Following meetings with Senate Majority Leader Bill Raggio and Assembly Speaker Barbara Buckley, and after reviewing the potential impact that 8% reductions would have on state services, including potential layoffs, Governor Jim Gibbons announced today that he will call for a smaller, broad-based reduction (4.5%) in general fund appropriations for nearly every state office, department, or agency, including the Department of Corrections, Department of Public Safety, and K-12 funding, which were previously exempt.

 

During the 2007 legislative session, Governor Gibbons increased K-12 funding by $390,312,006 (20.13%) for fiscal year (FY) 2008 and FY 2009.  Following a potential reduction of 4.5%, K-12 funding would maintain an overall increase of $294,078,644 (15.16%).

 

Although the Governor will request a reduction in K-12 spending of approximately $95,000,000, the Department of Administration preliminarily identified over $300,000,000 in K-12 appropriations that can be reduced without creating layoffs, reducing teacher salaries, or impacting classroom size or services.  Today, the Governor sent a letter to the Department of Education and to the Superintendent of each School District identifying those appropriations and asking for a meeting with them to further discuss these issues.

 

“While the state must prepare for revenue shortfalls, I remain committed to ensuring that we do everything possible to reduce the impact on services and programs for our most vulnerable citizens,” said Governor Gibbons.

 

Governor Gibbons remains committed to minimizing any impact on the state’s most vulnerable citizens as well as education programs and human services.  Therefore, exemptions to this proposal include child welfare and juvenile justice programs, as well as scheduled (COLA) salary increases for teachers, state employees, and the Nevada System of Higher Education. 

 

This proposal will also include the elimination or deferral of certain Capital Improvement Projects, a reduction of certain one-shot appropriations, and approximately $100 to $200 million from the Fund to Stabilize the Operation of the State Government (rainy day fund) during FY 2009.  

 

Due to the updated shortfall projection, it was determined that additional reductions would be needed.  However, as the Governor was provided recommendations by agency directors, it became clear that an 8% reduction in some departments, such as the Department of Health and Human Services, would dramatically impact state services.

 

“Following my assessment of the recommendations prepared by state agencies, I have determined that broad-based participation, reductions to the one-shot appropriations and Capitol Improvement Projects, and utilization of a portion of the Fund to Stabilize the Operation of the State Government, will be the only way to prevent potential layoffs and allow state agencies to continue providing vital services to children and those in need,” Governor Gibbons added.

Below are Governor Gibbons’ letters to Nevada state constitutional officers and state superintendents. 

*The attached chart lists potential K-12 spending reductions.

 

 

December 14, 2007

 

 

Dear Superintendent,

 

            As you are aware, general fund revenues in Nevada have been less than what was projected when the Legislature and I enacted the budget for the current biennium.  Based on initial revenue projections, I was hopeful that the shortfall could be reached by reducing the budgets of certain state agencies by 5% and by exempting K-12 education, the Department of Corrections, and the Department of Public Safety from the budget reductions.

 

            Subsequent revenue projections became available and the fiscal situation was worse than anticipated.  As a result, I asked the same state agencies to recommend budget reductions of 8%, while still exempting K-12, the Department of Corrections, and the Department of Public Safety.

 

            I have spent the last weeks carefully reviewing the recommendations from agencies asked to participate at 8% and I have considered the impact on Nevada should reductions be required at those levels.  Unfortunately, the impact is quite severe at that level, particularly with respect to services provided by the Department of Health and Human Services.  However, state agencies would be able to adequately serve the state at a less dramatic level of budget reductions.  In order to provide that level of service, however, the agencies previously exempted would need to participate in the budget reductions.  I am therefore asking the Department of Education, the Department of Corrections and the Department of Public Safety to prepare for budget reductions of 4.5%.   The same level of reductions will be required from other state agencies.

 

I would like to meet with you and your staff to explore the impacts you envision with reductions to the Distributive School Account, the Other State Education Programs account, and the School Remediation Trust Fund.  Please be prepared to discuss the impacts of reductions of 4.5%, or approximately $96,250,000, in the general fund appropriations to those accounts. 

