In Looking at Budget Facts, Look at All the Facts

In a column critical of NPRI’s 2011 ratings of Nevada legislators today, Las Vegas Sun columnist Jon Ralston wrote about the conservative think tank’s “disgust” with the budget deal, “as if there were some massive expansion of government that occurred.”

“I repeat the facts,” Jon writes. “In 2009, lawmakers approved a $6.9 billion general fund budget; in 2011, they approved a $6.2 billion general fund budget.”

But that simultaneously is half the picture and not the whole picture.

The half left out of the first part is that the Legislature had already pared the $6.9 billion 2009 general fund budget from $6.9 billion to $6.4 billion in a special session convened in February 2010. So the budget had already been cut by $500 million before Gov. Sandoval and current legislators took office. What the 2011 Legislature actually did was trim the current budget from $6.4 billion to $6.2 billion.

The fact is, Nevada’s general fund budget for the upcoming biennium WAS reduced, not increased. And to that extent, no matter how they spin it, the big-government liberals in this state lost and fiscal conservatives won. Big. That’s a fact. But again, that’s not the whole picture.

You see, because of the worst recession in Nevada history, bordering on depression, and the commensurate population loss, Gov. Sandoval campaigned on a platform of rolling back general fund spending to the 2007 level, which was in the neighborhood of $5.2 billion.

And indeed, when the Economic Forum met last December, it projected tax revenue in the neighborhood of $5.3 billion, so we’d have been covered without raising taxes. And if Nevada was to live within its means, that meant the governor needed to craft a budget that would cut out an additional $1.1 billion from the $6.4 billion that was currently being spent.

And for those who say that wasn’t possible, I’ll refer you to NPRI’s alternative Freedom Budget proposal that shows if you limit government to its core, essential functions and make some other changes….yes, you absolutely can operate the state’s budget on $5.3 billion.

But instead of proposing a $5.3 billion budget, the governor used some accounting gimmicks and raided some local government piggy banks to propose last January a budget of $5.8 billion – which was still a substantial cut of $600 million from present spending and WITHOUT using the $600 million worth of “temporary” tax hikes former Sen. Bill Raggio engineered in 2009 which were scheduled to expire (sunset)….tomorrow.

Now fast-forward to May 2011: The Economic Forum meets and determined that the state’s anemic recovery, combined with some other adjustments in Medicaid formulations, would result in the state being able to spend an additional $400 million. As such, the governor revised his budget proposal and beefed up general fund spending from $5.8 billion to $6.2 billion.

And then….the Nevada Supreme Court dropped its stink bomb.

I don’t want to get into the details of the case itself again, but the long and short of it was this: The Court said the governor had to give back $62 million the governor had raided from a local water project fund from his proposed budget.

No prob. That $62 million could easily have been covered by the $400 million budget surplus the Economic Forum has just declared a couple weeks earlier. However, the governor determined that the ruling *might* result in additional lawsuits which *might* have resulted in the Court ultimately stripping a full $600 million from his proposed budget.

So the governor chose to err on the side of caution and fiscal stability and decided he was just going to give back the full $600 million worth of raided local funds rather than just the $62 million. Which was fine. Tough call based on a little legal crystal balling of potential future cases. I don’t begrudge the governor, who has an exceptionally long and distinguished legal background, making such a better-safe-than-sorry judgment call.

But once that aspect of the call was made….

The governor had two choices: He could break his unambiguous verbal commitments to the citizens of Nevada that he would not raise taxes or extend the $600 million worth of “sunsets”….or he could cut $600 million out of his revised $6.2 billion budget which included the $400 million in additional spending he added earlier in the month thanks to the surplus the Economic Forum handed him.

Let’s be clear here: The governor originally proposed a spending level of $5.2 billion in his campaign, which was what the state was spending in 2007. He then officially proposed spending $5.8 billion last January. Then, because of the Supreme Court decision, he would have had to cut an additional $200 million from that January budget proposal….which was already $600 million higher than he said it needed to be for Nevada to live within its means without raising taxes or extending the sunsets.

Eyes glazing over yet?

So all we were really talking about was cutting an additional $200 million out of the governor’s own proposed budget from January which would STILL have resulted in spending $400 million MORE than the 2007 level which the governor himself said was the level sufficient to run the government’s essential services and operations.

Instead, he took the easy way out and raised taxes $600 million on Nevada’s businesses and families by extending the sunsets. And THAT’S why NPRI and other fiscal conservatives ended up being “disgusted” with the budget deal. That’s the full picture. And that’s a fact.

You see, despite government being trimmed slightly in the final budget deal, it could have and should have been shrunk SO MUCH MORE if the governor had just kept his word on not extending the sunsets and honoring his own budget proposal from prior to the start of the session. The “disgust” is over what might have been and should have been had the governor made his promise and kept his promise.

Alas, this likely comes down to what I’ve written before: Personnel is policy. And I suspect moderate senior advisers and staffers around the governor saw the Supreme Court decision as a face-saving opportunity to increase spending and taxes, since in their hearts they never really supported the governor’s no-new-taxes budget in the first place.

I suspect that had the governor been surrounded by conservative budget hawks such as economist Geoff Lawrence of NPRI, conservative businessman Monte Miller, former state Sen. Bob Beers and former Assembly Minority Leader Lynn Hettrick, when the Supreme Court decision came down, no way, no how, would the governor have broken his word on the sunsets even if his opinion had prevailed on the matter or whether or not to plug the $62 million hole or the entire potential $600 million hole thanks to the Supremes.

Again, personnel is policy. And under the circumstances, knowing the moderate tendencies toward government by many close to Gov. Sandoval, how this whole thing came down at the end shouldn’t have been a complete surprise. We all probably should have seen this coming.

But the governor, frankly, gave us reason to believe again. Which is why, I guess, saying that conservatives were “disgusted” with the budget deal isn’t quite accurate. A better description would probably be, monumentally disappointed.

Ah, what might have been.