Gov. Steve Sisolak on Tuesday outlined a hopeful vision for Nevada, but the recommended budget he released one day earlier suggests “doing more with less” may still be a fiscal reality for at least the next two years.
In his nearly 30-minute pre-recorded State of the State speech, Sisolak outlined a plan to diversify Nevada’s economy through public investments in clean energy, technology, infrastructure and job retraining programs for the thousands of displaced workers affected by the coronavirus pandemic. He also emphasized the need to modernize the state’s outdated computer systems, particularly those within the Department of Employment, Training and Rehabilitation, which was crippled by benefits claims after mandatory business shutdowns led to record-high unemployment in April of 2020.
Sisolak said his five-prong plan “will create 30,000 jobs in the short term” as well as “170,000 construction and development jobs and over 165,000 permanent jobs” over the next decade.
“We will emerge stronger from this pandemic and lead the nation in jobs and opportunities,” he said.
Sisolak’s optimism comes paired with a recommended budget that is better than the worst-case scenarios projected earlier in the pandemic, but will still leave many state agencies nervous about going into the upcoming legislative session. The governor acknowledged his initiatives come at the expense of other things within the overall state budget.
“Putting together a budget for the next two years is hard enough in the good times,” he said, “and even more difficult during a state of emergency.”
Sisolak’s recommended budget includes $8.67 billion in general fund spending — a 2 percent reduction from the previous biennium.
The total budget includes increased spending in health and human services, but that increase is paired with an increase in the number of Nevadans now relying on Medicaid. More than 761,000 Nevadans were covered by Medicaid as of November 2020, according to the governor’s office. Pre-pandemic the state had projected there would be 641,000 people enrolled in the program.
Nearly one in four Nevadans are now enrolled in Medicaid.
Sisolak’s budget includes the restoration of the 6 percent cuts on Medicaid rates made during the budget special session last summer. Similarly, Sisolak is recommending restoring Neonatal Intensive Care Unit hospital service rates to pre-budget crisis levels.
Nevada’s K-12 and higher education systems also take a hit within the governor’s recommended budget. Their combined budgets are down $130 million over the current biennium. However, those systems are expected to receive more than $550 million in federal aid combined, which could offset those shortfalls. The governor’s office noted those agencies are still waiting for federal guidance on how to use that money.
Sisolak chastised the federal government for not providing states and local municipalities relief.
“I am hopeful that long overdue federal support to state and local governments will be delivered in the coming months,” he said. “That support is critical and it’s outrageous that it hasn’t arrived already.”
Those hopes, which have been echoed by Democratic leadership throughout the state, may be answered soon. President-elect Joe Biden has previously announced a proposal to send $350 billion in additional relief money to states and local governments. How much that would impact the recommended state budget isn’t yet known.
No ‘no new taxes’ line
Sisolak’s speech gave no indication of whether he expects — or hopes — the Legislature will attempt to raise taxes to support state coffers, which are expected to continue to suffer until a Covid-19 vaccine becomes widely available to the masses.
Two years ago, during his first biennial state of the state speech, Sisolak praised the then-rosy economic outlook: “Nevada’s economic growth happened under our current revenue structure — and as they say, if it ain’t broke, don’t fix it.”
He continued, “That’s why this budget is presented without any new taxes. Let me say that again. This balanced budget does not contain any new taxes.”
At the time, the words were a gut-punch for progressive advocates who’d hoped the Democratic governor and Democratic Legislature would embrace raising revenue to support chronically underfunded state budgets, particularly within K-12 education and health and human services, which each make up about one-third of the state’s total budget. Democrats were one state senator shy of the two-thirds supermajority needed to raise revenue in the state.
Nevada Democrats saw their majorities shrink as a result of the 2020 general elections, making the prospect of raising taxes more difficult during the upcoming session. Still, calls for raising revenue have grown and several proposals are already dangling before lawmakers. Those include three separate mining tax increases originating from the 32nd Special Session last summer and two proposals backed by the Clark County Education Association to raise gaming and sales tax.
Battle Born Progress Executive Director Annette Magnus called the absence of revenue one of several “glaring omissions” within the state of the state.
“Raising revenue is an absolute necessity if Nevada is going to be able to recover and build a state that retains and attracts businesses and new residents,” Magnus said in a statement. “The old days of scraping by on fumes need to come to an end, especially as this pandemic has exposed how overly reliant our state revenue is on tourism industries.”
Nevada State Education Association President Brian Rippet said in a statement that “while there is some good news reflected in Governor Sisolak’s proposed budget, Nevada is still in desperate need of new revenue. Unfortunately, we did not hear about a plan to get us there in tonight’s state of the state address.
Others, however, were pleased with what they heard — or didn’t hear.
“Presenting a balanced budget that does not add more burdens to employers in the form of more taxes or regulations is great news for all Nevadans,” said Vegas Chamber President and CEO Mary Beth Sewald in a statement. “This commitment, along with more funding for small businesses, gives employers and entrepreneurs confidence to move forward and it will help preserve jobs.”
Assembly Minority Leader Dr. Robin Titus in the Republican response to the state of the state said lawmakers must “resist any effort to raise taxes on the backs of businesses.”
“Attempting to manipulate Nevada’s complex tax structure via ballot initiatives is both irresponsible and shortsighted and will hurt Nevada families,” she added, referencing both mining and tourism.
Titus also pushed back on the state’s handling of the pandemic, saying “we saw the limitations of our state government as it responded to the crisis. … From draconian policies that decimated our private sector, to the mismanagement of government agencies that failed to provide individuals with much-needed resources, we saw areas that need improvement.”
Clark County School District in its statement praised the governor for his “commitment to making education a priority in his proposed budget during these unprecedented times.” The governor expressed support for a phased-in approach to the long-awaited pupil-centered funding formula and stressed that returning children to in-person learning is a top priority.
But the district also acknowledged the overall budget: “We are realistic that difficult decisions will need to be made in order for lawmakers to pass a balanced state budget.”
The Nevada Association of School Superintendents also released a statement noting the difficult fiscal situation for the state: “Tough decisions had to be made, and all Nevadans will share in the pain of the budget reductions.”
The Nevada Health & Bioscience Corporation issued a statement thanking the governor for recommending the Legislature reinstate $25 million in funding for the UNLV School of Medicine building. That money was stripped from the university during the budget special session last summer.
What comes next
The Nevada State Legislature’s 2021 session is set to convene on Feb. 1. They will have 120 days to pass legislation and approve the state’s next biennium budget.