Nevada NewsMakers

News - May 1, 2020 - by Ray Hagar

A leading state senator from Reno, citing the economic crisis created by the Covid-19 conundrum, called on Gov. Steve Sisolak to call for a special session of the Legislature -- preferably sooner than later.

State Sen. Ben Kieckhefer, R-Reno, said on Nevada Newsmakers that the special session must be held by June to fully address cuts that will be necessary in the fiscal year of 2021, which begins July 1.

The total loss of revenue for Nevada in its current two-year budget cycle could be close to $2 billion, Kieckhefer warned. That's a big chunk of the state's biennial $8.9 billion general-fund budget.

"We are going to see massive revenue declines, not just this fiscal year but next," he told host Sam Shad. "In this fiscal year alone, were are going to see more than $800 million in declines of our revenue and we need to take steps immediately to address our spending levels to make our budget balance. We are going to burn through all of our cash reserves this fiscal year and create a much bigger hole when we go through the next fiscal year, which begins on July 1.

"It is entirely likely that we are going to see a $1 billion shortfall in fiscal year '21," he added. "And having already burned through our cash reserves, using most of the tricks we can use to make things balance for this fiscal year, that puts us in a world of hurt."

"So we need to get minds at the table and come up with a plan to address this, sooner rather than later," he said.

Nevada's two major sources of income, sales tax and gaming revenues, make up almost 47 percent of the state revenues. Those tax sources, however, have virtually dried up up during the state's stay-at-home order that has shut down gaming and many retail businesses as a way to limit the spread of the virus. Nevada, which has an estimated population of about 3 million, has seen about 250 deaths due to the virus.

Cuts to various state departments and agencies could be so severe that Gov. Sisolak may not have the authority under Nevada law to do them alone, Kieckhefer said.

"In my current estimation, the governor does not have unilateral authority to do the things that are going to be necessary in order to close that gap and that he is going to need the Legislature to take some action," Kieckher said.

"The governor has the authority to create reductions of up to 14 percent in terms of budget reserves, or up to 15 percent I should say, based on the Appropriations Act and that is not going to be enough to close the hole on its own," Kieckhefer said.

The longer Sisolak takes to call a special session, the deeper the budget cuts may be, Kieckhefer said.

"If we can spread out that burden out of the course of a full 12 months, it doesn't make it easy but it makes it easier to finish the task," he said. "If we don't go in until later in the summer or the fall, we'll only have eight months or so left of the fiscal year and then we're compressing the time we have to address any shortfalls that exist."

All state departments, including education, will probably suffer severe cuts, Kieckhefer said.

"You can't say that you are going to hold harmless certain areas of spending -- like education that account for more than 50 percent of the budget -- to still actually close that gap," he said. "So I think it is going to be a tough time. The Legislature is going to have to make hard decisions and the governor is going to have to make hard decisions. But we have a constitutional mandate for a balanced budget and we have always done that and we always will."

Nevada won't be able raise enough new taxes to solve the crisis, Kieckhefer said.

"You can't tax yourself out of this," he said. "People will be automatically inclined to pick a couple of industries and try to get more revenue out of them. But that doesn't even come close to closing that hole."

Nevada is not alone in its budget problem. More federal aid may be coming to the states, Kieckhefer said, addding, "But I don't see a massive infusion of (federal) cash into the states to offset lost revenue."