Many people were no doubt surprised when Gov. Gibbons, in his State of the State address, proposed spending $17.3 billion for the 2009-2011 budget, as the most commonly heard predictions put the expected biennial budget in the neighborhood of $6 billion. The confusion stems from a common misunderstanding that the "general fund" is the same thing as "the budget." In reality, the general fund makes up only about 35 percent of the total budget. The Governor's proposed general fund appropriations actually total $6.17 billion, $340 million higher than projected general fund revenues for the 2007-2009 biennium.
When one looks at the entire budget, the governor is actually proposing to spend only $900 million less than he proposed back in 2007. The 2009-2011 budget will only be 0.9 percent smaller than the estimated total revenue collections for the entire 2007-2009 biennium (see page 7 of the executive budget). So the conventional wisdom that we're "cutting to the bone" remains quite wrong.
And what of this alleged $2.3 billion shortfall? That number is dubious, as NPRI has pointed out repeatedly. Basically, state government took the number for 2007 general fund appropriations and added 20 percent so that it could maintain its current services inefficiencies. Imagine that. As the cost of doing business goes down each year for the rest of the world, thanks to new technology, cheaper goods and higher productivity, government assumes it must increase spending by 10 percent annually just to "maintain services." Does that suggest a culture of some guaranteed, recalcitrant inefficiency or what?
By all measures, Nevada's state government is doing quite well in this economic climate – especially in relation to Nevada's business community. Revenues and expenditures today are lower than expected, but they are not significantly lower than revenue collections or expenditures in the previous budget. For example, total State of Nevada revenue collection increased from $15.8 billion in 2005-2007 to $17.5 billion in 2007-2009, a 10.47 percent increase. Compare the state's situation to that of gaming, Nevada's largest industry, which saw gross revenues decline 9.42 percent at the tables and 7.88 percent at slot machines between December 2007 and November 2008. In fact, net revenues for gaming are down more than 50 percent since 2007.
Even with the recession likely to continue through 2009 and 2010, Nevada government faces projected revenues that are 9.1 percent higher than just two years ago. Most businesses in Nevada would treat that as good news, but many government officials and state workers are acting as if Nevada is entering a new Stone Age.
Below, based on available data, is Nevada's budget outlook. (These figures are not adjusted for inflation, although we note that we are currently experiencing a deflationary period. Budget amounts for 2005-2007 are in 2007 dollar values, while 2007-2009 to 2009-2011 budget amounts are in 2008 dollar values.) Any asterisk(*), below, indicates projections. The 2007-2009 general fund assumes approximately $320 million in additional spending thanks to a surplus in 2005-2007.
|Nevada's General Fund|
|Expenditures||$5.88 billion||$6.15 billion||$6.17 billion|
|Revenue||$6.19 billion||$5.83 billion||$6.17 billion|
|Nevada's General Fund|
|% Change Expenditure||–||4.59%||0.33%|
|% Change Revenue||14.28%||-5.81%||5.83%|
Governor's Proposed Budget
|Expenditures||$15.85 billion||$18.2 billion||$17.3 billion|
|Revenues||$16.1 billion||$17.5 billion||$17.3 billion|
|FY 2008||$9.18 billion||11.14%|
|FY 2007||$8.26 billion||4.82%|
|FY 2006||$7.88 billion||–|
* 2007-2009 budget and revenue amounts are projections. 2009-2011 budget revenue and expenditure amounts are from the proposed 2009 Executive Budget. Note: The Governor's 2009 Executive Budget estimates that the total revenue for FY 2009 will be $9.42 billion. However, the governor's actual FY 2008 expenditures and projected FY 2009 revenues add up to $18.6 billion, not the $17.5 billion in total revenue (page 7) stated in his budget.
If Nevada's business community can survive this economic downturn, cut costs and increase efficiency despite having less money than the previous year, why can't Nevada's government increase efficiency and cut costs as it receives more money than the previous year?