NFA Board member Sondra Cosgrove, College of Southern Nevada, filed this report from Tuesday's budget hearing in Carson City.

Monday, March 28, the Nevada Senate met in a committee of the whole to review the Governor’s budget. Senate majority leader Steven Horsford highlighted the proposals for each area of the state budget, identifying not only more than $2.5 billion in proposed cuts to essential services, including a 29-percent cut for higher education from 2009 levels, but also over $1 billion in anticipated revenues to be borrowed from county reserves or from the 2013 biennial budget. This chart highlights the impacts.

Most importantly, the discussion made clear that even if the legislature were to renew the package of sales taxes passed in 2009, which expire unless renewed by the 2011 legislature, the anticipated $780 million would provide only very limited relief for the state and would still leave a significant gap in the Nevada System for Higher Education budget.

With particular relevance to the NSHE budget, Senator Horsford demonstrated the incorrect assumptions in the governor's claims that higher education is being cut by only 7 percent. He noted that in 2009, the legislature cut state general fund support for higher ed by 25 percent, then used federal stimulus funds to fill in some of the gap. But in this year's budget, the governor took the 2009 funding level as the base, from which he subtracted a cut of 23 percent in general fund support.

While other agencies that received federal stimulus funds in 2009 would see some state funds restored in 2011 under the Sandoval budget (such as K-12, human services and public safety), higher ed would receive no additional state dollars – only a projected diversion of property tax money from Washoe and Clark counties, which is being disputed by the county governments. Moreover, the amount of these property tax revenues appears to be overestimated in the Governor's budget.

So, higher ed, which already took the steepest cut of any major agency in 2009 (a 15-percent reduction in total allocations, even after tuition increases were figured in, then another 6.9 percent in the 2010 special session) would now be cut by another 17 percent after projected tuition increases. The result would be a base budget reduced by nearly 40 percent since 2007.

At the hearing, Senate staff stated that Governor Sandoval’s budget assumes that the taxes increased in 2009 will sunset July 1, 2011. To make up for the deficit created by the sunset and continued economic weakness in the state, the Governor’s budget depends on cuts, borrowing tax revenue from the counties, economic recovery and growth, as well as borrowing against future tax revenue by issuing bonds. Staff reported that in order to replenish monies taken from other revenue streams through growth alone, Nevada’s economy would have to average 12.6-percent growth over the next six years.

Senator Horsford made it very clear that the state can no longer count on gimmicks and moving money around to fund state services. He equated the governor’s budget to taking out a second mortgage to pay for everyday expenses. Senator Mike McGinnis argued that looking at what could happen in the future if the economy stays depressed was counter-productive, but others argued that cutting now and creating funding problems for the future were inappropriate budget strategies.

Strategies proposed by the governor’s office included securitizing future tax revenues from the insurance premium tax (selling bonds backed by future revenue), which would generate approximately $190 million for this biennium, but would cost over $200 million in interest in addition to the bond principle; borrowing tax revenue from the counties, yet if the state takes county property tax money and the counties run short on revenues, then the counties may have to raise property taxes; and making cuts to state workers’ salary and benefits; with the total cut to salary and benefits possibly reaching over 10 percent.

No one proposed alternatives to the governor’s budget during the meeting, but the media is reporting that a bill to remove the sunset provision on the 2009 tax increases will be submitted this week.

It is not yet clear, however, what share of this money might be used to invest in higher education nor how this money would be distributed among System institutions.