CARSON CITY, Nev. (AP) - Members of the Legislature’s Interim Finance Committee were expected to convene Friday morning to consider Gov. Steve Sisolak’s proposal to cut $116 million in immediate spending from the state budget amid the coronavirus pandemic and subsequent economic fallout.
Few states have been hit as hard by the downturn as Nevada, which relies heavily on tax revenue from the gaming and hospitality industries to underwrite its state budget.
“The state is making difficult budgetary decisions at this time that are necessary to end Fiscal Year 2020 with a balanced budget following the unexpected impact of a world-wide pandemic,” Sisolak said in a news release announcing the proposal.
As the Las Vegas Strip emptied out and tourists canceled trips due to the pandemic, the state’s unemployment rate soared from 3.6% to a nation-topping 28.2% from February to April 2020 and taxes collected plummeted.
Even though tourists are now trickling back to Las Vegas, the Governor’s Finance Office estimates Nevada will bring in substantially less revenue in the current budget year than it projected in May 2019.
State officials now expect to end the fiscal year with $1.1 billion in sales tax revenue, 14% below the $1.3 billion they initially projected. They projected live entertainment tax revenue will fall 29%, from $192 million to $92 million and gaming tax revenue to fall 20%, from $781 million to $620 million.
The state expects the total shortfall will be $812 million in the budget year that finishes at the end of June. It projects a $1.3 billion shortfall for the next fiscal year.
To shore up the state’s $4.4 billion annual budget, Sisolak asked all state agencies to prepare 4% budget cuts, furlough employees one day per month and implement salary freezes. Nevada also drew $401 million from the state’s rainy day fund.
In a letter to state employees announcing the furloughs, Sisolak lamented how the revenue shortfalls would prevent Nevada from using funds to enact policies he and the Democrat-controlled Legislature have passed since 2018.
“The economic crisis caused by the COVID-19 pandemic has forced us to take a different direction with our state budget to respond to this new economic reality,” he said in a video address to state employees.
Sisolak’s announcement garnered pushback from labor groups, including AFSCME Local 4041, which represents more than 6,000 state workers. Harry Schiffman, the union’s president, denounced the proposed freezes and furloughs and said state employees - many who have remained working throughout the pandemic despite the risks - couldn’t survive cuts like those they were subject to a decade ago during the last recession.
“Public service workers are essential to strengthening our economy and helping all Nevadans get back to normalcy,” he said. “We can do neither if we are laid off or asked to take furloughs.”
The proposal he’s putting in front of the Legislature’s interim finance committee would reduce funding by $265 million, or 8%, for the state’s K-12 schools, which routinely rank among the worst in the United States. It would slash $67 million from state agency budgets and $49 million in one-time earmarks passed by lawmakers, including $25 million allocated for a new building at UNLV’s medical school.
The proposal would cut $19 million from Nevada’s Department of Health and Human Services. The department has received $9.8 billion in funds from the U.S. government’s $2.2 trillion package to help businesses, workers and a health care system staggered by the coronavirus.
The cuts in addition to the draw from Nevada’s rainy day fund will shore up $612 million of the $812 million shortfall, meaning Nevada will still have to make up almost $200 million to break even in the budget year that ends in June.
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Sam Metz is a corps member for the Associated Press/Report for America Statehouse News Initiative. Report for America is a nonprofit national service program that places journalists in local newsrooms to report on under-covered issues.
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