Legislature’s special session ‘could get ugly’

CARSON CITY -- The mood in this once vibrant city of 55,000 has turned to gloom and doom these days as legislators arrive Tuesday to begin what could be a contentious special session to cut state spending by $887 million.

This is a state government company town that already has seen a rash of store closings, high unemployment and lower paychecks. Even the downtown Burger King closed because of lack of business.

Under the best case scenario, state employee wages will be reduced by 1.75 percent and 227 state workers will be joining unemployment lines once the special session is done.

And the session could be a public relations disaster for Gibbons and legislators just as their campaigns for re-election approach. At this point, they haven't agreed on a spending cut plan.

If neither side budges, then the session might not end until the lilacs bloom in May.

"If somebody in the Legislature digs in his heels or Jim Gibbons decides it's my way or the highway, this special session has great potential for being a train wreck," said Eric Herzik, a political science professor at the University of Nevada, Reno.

"The whole thing could get ugly," added former state Archivist Guy Rocha. "It could mirror the craziness of 2003."

That was the year when legislators spent six weeks in special sessions throwing insults at each other before they approved $833 million in tax increases sought by then-Gov. Kenny Guinn, a Republican.

Based on their public comments, Democratic legislative leaders and state Senate Minority Leader Bill Raggio, R-Reno, begrudgingly will accept most of Gibbons' proposed cut list, if they can locate $200 million or so to prevent reductions to public education and layoffs of thousands of teachers.

Cutting $887 million in state spending is unprecedented. That cut is equivalent to about 20 percent of the tax revenue state government had anticipated receiving between March and June 30, 2011, the end of the two-year budget cycle.

Assembly Speaker Barbara Buckley, D-Las Vegas, put it this way: If all 16,000 state employees were laid off, lawmakers would still need to find another $300 million in cuts to balance the budget.

Schoolteachers, university faculty members and their support staff, all of whom largely depend on state government for their salaries, were not included in her example.

Walt Rulffes, superintendent of the Clark County School District, testified he would have to lay off 2,300 teachers to cover the shortfall. Some 400 teachers would get pink slips in Washoe County.

In his special session proclamation, Gibbons proposed covering the shortfall through 10 percent cuts to virtually all state agencies, including public schools and higher education, by raiding $150 million from various state trust funds, using $90 million in federal funds, increasing revenue from the mining industry by $50 million, and securing $30 million from InsureNet, a company that would use cameras to catch drivers without insurance.

The revenue from the mining industry would not come from a new tax but instead by limiting deductions the companies can take before computing their existing taxes, Gibbons has said. This route, he said, does not violate his no-new-taxes pledge.

Legislative leaders have been looking to the mining industry to pony up $100 million.

They also want most other businesses, including gaming, to pay additional fees to cover what state agencies need to regulate them. They are seeking additional auditors to try and collect several hundred million dollars in overdue taxes.

But in a Thursday meeting, Taxation Director Dino DiCianno questioned whether even a fraction of the overdue taxes can be collected.

In some cases, taxes have gone unpaid for 20 years and companies are no longer in business. Other companies are in bankruptcy.

Despite predictions that the session could be long and bitter, Gibbons' communications director Daniel Burns said the governor, his staff and legislative leaders continue to talk and that the governor is optimistic a solution might be reached before the session opens.

"There are solutions on the table," Burns said. "If there is no action in the Legislature, then I am sure they would send themselves home. Every day the Legislature goes on, then another state employee will be laid off."

It will cost $100,000 to bring the Legislature into session on Tuesday and another $50,000 for each additional day legislators remain in Carson City, according to Lorne Malkiewich, administrator of the Legislative Counsel Bureau.

Legislators receive $146 a day in pay and a $161 per day living allowance. They also are compensated for travel costs.

Rocha isn't optimistic that legislators will find a way to reduce the cuts in education.

He questions whether business, particularly the gaming industry, which realized a $6.8 billion loss in 2009, would make what seems like charitable contributions to reduce the shortfall.

"Why would they?" he asked. "Do you go up to mining and just say, 'Give us money?' That it is unprecedented. It seems preposterous. The same with the casino industry. What do they gain, other than buying good will. These dramatic cuts will leave the state hemorrhaging."

If there is a breakthrough, expect it to be revealed during the 3 p.m. Monday meeting of the Legislature's Interim Finance Committee. The agenda calls for talks about proposed budget shortfall solutions.

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