Budget ‘Band-Aids’ approved: Legislators close deficit, warn of more struggles

CARSON CITY — A quick fix passed quickly through a special session of the Legislature on Monday, as lawmakers wrapped up a patchwork of solutions to a $340 million revenue shortfall in under nine hours.

The Assembly and Senate speedily ratified bills to cut $73 million from state programs; transfer $77 million that was lying around in other state accounts; change the way mining, sales and rental car taxes are collected; and take out a $160 million line of credit on a pool of local government money.

But lawmakers cautioned that more serious budget modifications lie ahead when the Legislature starts its regular 120-day session starting in February.

“There will be no more Band-Aids left,” Assembly Speaker Barbara Buckley, D-Las Vegas, said in her speech opening the proceedings .

The special session convened shortly after 9 a.m. and adjourned sine die at 5:53 p.m., sooner than most had expected.

The $341.7 million legislators scraped together came on top of $1.2 billion in previous cuts to the biennial budget legislators originally approved in 2007.

When they meet again to face the next biennium, projected revenue levels would force state government to cut more than a third if applied across the board. “Education, health care and public safety cannot withstand a 34 percent cut,” Buckley said in calling for longer-term solutions than Monday’s patchwork. But, she added, “Many Nevada families and businesses are hanging on by a thread.”

Gov. Jim Gibbons, who is scheduled to present his blueprint for the next budget with his State of the State address Jan. 15, said savings in personnel costs and consolidation of state agencies will allow him to draft a budget that neither raises taxes nor cuts state services.

Already, 2,700 state jobs have been left vacant, while only 35 state employees have been laid off, Gibbons’ chief of staff, Josh Hicks, said. Remaining state workers will see no salary increase under Gibbons’ proposal for 2009-11, when the state Economic Forum said there will be just $5.65 billion to spend, down from $6.8 billion in the original 2007 budget.

“You will see a more efficient government, a leaner government,” said Gibbons, a Republican. “I see no elimination of services in the next budget.” At the same time, he said, “Now is not the time to raise taxes. People are losing their homes.”

The bills in Monday’s special session were based on prior negotiations between legislative leaders and Gibbons, who planned to promptly sign them into law.

The legislators who met Monday were those elected in last month’s general election: Three new members of the state Senate and eight new Assembly members were sworn in.

With the new Democratic majority in the Senate, Steven Horsford of Las Vegas became Nevada’s first black Senate majority leader and the first African-American to lead a house of the Legislature.

Controversy surrounded many of the special session measures, even though it did not prevent a speedy resolution.

Two of the four special session bills were rejected by all 14 Assembly Republicans on party-line votes. Members said they felt the bills would hurt businesses and the state’s rural counties.

One bill changed the administration of several taxes to increase the amount of money collected by state government. Under one provision, mining companies will prepay $28 million in mineral taxes.

Another provision took a portion of the tax on rental cars that the companies currently get to keep to pay for licensing costs, and turned it over to the state instead, a gain of $1.8 million by the state. A representative of the rental car companies complained that to him, it looked like an increase in the taxes those businesses pay.

When business has to give more of its revenue to government, lobbyist Robert Ostrovsky told senators, “Any way you look at it, it is a tax increase.” Gibbons disagreed with this view.

A third provision changed the amount of the 6.5 percent state sales tax retained by retailers that sell cigarettes or liquor for administration costs from 0.5 percent to 0.25 percent. That was expected to return $3 million to state coffers.

Assemblyman John Carpenter, R-Elko, joked that the bill would displease his wife, since they run a convenience store. “I love this body, but I love my wife more, so I must rise in opposition to this bill,” he said.

More seriously, Carpenter said he knows from experience that businesses need that money to defray the costs they incur to comply with state tax bureaucracy. “It costs small business and large business a lot of money to collect these taxes,” he said.

Democratic lawmakers chastised Republicans not to let the perfect be the enemy of the good in such an emergency situation.

Assemblywoman Sheila Leslie, D-Reno, said there were plenty of things she objected to in the bills, too. “But we are in a crisis here, people,” she said. “A crisis. We know when we come back in February we will have a lot of hard work to do. We will have a lot of hard things to address. But today is about doing our duty and closing the budget deficit.”

Some, but not all, Republicans also objected to a bill that took out a $160 million line of credit against a fund known as the Local Government Investment Pool, where city, county and school district surplus monies are invested by the state.

Assemblyman Pete Goicoechea, R-Eureka, said legislators ought to bite the bullet and make cuts to state personnel spending instead of working around the problem of big government.

“I think we’re doing a terrible disservice to the taxpayers of this state by not making cuts now,” he said.

Assemblyman Chad Christensen, R-Las Vegas, also objected to the loan, which legislative lawyers and the attorney general’s office ruled was legal despite the balanced budget requirement of the state Constitution.

“I had a lengthy conversation with a constituent who said, 'Chad, are you going to go pay the mortgage with a credit card?’” he said.

Nine Republicans and one Democrat voted against the bill in the Assembly. The Democrat, Peggy Pierce, said what she objected to was not the loan but the cuts to state programs that the bill also contained.

“I think it’s time to start raising revenue. We’ve got to save our state,” she said. “It was real clear to me, talking to voters in my district, that they want us to grow up and stop goofing around and trying to do everything on the extreme cheap. We need a responsible government that funds an education system we can be proud of and a safety net that’s worth something.”

Pierce said she understands that most lawmakers just wanted to get in and get out of Carson City, deferring the heavy lifting to February. But, she said, “I think we’ve got to do the work when we’re here.”

In the Senate, Minority Leader Bill Raggio, R-Reno, said he was hearing from constituents opposed to the line of credit, but he saw no way around it.

“There are still people out there who say 'Cut, cut, cut,’” he said. “Unfortunately they don’t have to come in here and vote. The alternative would be raising taxes or further cuts.”

A provision by which the state will deplete a $25 million account used to cover the hospital expenses of indigent people injured in auto accidents raised objections from the hospital industry. Nevada Hospital Association President Bill Welch said rural hospitals in particular would be hurt by the loss.

Gibbons pledged to replace the money, saying hospitals depend on it.

After it was over, Horsford praised the governor, Republicans and Democrats for the “extraordinary collegiality and bipartisanship” they showed in the short session. “This is how I think bipartisanship can and should work,” he said.

Just before the Senate adjourned, Sen. John Lee, D-North Las Vegas, rose to thank fellow senators and people in attendance for their prayers.

Lee is suffering from cancer. He said he last received chemotherapy on Friday, but is starting to feel better. He has lost considerable weight and wore a hat most of the day.

At times in recent months, Lee said he wanted to die, only to gain renewed strength from the calls and e-mail from legislators and friends who offered him encouragement.

“I believe in the power of prayer,” added Lee, the father of seven. “I felt a lot of those prayers that were sent my way.”

Contact reporter Molly Ball at mball@reviewjournal.com or 702-387-2919; or Capital Bureau Chief Ed Vogel at evogel@reviewjournal.com or 775-687-3901.