 

            Please be prepared to discuss the following biennial appropriations, totaling almost $300,000,000, that may be areas where budget reductions can be made without harming K-12 education:

1.                  Clark County School District “Other Obligations.”  The Department of

Administration has identified $58,083,152 per fiscal year in appropriations to this account that require further explanation, including:

 

-     An apparent $413,152 overstatement from the audited financial statement

 

-                      An apparent $1,500,000 duplicate appropriation for retirees in

PEBP

 

-          $5,000,000 for the implementation of empowerment where it has already been implemented

 

-          $2,000,000 in redundant regional formula funding

 

-          $26,845,000 for a business resource data system that was projected to “take 2 to 3 years to fully implement” as of March, 2005

 

-          $7,325,000 for a one-time kitchen remodel

 

-          $10,000,000 set aside for potential revenue shortfalls

 

-          $4,000,000 in carryovers from previously unspent appropriations

 

-          $1,000,000 in unfunded costs associated with No Child Left Behind

 

2.                  Washoe County School District “Other Obligations.”  The Department of Administration has identified $18,144,617 per fiscal year in appropriations to this account that require further explanation, including:

 

-          $11,805,560 for the opening fund balance for the forthcoming year

 

-          $6,339,057 for a carryover of previous general supply appropriations

 

3.                  Equipment.  The Department of Administration has identified $117,683,781 in equipment over the biennium that may be deferred or otherwise reduced to save general fund dollars.

 

4.                  Empowerment and the expansion of Full Day Kindergarten.  The Department of Administration has identified $22,708,960 in appropriations to these programs that could be deferred to the future.

 

            Enclosed with this letter is a spreadsheet further detailing the above referenced appropriations.  I would also like to let you know that, as part of the final budget reduction plan, I anticipate a significant withdrawal from the fund to stabilize the operation of the state government (the rainy day fund), a reduction of “one-shot” appropriations, and a reduction of capital improvement projects.  Even with these other elements, however, the state will not be able to meet reduced revenues without reduced spending.  Thank you for your anticipated cooperation and I look forward to meeting with you in the near future.

 

 

Sincerely,

JIM GIBBONS

Governor

 

 

Governor Gibbons’ letter to state constitutional officers:

 

December 14, 2007

 

 

            As you are aware, state general fund revenues have decreased significantly this fiscal year.  The Department of Administration is projecting that we may see an overall decrease of general fund revenues in fiscal years 2008 and 2009 of over $450,000,000.  As more revenue reports come in, there is a very real possibility that the shortfall will be even more serious.  The projected decrease is due to reduced revenues in nearly all areas, and particularly in sales and use tax, modified business tax, real property transfer tax, and insurance premium tax.

 

            In order to address decreased revenues, the state must reduce spending.  Beginning in October of this year, I began asking various state agencies and departments to prepare for reductions in general fund aspects of their budgets.  Currently, I am asking various state agencies reduce the general fund aspects of their budgets by 4.5%.

 

            You will recall that earlier this year, during the Legislative session, I asked your office to voluntarily reduce your biennial enhancements by 63.27% in order to meet an earlier reduction in projected state revenues.  I thank you for your cooperation in that regard.  Unfortunately, with the new revenue projections, I must ask your office to again reduce spending to match incoming revenue.

 

            Therefore, I am asking your office to prepare for a voluntary reduction of at least 4.5% in any aspect of your budget for the current biennium that is funded by the general fund.    I am making the same request of all constitutional officers, the Supreme Court and the Legislative Counsel Bureau.  I would greatly appreciate it if you would be prepared to announce and implement these budget reductions by the end of the calendar year, or shortly thereafter. 

 

            Thank you again for your attention to this important matter.  While it is unfortunate that we are faced with budget shortfalls so early in the biennium, I am confident that by working together in a responsible manner we can match our spending with our revenues and continue to provide essential services to the people of Nevada.

 

Sincerely,

JIM GIBBONS

Governor