Gov. Joe Lombardo’s recommended two-year budget is $335 million in the red without offsetting revenue, state officials confirmed Tuesday, setting up a process that Democrats say will require corrective action from the governor by next week. 

State officials acknowledged the shortfall and said they have already made revisions to the proposed budget. But an $85 million deficit remains with those changes included, according to testimony given Tuesday by staff of the Governor’s Finance Office during the first pre-session legislative budget meeting of the year. 

Outside of their comments at the meeting, a spokesperson for the Senate Democratic caucus said lawmakers had only received the slide presentation from the governor’s office, not a physical copy of the revised budget.

“We will do our best to ensure that we can make adjustments to the budget so that you can move forward expeditiously with the legislative session,” Debi Reynolds, Lombardo’s deputy chief of staff, said Tuesday.

The $335 million budget deficit — which represents about 2.5 percent of the two-year budget — comes less than one week after Lombardo released his budget, which immediately prompted concerns from Democrats that the budget was not balanced. Nevada’s Constitution requires the Legislature to pass a balanced budget, where revenues must equal expenditures.

Senate Majority Nicole Cannizzaro (D-Las Vegas) announced the deficit Tuesday, which she called “unprecedented.” She said lawmakers have a responsibility to fix the budget and gave the governor a Jan. 29 deadline to submit an amendment.

“I have been here for a short bit, and I cannot recall a time where the governor sent the Legislature a budget that just simply didn't add up,” Cannizzaro said. “I'm very worried about what this process looks like going into the legislative session, and how we fix this, and pass a budget.”

In a statement sent after this story was published, a spokesperson for the governor said the office would be able to meet the Legislature’s deadline and blamed the budget concerns on continued funding for pay raises for public school teachers and preschool education, which were approved in 2023 as one-time funding allocations. She said the governor is building those one-time funds into the budget as a permanent, ongoing expense.

“The Governor hopes the Legislature shares his commitment to teachers and parents and will join him in making these expenditures permanent,” she said. “The executive budget remains balanced through one-time funding.”

Another issue raised with the proposed budget was that it moved about $120 million in one-time funding allocated during the 2023 legislative session to the state’s general fund, which is prohibited. This includes $90 million for a future homeless services campus, $14 million in tax credits for the Athletics’ stadium through the infrastructure bank, $5 million in wildlife crossings for the Nevada Department of Transportation and $11.6 million for collective bargaining adjustments.

It represents a bumpy start to this year’s budget process two weeks before the legislative session kicks off. Nevada, which has a part-time Legislature that meets every two years for 120 days, has to pass a budget encompassing two fiscal years during every session. Tuesday’s meeting served as an initial presentation on the budget to an interim group of lawmakers, though legislators go into more details once the session begins.

Democratic legislators criticized the proposed budget and complained about what they called minimal information on what might be cut from the budget to lower the deficit.

“[It] is beyond frustrating,” Sen. Rochelle Nguyen (D-Las Vegas) said.

Officials with the governor’s office said they were working around the clock to fix the issue, but also noted that they were new to their roles.

Tiffany Greenameyer was announced as the director of the Governor’s Finance Office just minutes before Tuesday’s meeting began after her predecessor, Amy Stephenson, was fired  Friday, sources said. Reynolds, Lombardo’s deputy chief of staff, has also only been in her role for two weeks.

However, Democrats said Tuesday that was no excuse. About 30 employees in the Governor’s Finance Office work on the budget.

“How is it that this is only something that has been looked to be remedied in the last three days?” Cannizzaro asked. “This is not something that just happened three days ago.”

Republicans were largely quiet Tuesday, but Senate Minority Leader Robin Titus (R-Wellington) said that she was “looking forward to hear solutions.”

Because of the lack of documentation surrounding the immediate revisions to Lombardo’s proposed budget, it was not clear how the deficit might be decreased to $85 million.

Setting the budget

The state’s Economic Forum — a panel of private-sector economists whose revenue projections are legally required to form the size of each two-year budget — predicted in December that the state’s general fund will generate about $6.13 billion in revenue in fiscal year 2026 and $6.4 billion in fiscal year 2027.

Lombardo’s proposed budget, however, calls for $6.37 billion in expenditures in fiscal year 2026 and $6.4 billion for fiscal year 2027.

Lombardo has prioritized fiscal responsibility, including touting during last week’s State of the State address his decision to decline “millions of dollars in state agency requests for more funding,” in favor of more accountability and increased financial resourcefulness.

Following the COVID-19 pandemic, Nevada received more than $2.7 billion in flexible state aid to address the crisis. The money must be spent by the end of 2026, and with the allocations finalized, state officials have less maneuverability when it comes to the budget than in prior legislative sessions.

Lawmakers will have until the last day of the legislative session to pass the state's budget, which consists of five bills, one centered on K-12 education which has to be passed first, a bill that makes appropriations from the general fund, a state worker pay bill, a bill authorizing state agencies to spend funding not appropriate from the general fund and a capital improvement budget used for infrastructure.

Controversy about the state’s budget is nothing new, but rarely does it happen so early in the year of a legislative session. In 2011, for example, a Nevada Supreme Court ruling on using local funds to craft the budget sent negotiations into a spiral in the final weeks of the session.

This story was updated at 11:50 a.m. on 1/21/2024 to include legislative budget committee meeting updates and at 2:28 p.m. to include a statement from the governor’s office.