The State of the State

Today the Governor announced he will call a special session beginning February 23 to address a projected budget shortfall of almost $900 million.  The Governor has yet to issue his official proclamation calling the session, where the agenda for the session will be spelled out.

In his speech, the Governor pointed out the continuing economic woes plaguing Nevada and blamed the Legislature for raising taxes and failing to enact stiffer budget cuts in 2009.  The Governor took potshots at Senator Harry Reid as well, noting that Nevada came in 50th in per-capita stimulus funding.  Just about all that was missing from the critique was a challenge to settle things out behind the bleachers after school.

As for specific budget solutions, neither the Governor nor the Democratic response provided exact details on how to come up with $900 million.  The Governor spoke of reducing state salaries, closing the aging Nevada State Prison, laying off hundreds of state employees, reducing health care levels, and reducing spending for both K-12 and higher education.  The Governor reiterated his vow to not raise taxes, and said he would not look to county or municipal revenue coffers.  The Democratic response from Senator Steven Horsford noted the already severe cuts in state services and disagreed in principle with the Governor’s recommended budget cuts.  While Senator Horsford said there is no appetite to raise taxes in a special session, he was very straightforward that tax reform would be on the table in 2011 and that mining and big business would be expected to pay their “fair share.”  Senator Horsford also said the state must do a better job of collecting unpaid taxes which seemed somewhat odd given that just recently the Department of Taxation concluded a successful tax amnesty program that brought in $40 million in unpaid taxes without costing the state anything.

What was very apparent in the speech and response was the lack of an agreement between the Legislature and the Governor on how to fix the budget shortfall.  Recent media reports claimed there had been good cooperation and communication between the Governor and the Legislature but that cooperation and communication will certainly be strained by the Governor’s aggressive comments about the Legislature.  Leaving the solutions for a budget deficit unresolved also threatens to result in a lengthy and contentious special session.

As dire as the situation appears now, it will only grow worse in the next biennium when the budget shortfall could reach 50%.  Coupled with the loss of many experienced legislators to term-limits, the 2011 session may well be one of the most challenging sessions in our state’s history.  In the current biennium, the challenge for the Governor and Legislature has been to maintain the existing state government.  In the 2011 session, they will have to redefine how that same government functions in the 21st century.

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