State of the State: Nevada in 2011

This is the sixth of a ten-part series on the 2011 State of the State (SOTS) speeches in states with the ten worst projected relative budget deficits for FY 2012. Budget data is from the Center on Budget and Policy Priorities’ (CBPP) recent budget report, and SOTS speech text is from Stateline. CBPP’s data on states’ FY 2012 budget deficits as a percentage of their FY 2011 budget is the benchmark for relative budget deficits.

According to CBPP, Nevada is projected to have the worst relative budget deficit of any state in FY 2012, totaling over 45% of its FY 2011 budget. Nevada has an absolute projected budget deficit of $1.5 billion, placing it in the middle of the pack using the latter measure.

On January 24, 2011 Nevada Governor Brian Sandoval delivered his 2011 SOTS speech (full text available here). He notably says, â??[For Nevada,] true success lies in making a fundamental course correction.â? Gov. Sandoval includes more substantive discussion of policy in his SOTS than any other governor evaluated in this ten-part series so far. Below are the policy proposals included in his address:

  • Spending Cuts: Gov. Sandoval is critical of the previously proposed budget, which allotted $8.3 billion in spending over the next two years ($2.1 billion higher than the stateâ??s current spending level.) He notes that this 34% increase in spending comes at a time when the stateâ??s population is declining. Instead, he wants to decrease spending to 2007 levels and proposes a two-year $5.8 billion budget. He proposes several measures that would affect public employees in an effort to reduce layoffs, these include: maintaining current freezes on merit and longevity pay, reducing salaries by 5% and eliminating the furlough program. K-12 per pupil spending would be reduced, in part due to expiring stimulus dollars, but his budget contains several education reforms (discussed below) meant to offset spending cuts. He discusses transferring a number of responsibilities from state agencies to local governments. He goes on to emphasize that his proposal would redirect and fine-tune funding to mitigate cuts to services and programs.
  • Tax Increases: He does not discuss any tax increases in the SOTS, however proposes â??raising $190 million by monetizing the state insurance premium tax proceeds.â? This essentially calls for an advanced payment of future revenue.
  • Government Reform: Gov. Sandovalâ??s SOTS includes many detailed government reform proposals.

    He recommends the â??consolidation, elimination or centralization of twenty departments and agencies.â? He discusses the creation of an â??Office of the Inspector General within the executive branchâ?¦ [Responsible for] reviewing, auditing and evaluating expenditure of state funds.â? Gov. Sandoval mentions his plans to introduce a bill that would place a sunset clause on every licensing and advisory board by June 2013. He goes on to discuss his Priorities and Performance Budget, which articulates the level of priority of each public program/service and provides corresponding performance measures.

    He announces plans to address operation and oversight of a Nevada Health Insurance Exchange in order to comply with new federal laws and maintain state control. He clearly states his belief that â??many aspects of [the National Health Care Reform passed in 2010] are unconstitutional, and (he) will continue to fight to have them overturned.â? Gov. Sandoval also recognizes the projected costs of Medicaid expansion, which could cost the state $574 million between 2014-2019.

    His budget includes a number of education reform proposals. First, he proposes the creation of a Block Grant Program that would adjust distribution of education funds to local districts and allow them more flexibility and autonomy. $20 million would be provided as performance pay incentives for the most effective teachers. He makes clear his desire to eliminate teacher tenure, longevity pay increases and advanced degree benefits. He wants to pursue open enrollment, expand charter school options and increase vouchers for private schools. In higher education, he proposes increasing scholarship funds and granting autonomy over tuition to the Regents that administer universities and community colleges, with the request that 15% of any increased tuition revenue be reserved for financial aid.

    Gov. Sandoval shares candid words on collective bargaining saying, â??collective bargaining must be reformed if (Nevada is) to change the course on which (they) find (themselves).â? He then addresses public employee benefits saying, â??Nevadaâ??s Public Employee Retirement System (PERS) cannot sustain its current level of liability. Future employees must join PERS under some form of a defined contribution plan. And the Public Employee Benefit Plan can no longer afford full health care coverage for all retirees. New employees entering that system must do so under a new set of rules as well.â?

  • Economic Development: He proposes revamping the stateâ??s Commission on Economic Development by restructuring and renaming it completely. The new entityâ??Nevada Jobs Unlimitedâ??would be â??a public-private partnership existing largely outside state government.â? The public-private economic development entity would be a cabinet-level agency and would focus on growing jobs and recruiting companies from out-of-state. He proposes a $10 million Catalyst Fund to provide resources to Nevada Jobs Unlimited. He states his desire to expand public investment in broadband by including $3 million in his budget towards that end. He agrees with the Nevada Vision Stakeholders Group, which wants increased access to federally owned land within Nevada for alternative energy production. He endorses investment in access to Las Vegas from Phoenix via Interstate 11 and from Southern California via rail lines. Gov. Sandoval emphasizes his recently signed Executive Order that freezes most state regulations and requires a complete regulatory review. Gov. Sandoval also identifies the â??Silver State Worksâ? program, which will spend $10 million over the next two years providing resources to unemployed workers. Lastly, he calls for the creation of a state Grants Office, responsible for identifying â??federal and philanthropic opportunities that have for to long been overlooked.â?

Policymakers in the Silver State are grappling with the worst projected relative budget deficit in the country. While there are no quick fixes, Gov. Sandoval does include an impressive number of policy proposals to assist in balancing the budget. For more ideas, see the American Legislative Exchange Councilâ??s (ALEC) recently published State Budget Reform Toolkit and Reason Foundationâ??s Annual Privatization Report 2010: State Government Privatization section.

For the previous articles in this SOTS series, see: Wisconsin, California, Illinois, Connecticut, Minnesota and Oregon.