Inflating Nevada’s budget deficit: The lie that’s dying, though some keep trying; Updated

Victor Joecks

Last week I noted that the media overwhelmingly reported accurately on the size of Nevada’s budget deficit.

Although the truth is now the accepted budget narrative, some in the media, including David Schwartz of the Sun, are still trying to inflate Nevada’s budget deficit.

Instead of providing clarity, the Economic Forum’s ruling on how much money the state can spend over the next two years set off an even more heated debate on the actual size of the budget deficit.

On one side, there’s Gov.-elect Brian Sandoval and conservatives who say the state has a deficit of $1.2 billion.

On the other side, Democrats and advocates for maintaining current government services say the deficit is $3 billion.

The real number is somewhere in between, about $2.2 billion, according to a Sun analysis. …

Both sides have accused the other of using fuzzy math to further their ends.

Here’s the simple math equation that liberals have consistently answered incorrectly and that David Schwartz avoids entirely in his article above.

Nevada is going to have about $5.4 billion for the next biennium when you include the Economic Forum’s forecasted revenue and a little bit in surplus revenues.

In the last biennium, Nevada’s General Fund spending was about $6.4 billion.

$5.4 billion – $6.4 billion = -$1 billion.

And the vast majority of journalists in Nevada have reported this correctly – Nevada faces a $1 billion deficit, or about a 17 percent budget gap, not including the $200 million in additional Medicaid funding that Sandoval has pledged to spend.

The problem with Schwartz’s reporting on the $1.2 billion, $3 billion and $2.2 billion deficit figures is that he assumes a budget with a $2 billion spending increase and works from there.

Outside of government, no one budgets this way – it’s the difference between real and government math.

Schwartz’s conclusion, then, is based on his assumptions about the political mood of Nevada’s leaders.

The $480 million savings from furloughs and pay freezes is virtually assured to be extended. So we can subtract that from the $3 billion.

The state has made new projections improving the budget outlook, further reducing the number. Still, the 10 percent ($820 million) cuts Sandoval is including seem a generous assumption – especially considering such a proposal will have to make it through the Legislature.

Same goes with the $175 million cut in higher ed. Students, faculty and school boosters won’t let that happen without a fight.

So add back that combined $1 billion in proposed cuts to Sandoval’s number. That leaves a $2.2 billion deficit – and tough decisions for legislators and the governor to make.

Do you see the danger in that kind of thinking? He’s subjecting numbers (and what constitutes a deficit) to his thoughts, err … a “Sun analysis,” on what is going to happen politically.

Therefore, using the same logic as Schwartz, I can make Nevada run a surplus.

Since Nevadan’s are sick of wasteful government spending and with record high unemployment facing Nevadans, its citizens won’t be satisfied until spending is brought down 22 percent (Nevada’s “actual” unemployment rate) to $5 billion in the next biennium. This means that Nevada has a $400 million budget surplus.

That type of logic would be just as intellectually disingenuous as what Schwartz did. (Note: This doesn’t prevent either side from arguing that Nevada needs to spend $5 billion or $8.3 billion, but neither side should claim that the amount of money it wants to spend determines the budget deficit. And believers in limited government haven’t been claiming this.)

A surplus or deficit, commonly defined, is what you have minus what you spent before.

And to their credit, the rest of the media – and add the Elko Daily Free Press editorial board to the growing list – is getting this right.

(An update, including a response from Schwartz after the jump.)

Update: David Schwartz has made his disagreements with this post known on Twitter. With apologies for switching between Twitter and a blog post (hard to accurately reply in 140 characters), let me respond.

Here are Schwartz’s disagreements:

NPRI doesn’t like my math on NV budget. But I use Gibbons/Sandoval #’s. They over-simplify for political reasons.

“$5.4 billion – $6.4 billion = -$1 billion.” Willful ignorance on budget. Ignores fed. stimulus, local school support.

Left doesn’t like my number either. But saying deficit is “$1 billion to $3 billion” is meaningless to readers, even if I’d get less flak

First, it’s not Schwartz’s math I disagree with, it’s his premise – that the size of Nevada’s budget deficit is dependent on his (or the Sun’s or anyone’s) interpretation of political reality.

Second, NPRI uses the general fund spending number, because that’s what the debate is over – what will Nevada’s general fund spending be? Also, general fund spending (exclusive of federal stimulus, etc.) is widely reported as Nevada’s budget, including in an article Schwartz wrote.

Gibbons and the Legislature were at odds during most of the session. He vetoed more than 40 bills, which was a record. These included the state’s $6.6 billion budget and higher taxes to pay for it. Lawmakers easily overrode the governor on most major vetoes. [Emphasis added]

So according to Schwartz, in 2009 the state’s budget was $6.6 billion (before the 2010 special session took the number to $6.4 billion), but now in 2010, when it’s politically convenient (i.e. useful to the goal of increasing state spending), the budget now includes federal stimulus funds, etc.

Third, no one at NPRI is ignoring federal stimulus funds or local school support. I’ve personally linked to the agency requests budget, which contains both, several times, including in the post above.

Nothing is stopping anyone from arguing that Nevada needs to spend $8.3 billion (or $100 billion!) in the next biennium, but don’t pretend that the budget you or anyone else believes Nevada “needs” determines what the budget deficit is or that an $8.3 billion budget isn’t a $2 billion increase in general fund spending over the previous biennium. Just have the intellectual honesty and integrity to defend increasing spending by $2 billion.

Note that NPRI has never argued that Nevada doesn’t have a budget deficit, because we “project” that Nevada “needs” to spend less than it’s going to take in. We have plainly acknowledged many times that Nevada is facing a $1 billion budget deficit (see above) and we aren’t afraid to defend the need to shrink government by eliminating waste and ineffective government programs.

The other side needs to be that intellectually honest as well – then the productive discussions and disagreements can begin about what is and isn’t important in Nevada’s budget.