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Nevada leads nation in size of its budget gap, national group reports

By ThisIsReno

By Sean Whaley, Nevada News Bureau: When it comes to the budget problems looming for many states over the next two years, a report released this week by the National Conference of State Legislatures makes one point very clear: Nevada is No. 1, and not in a good way.

The report identifies Nevada as having the largest general fund budget gap of all the states at 32 percent next fiscal year. The report, “State Budget Update, November 2010” shows New Jersey in second place with a 26 percent gap, and North Carolina with a 20.3 percent gap.

The news for fiscal year 2012-13 is even worse, with Nevada first again with a general fund budget gap estimated at 40 percent, followed by New York at 20.4 percent.

The report says 35 states are projecting budget gaps next fiscal year, and 24 states project gaps in 2012-13, due largely to the loss of federal stimulus funds in their current spending plans.

Nevada leads the nation in its unemployment rate and in its home foreclosure rate, factors which have helped create the budget gap.

“And while state revenues are starting to pick up, the growth is unlikely to be sufficient to replace expiring American Recovery and Reinvestment Act (ARRA) funds or cover projected increases in program areas such as Medicaid and K-12 education,” the report says.

States will face a $37.9 billion loss in federal funds next fiscal year, which begins July 1, 2011, compared to the current year, according to the Federal Funds Information for States. This is expected to make big holes in state budgets, what many state officials call the “ARRA cliff effect.”

Nevada is expected to lose about $600 million in federal stimulus funds that helped balance the current budget.

“State legislators are being realistic about the budget situations facing their states,” said William Pound, executive director of the National Conference of State Legislatures. “But how they balance their budgets could be filled with as many twists and turns as the latest Harry Potter movie.”

Nevada’s public school enrollments are expected to be nearly flat in the next two years, but the state’s Medicaid caseload is growing dramatically. General fund support for Nevada’s Medicaid program could increase by as much as 50 percent to $1.25 billion in the two-year budget that will be approved by the 2011 Legislature compared to the current budget.

Nevada is projected to have about $5.3 billion in general fund revenues to spend over the next two years, well below the current biennium. Gov.-elect Brian Sandoval said the revenue estimate means state agencies will have to cut about $1.2 billion from their two-year budgets.

Some Nevada lawmakers have called for tax increases as part of the solution for the general fund budget hole, but Sandoval has rejected any such suggestions.

Nevada’s budget problems are being made worse not only with the loss of federal stimulus funds, but because a collection of tax hikes approved by the Legislature in 2009 will expire on June 30 next year.

There was some good economic news for Nevada this week. The October gaming revenue report shows Nevada casinos took in nearly $889 million from gamblers for an 11 percent increase over October 2010. For the fiscal year to date, revenues are up 4.4 percent.

The NCSL budget gap estimates for Nevada were made before the state’s Economic Forum made its revenue projections on Dec. 1.

NCSL is a bipartisan organization that serves the legislators and staff of the states, commonwealths and territories. It provides research, technical assistance and opportunities for policymakers to exchange ideas on pressing state issues.