Annual Controller Report on Finances Reveals Dismal State of Affairs

CARSON CITY – An annual financial report released today by state Controller Kim Wallin examining the 2009 fiscal year that ended June 30 details just how difficult the national recession has been on the Nevada budget and how much worse it’s going to get.
Called the Comprehensive Annual Financial Report (CAFR), it describes government revenues and expenses for the just-ended fiscal year and how they compare to previous years.  In 2009 revenues totaled $7.79 billion, up over $500 million or 7.4 percent from the $7.26 billion in fiscal year 2008.
Some of the data is also available in a simplified report called the Popular Annual Financial Report (PAFR).
“Revenues were up because of the increase in federal funds the state received from the stimulus dollars,” Wallin said. Every other source of revenue to the state was down in fiscal 2009 over 2008.
Unfortunately expenses were up even higher than revenues, totaling $8.85 billion, an 18.3 percent or $1.37 billion increase from the $7.48 billion of the prior year.
Wallin said higher demands for services by Nevada residents, such as unemployment and Medicaid, pushed the spending level higher last year.
The state last fiscal year saw a 204 percent increase in unemployment benefits paid out over the prior year totaling $896 million, she said. Now the state is borrowing from the federal government to pay unemployment claims.
“What we’ve done is spend a lot of our reserves,” she said. “Are we in dire straits now? No. But if the trend continues we could face severe problems.”
Wallin said the state has a healthy general fund balance of $445 million currently. If it gets to the $200 million range there would be cause for concern.
The current budget does not show any promise of an economic turnaround, according to the report.
Revenues for the two-year, 2010-2011 budget are expected to be $5.5 billion annually.
The difference is a nearly 27 percent decline, from about $15 billion in revenue in the previous two-year budget to $11 billion this biennium.
The reduction in revenues means severe cuts to the budget are necessary, Wallin said.
“We have the fewest number of state workers per capita; we’re very lean,” she said. “I don’t know what we’re going to do. How many prisoners are we going to release? How many offices are we going to close?”
The CAFR, which looks at the state’s overall financial picture as well, did contain some good news.
The report notes although Nevada has experienced financial challenges this year, the state retained its high ‘AA’ credit ratings. These ratings are an indication of high quality obligations and a reflection of sound financial management, the report said.
Wallin said the state financial reports are great tools for people who are interested in how their government receives and spends their tax dollars and how the recession has seriously affected our ability to continue providing services as we have in the past.
“The PAFR is a basic view of Nevada’s revenues and expenses that allows citizens of all ages a better understanding of state finances,” she said.
The state of Nevada’s public and higher education systems is not good, according to the PAFR report, which noted that for the first time in 3 years, the Clark County School District did not achieve Adequate Yearly Progress, a designation of the federal No Child Left Behind Act.
Nevada also continues to have one of the lowest high school graduation rates in the country with just 68.7 percent graduating in 2008 after four years of school.
One item not in the report is the long-term financial status of the Public Employees Retirement System, the pension plan for state employees. Wallin said that because the plan is being pre-funded at appropriate levels, the unfunded liability, or the amount that would have to be paid out today if the state closed for business, does not have to be carried as a liability on its balance sheet.

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