Politicians face no-win situation as they tackle state budget

By J. Patrick Coolican, David McGrath Schwartz

Wednesday, Feb. 17, 2010 | 2 a.m.

Imagine a game in which there are no winners. Scrabble without vowels. All chutes, no ladders.

That is the situation as the Nevada Legislature meets next week for a special session, made official Tuesday by Gov. Jim Gibbons’ proclamation, to close a $881 million budget hole.

Republicans and Democrats know they will be forced to turn their backs on favored policies and favored friends.

“Certainly nobody wins,” said Eric Herzik, a UNR political scientist.

Democrats and Republicans, conservatives and liberals, interest groups such as mining and labor — all will almost certainly take hits.

Gibbons is calling for 10 percent cuts in most state-funded agencies, including schools and universities. Other reductions include some that are wince-inducing, such as dentures for poor people. State workers will see their pay cut, and 227 will be laid off. Vacancies will be left unfilled.

Democrats are loath to pursue another course, as they don’t have the necessary two-thirds majorities for a tax increase and have no interest in an election-year vote on one. So they will likely swallow hard and make the cuts.

Last week, they faced attacks from labor leaders for capitulating and not advocating a tax increase.

But even those cuts are not enough, forcing Gibbons to acknowledge that he cannot cut his way to a balanced budget. He proposed eliminating some tax deductions for mining companies, the equivalent of a $25 million tax hike on an industry that Gibbons, who has a master’s degree in mining, has long courted and felt at home with.

Indeed, Democrats got something of a respite Tuesday, while it was Gibbons’ turn to take his jabs from both Democratic opposition as well as conservative allies after releasing his plan early in the day.

Last week, in a State of the State speech, Gibbons pleased conservatives with a red-meat barrage on the evils of big government.

But the plan released Tuesday satisfied no one, with the mining industry and conservative anti-tax advocates decrying the increased levies.

Mining companies are taxed on net proceeds but allowed a slew of deductions. Gibbons proposes eliminating some of the deductions.

That’s not a tax increase, he said. It’s merely “clarifying the deductions that they are allowed to take.”

Not so, mining lobbyist Jim Wadhams said. “When more revenue is exacted from any of us, as taxpayers, that’s a tax increase.”

Chuck Muth, president and CEO of Citizen Outreach, which has pressured politicians, including Gibbons, into signing a pledge not to raise taxes or fees, also said it was a tax increase.

“There’s no way to wiggle out of that one,” he said. He compared it to the federal government eliminating mortgage-interest or charitable-giving deductions for taxpayers.

“It’s not that he’s doing it,” Muth said. “It’s denying what he’s doing. To be disingenuous, to propose a tax increase and say it’s not a tax increase, that is what’s most aggravating.”

Robin Reedy, Gibbons’ chief of staff, sounded like a Democrat in her response: “It’s a matter of fairness. The fact is, (mining) pays very little.”

How the mining issue is perceived and resolved could have fatal consequences for Gibbons in his bid to win the Republican nomination for governor. He faces a difficult challenger in former federal Judge Brian Sandoval.

Gibbons received 67,000 votes in the three-way Republican primary in 2006, and nearly 20,000 came from rural counties, where mining is a key industry.

Gibbons took fire from his left, as well.

Danny Thompson, head of the Nevada AFL-CIO, ridiculed Gibbons for proposing that the Legislature eliminate the statute that gives collective-bargaining rights to local public employees, including teachers, firefighters and police. Gibbons and other conservatives hope to rein in public-employee pay by breaking their unions. The idea is “nonsense,” Thompson said, as their pay is not related to the state budget crisis.

“Anyone who thinks otherwise doesn’t understand the state’s budget,” the former legislator said.

Lawmakers attacked some of Gibbons’ cuts. He restored some programs, including housing for the mentally ill, home health care for seniors and 77 new welfare workers to deal with the growing demand.

Other cuts included $35 million from school districts and $9.5 million from higher education, on top of the 10 percent in cuts previously levied against them.

“That’s the wrong way to go,” Assembly Speaker Barbara Buckley said. “We’ve been searching for ways to go the other direction.”

For all of the displeasure among insiders, it’s Nevadans who will bear the brunt of the budget crisis.

Gibbons’ plan proposes 10-hour workdays, four days a week. Many state offices will be closed another day, although details aren’t firm.

The Department of Motor Vehicles, open six days a week, will look at scaling back to four or five days a week, Director Edgar Roberts said. Offices could be closed Sundays, Mondays and Tuesdays, he said.

For prisons, Corrections Director Howard Skolnik has spent the past year saying his department couldn’t institute eight-hour-a-month furloughs for employees without jeopardizing inmate and worker safety.

Gibbons is ordering all departments institute 10-hour furloughs a month — increasing the pay cut for state workers from 4.6 percent to 5.77 percent.

“We’re right on the edge,” Skolnik said. Programs will have to be eliminated, there will be rolling lockdowns and prisons closed, he said.

Health and Human Services Director Mike Willden said he would lobby that welfare offices be spared from closing an additional day each week. The state processes 1,000 applications a day for services such as food stamps, welfare and Medicaid, which many newly impoverished are using to survive.

“The burden and pressure will be too hard to run four days a week,” Willden said.

Nevadans hoping the special session would reform the state’s fiscal structure will have to wait for another day — as they usually do.

The state will have to limp along until the next regularly scheduled session in 2011, acknowledged Buckley.

“I think the plan for lawmakers is to weather the economic recession,” she said. “The economy will begin to rebound. It’s just a matter of when ... You cannot remake your state financial structure in a week. I think people underestimate the amount of consensus needed to remake the state’s financial structure.”

Gibbons’ spokesman Dan Burns said, “I don’t view it as simplistic as kicking the can down the road. But there is some truth to the fact that we will have serious budget issues in 2011.”

By then, the deficit is projected to be $2 billion to $3 billion.