Horsford says governor’s budget leaves $2.5 billion revenue gap

"That’s irresponsible," the Las Vegas Democrat said after a 2½-hour briefing to the Senate on Sandoval’s budget. "Let’s have some adult conversation. Let’s put ideological differences aside."

Horsford said in a separate interview that he was not proposing a $2.5 billion tax increase to cover the revenue gap, but "about half" should come in the form of tax increases.

Neither he nor Senate Revenue Committee Chairwoman Sheila Leslie, D-Reno, was specific on what taxes should be increased, saying those decisions are more than a month away.

But Republican leaders were not convinced that they have to increase taxes.

"It was probably designed to scare us," said Senate Minority Leader Mike McGinness, R-Fallon, adding he and his caucus weren’t scared.

He said Republicans will not increase taxes or reauthorize about $700 million in taxes that expire June 30, as some Democrats have urged.

"No new taxes and no reauthorization of existing taxes," McGinness said.

WHAT HORSFORD WANTS

The hearing before all 21 senators comes at a key time. Next week, Senate and Assembly budget committees will start to make final changes to the proposed state agency budgets submitted by Sandoval. Most of the information discussed Monday had been discussed previously by the budget committees, but not in front of other senators.

In particular, Horsford told senators he will not consider Sandoval’s plan to cut education spending or reduce spending on mental health care and nursing homes.

"These are not just numbers on paper," he said.

In an interview, Horsford said he cannot understand why Republicans such as McGinness won’t support increasing revenue to support education.

Horsford said that the Western Nevada College branch in Fallon will close next year if more education funds are not found. Local officials criticized the education cuts during a hearing Thursday in Fallon.

Without the college branch, McGinness’ constituents will have to drive three hours a day to catch college classes in Reno, he said.

"In my view all politics are local," Horsford said. "I don’t know how you go home to your constituents who elected you and told you these cuts will be devastating to the community. Is your loyalty to the governor or your constituents?"

Democrats are at least four votes shy in the Senate and two in the Assembly of the two-thirds vote needed to pass tax increases and override a governor veto. That means Republicans, if they don’t bend, can defeat all tax increase proposals.

Last week Assemblywoman Peggy Pierce, D-Las Vegas, proposed a 4.5 percent tax on business income over $500,000 and a 5 percent tax on services such as dry cleaning and haircuts. She also proposed mining, cigarette and sales tax increases, with continuing $800 million in tax increases that expire June 30.

REPUBLICAN RESPONSE

Heidi Gansert, Sandoval’s chief of staff, said increasing taxes now would only make life more miserable for Nevada businesses.

"The budget is balanced," she said at a news conference held later Monday.

By not increasing taxes now, Gansert said, Sandoval is giving the economy time to recover and not burdening businesses that otherwise might lay off more workers.

Dale Erquiaga, Sandoval’s policy director, said the presentation to the Senate "seemed more designed to justify tax increases than anything else."

Gansert said Democrats squawk about Sandoval’s budget without having a balanced budget plan of their own.

But Horsford and Leslie said once legislators finish closing state agency budgets — which could take about six weeks — they will come out with their tax plans.

FUTURE BUDGET HOLE

State Budget Director Andrew Clinger challenged Horsford’s assertion that the governor’s budget will leave a $1.1 billion hole for legislators when they meet in 2013.

"They are assuming we will have zero economic growth (over the next two years)," said Clinger in a news conference called by the Sandoval administration. "That is not valid."

But Horsford told the Senate that state tax revenue must increase at a 12.6 percent-a-year pace to cover the hole. Legislative Fiscal analyst Russell Guindon predicted that would not happen.

Fiscal analysts also said Sandoval is balancing his two-year budget by $1.1 billion in unusual financial changes, changes Horsford does not support.

The governor wants to divert $300 million from school district construction bond reserves to school operating costs, take out a $190 million loan, divert $227 million in room taxes to the general fund, use $121 million in Washoe and Clark county property taxes to cover a part of higher education costs, require counties to pay $107 million for state-performed services, among other proposals.

Horsford said that money will not be available to the Legislature in 2013.

He called those proposals stopgap measures designed by Sandoval to hide the need for tax increases and said they merely will create a $1.1 billion hole in the budget for future legislators.

"The governor is shifting the problem to another day," Horsford said. "We all need to show fiscal restraint, but we shouldn’t put this much of a burden on the next Legislature."

McGinness disagreed. He said legislators should examine the proposals closely but "not stress over them" because their job isn’t looking two years ahead, but at the current budget plan.

Contact Capital Bureau Chief Ed Vogel at evogel@reviewjournal.com or 775-687-3901.