Local governments could hurt budget deal

By David McGrath Schwartz

Friday, Dec. 5, 2008 | 7:11 p.m.

Some local governments are more than worried about the state's plan to borrow up to $160 million from them. Some have actually pulled out there money, fearing the state would not repay them.

After news broke about state Treasurer Kate Marshall's plan to borrow money from the Local Government Investment Pool, Humboldt County pulled out $11 million earlier this week; Elko pulled $15 million and Fallon pulled $6.2 million.

If too many local governments - most of which are northern counties, cities and school boards - pull out money from the pool, it could endanger the deal hashed out by Gov. Jim Gibbons and legislative leaders to meet the $340 million shortfall.

The $160 million is nearly half the proposed solution for the shortfall that legislators will vote on in the special session called for Monday.

Mark Winebarger, the chief deputy treasurer, said it was not clear why Fallon pulled its money. But Elko and Humboldt did because they feared the state would not repay the loan, he said.

Marshall and staff members traveled to Winnemucca today to meet with leaders from rural counties and cities. They are trying to reassure the entities that the state will be required to pay back the money.

Marshall said that as the bill reads now, the state would have to repay the money after four years, with local governments receiving better-than-market interest rates.

Winebarger, when asked whether the local governments felt comfortable after hearing the pitch, said: "It depends on what happens Monday. They'll read the bill, and see how it goes," he said.

Under the proposed legislation, the state could not borrow more than $160 million or 25 percent of the total amount in the fund, whichever is less.

Currently, there is $726 million in the fund.