like program for kids.

Willden said that the state may also move toward shifting the aged, blind and disabled Medicaid population from a fee-for-service structure, where the state pays individual medical bills, to a managed care structure, where the state pays an insurance company a flat rate to cover all of an individuals’ health-care needs, which will influence utilization, though he said he believes that utilization will continue to be “dynamic.”

Autism

Sandoval has recommended allocating an additional $7 million toward autism treatment and reduce Nevada’s 400-person waitlist for the state’s Autism Treatment Assistance Program.

Aging and disability services

As the state is seeking to transition from an Elder Protective Services model to an Adult Protective Services model, the governor is recommending that the state spend an additional $4 million a year to expand and implement that program. Under the new model, there will no longer be an age requirement to receive protection and assistance from the state.

Northern Nevada Veterans Home

Willden said that the home, which will have its ribbon cutting on Dec. 17, will operate on a $6.1 million a year budget largely funded by revenues from patient charges. He said that the state has proposed to allocate somewhere between $350,000 and $500,000 of general funds to get the home up and running but then the home should be largely self-sufficient.

Public Employees’ Retirement System

Sandoval is recommending $37 million to support retirement increases for state employees.

Criminal Justice

Sandoval proposes another $5 million to the Division of Parole and Probation, which is reworking its programming in an effort to ensure people do not return back to prison or jail after their release. The agency has already launched Day Reporting Centers where ex-offenders can take classes, find resources and meet with parole officers, and it received more money last session to subsidize housing for people leaving prison.

The funding will support about 30 new employees, Willden said.

Willden said the state expects to bring home 200 inmates who are being housed in a private prison in Arizona. Half of that group is expected to return to Nevada in the summer of 2019, and the other half is expected back at the end of 2019.

The controversial arrangement came about because the state was refurbishing some wings of Southern Nevada prison and didn’t have other housing. It cost about $9 million to keep them in Arizona.

To be determined

Willden said Sandoval hopes to increase the state’s per-pupil basic school support, but that will depend on how much it needs to spend on other objectives. The governor also wants to give state employees a cost of living increase if resources allow.

Another significant variable is the cost of implementing Marsy’s Law, a voter-approved initiative that enshrines a slate of crime victims’ rights into the constitution. The measure requires defendants pay full restitution to victims before any other fees are paid; that will shake up a court system that has become heavily dependent on fees and fines.

Willden said he met with courts and governmental agencies last week who estimate that they may lose 20 percent of their revenue because restitution will take the highest priority and it’s unclear if many of the defendants will even get around to paying fees and fines. Willden said the fiscal impact of Marsy's Law will not be known until perhaps the spring.

Updated at 11-28-18 at 7:06 a.m. to clarify the number of enrollees in Medicaid and Nevada Check Up.