Gov. Sandoval Taking Two Pronged Approach To Addressing Potential $656 Million Budget Shortfall

CARSON CITY – The Sandoval administration is pursuing two paths in an effort to resolve a potentially massive budget shortfall, seeking clarification from the Nevada Supreme Court on the case that created the issue and working with lawmakers on potential additional revenues should they be necessary.
Dale Erquiaga, senior adviser to Gov. Brian Sandoval, briefed a number of interested parties on the developments since the state’s high court dropped the potential budget bombshell on the Legislature yesterday.
“The Supreme Court, in a rather dramatic decision, presented us with a math problem,” he said. “They didn’t present us with a crisis, and they didn’t present us with something insurmountable.”
In a decision rejecting the Legislature’s right to use $62 million from a Southern Nevada water fund to help balance the current budget, the court intimated that as much as $656 million proposed by Sandoval to be used in the upcoming budget could be legally unavailable.
Erquiaga said the first course of action was for Sandoval early this morning to ask Attorney General Catherine Cortez Masto to ask the court to clarify if its decision was narrowly focused on the $62 million clean water fund sweep, or if the decision should be interpreted more broadly to cover other proposed uses of local funds to help balance the governor’s proposed $6.1 billion spending plan.
“Again, did the court mean $62 million, or did the court mean to take the broadest interpretation possible, thus putting at risk an amount ten times that size, and really, forever changing the way we budget in the state of Nevada,” Erquiaga said.
“These revenue mechanisms have been used for anyone’s recent memory here,” he said. “All of the revenue mechanisms that the governor included in his budget except one have been used by prior legislatures. For the court to say you can’t use that kind of money anymore will forever change the way we budget.”
Erquiaga said that if the issue is only the $62 million water fund sweep, the Legislature can move forward with adopting Sandoval’s proposed two-year budget. Sandoval would like the court to act quickly on the clarification request so the Legislature can complete its work by June 6, the constitutionally mandated final day of the session, he said.
On the budgetary front, Sandoval has met with lawmakers from both parties and both houses to discuss the possible continuation of some of the tax increases set to sunset June 30 as a source of new revenue should it be needed to balance the budget, Erquiaga said.
About $679 million could be generated if the taxes were extended another two years. The taxes include a sales tax piece and a higher modified business tax for the state’s largest employers, but Sandoval will not support continuing all of the higher levies, he said.
So if $656 million is needed to balance the budget, Sandoval will look to other revenues, but not new taxes, Erquiaga said.
“If sunsets are called into play, you may be assured that the margin tax and the service tax are not,” he said.
These new taxes were proposed by legislative Democrats in recent weeks as a way to augment the budget.
As part of these tax discussions, Sandoval and Republican lawmakers are seeking a number of policy reforms as part of any such continuation, Erquiaga said.
Some of the reforms being discussed this session include changes to Nevada’s collective bargaining law, the elimination of teacher tenure, and others.
“It is critical to the governor that reforms be included in any final solution,” Erquiaga said.
He would not disclose the specifics of the reforms under discussion.
Charles Blumenthal, communications director for the Assembly Democratic Caucus, said legislative leadership is having productive discussions every day trying to work through the process and get a budget agreement.
Audio clips:
Sandoval Senior Adviser Dale Erquiaga says the Supreme Court presented the governor and Legislature a math problem, not a crisis:
052711Erquiaga4 :10 with something insurmountable.”
Erquiaga says Sandoval wants the court to clarify its intent:
052711Erquiaga1 :14 state of Nevada.”
Erquiaga says the revenue mechanisms used in Sandoval’s budget have been used before:
052711Erquiaga2 :16 way we budget.”
Erquiaga says policy reforms have to be part of any budget solution:
052711Erquiaga3 :05 any final solution.”