Outgoing Nevada Governor Sandoval releases 2019-2021 biennium budget recommendations

CARSON CITY — Nevada Gov. Brian Sandoval issued the following statement Friday regarding the 2019-2021 budget building process and priorities:

“I am pleased to announce that my Administration is in the final stage of building the next biennium budget and turning the reins over to Governor-elect Steve Sisolak for review, modification, and submission to the 2019 Legislature.

"I would like to extend my deepest thanks to the many members of state government who have worked to develop this budget. After building four separate biennium budgets, I understand the time and effort which goes into the process and the many difficult decisions that must be made — thank you to each state employee who has helped this process throughout my tenure as Governor.

“I want the Nevada family to know the great opportunity that lies ahead. This budget is far different from the first years of my Administration when Nevada was recovering from the Great Recession. More opportunities are ahead as the Silver State continues to diversify our economy, improve education outcomes, and provide affordable and quality health care, and I am confident our budget recommendations begin that process.

“I wish Governor-elect Sisolak all the best as he carries on with this process and works with the 2019 Legislature to continue to make Nevada the best it can be.”

The budget highlights outlined below include additional funding for programs and services statewide. Through this budget, Governor Sandoval continues to focus on the education of students of all ages through funding for K-12 education and school safety projects, as well as a focus on scholarship opportunities and student enrollment growth at institutions in the Nevada System of Higher Education.

Additionally, there is a strong focus on health care programs and availability of social services, and funding for much-needed equipment for the Nevada Division of Forestry. As he has done throughout his Administration, Governor Sandoval has developed this budget with the focus of ensuring the Silver State continues to move forward, and all citizens have opportunities for success.

BUDGET HIGHLIGHTS — REVENUE:
— The Economic Forum has forecast revenue of approximately $8.8 billion over the next biennium, up from approximately $8.2 billion for the current biennium.

— Included with the Economic Forum forecast, and as a result of better than forecasted revenue from the Commerce Tax/Modified Business Tax (MBT), and the Bank Branch Excise Tax; the MBT tax rates will be decreased effective July 1, 2019 from 1.475% to 1.378% for General Business category, and from 2.0% to 1.853% for the Financial/Mining category.

— Marijuana revenue for the Distributive School Account (DSA) (15% wholesale tax) and the Rainy Day Fund (10% retail tax) are performing better than forecasted.

— The Government Service Tax (GST), which produces approximately $20 million per year for the General Fund, is set to sunset at the end of FY19, and will be redirected as revenue in the Highway Fund along with the approximately $60 million per year of GST currently going into the Highway Fund.

— Strong ending fund balances for FY18 and FY19 have/will result in substantial transfers to the Rainy Day Fund (state’s saving account) and provide the opportunity for significant funding for one-time purchases and projects the State has previously deferred.

RAINY DAY FUND:
— Compared to no balance in 2011, currently has approximately $233 million.

— The marijuana 10% retail tax increases the Fund by approximately $4.2 million per month.

— The Rainy Day Fund balance is expected to be nearly $300 million at the end of calendar year 2018, once final fiscal year end transfers are made.

— Governor Sandoval’s budget recommends the marijuana 10% retail tax of approximately $50 million per year – now directed into the Rainy Day Fund, be instead used to fund education related programs, specifically to fund new school safety initiatives and to address a projected shortfall in the Governor Guinn Millennium Scholarship program (shortfall projected to be $31 million at the end of FY 21).

SUPPLEMENTAL APPROPRIATIONS NEEDED FROM FY19 PROJECTED ENDING FUND:
The Legislature will need to provide approximately $66.5 million in Supplemental Appropriations to support current biennium costs, including:
— $36.5 million for the Distributive School Account

— $14.5 million for the Medicaid program

— $9.6 million for Forestry fire suppression

— $160,000 for Water Resources/Department of Conservation and Natural Resources

— $142,000 for State Parks/Department of Conservation and Natural Resources

— $67,000 for the Governor’s Finance Office

— $65,000 for visiting Dignitary Protection

— $69,000 for Investigation Division/Nevada Highway Patrol

— $5.4 million for Corrections overtime shortfall

ONE-SHOT APPROPRIATIONS:
The Sandoval budget would include more than $134 million in one-shot purchases and projects, including:
— New Forestry helicopter (approximately $4.5 million)

— New Forestry firefighting equipment

— Department of Corrections replacement vehicles

— New Fleet Services vehicles

— Payment of $8.6 million to Washoe County School District for the online schools funding issue

— $42.5 million for the Governor’s Finance Office SMART 21 – Replacement of HR and Financial Systems – includes data clean up and interfaces between legacy systems

— Child Support Enforcement IT system replacement ($17 million)

— Child Welfare/Unity IT system enhancement ($437,000)

— Department of Corrections IT systems ($3.9 million)

— State Parks enhancements, including paving and self-pay kiosks at Ice Age Fossils State Park

— Budget system upgrades at the Governor’s Finance Office

— Nevada Criminal Justice information system upgrade

EXPENDITURE SUMMARY
K-12 EDUCATION:

— Continued investment in education programs with accountability for results.

— DSA student enrollment growth is forecasted at approximately 1.3% per year costing $45 million in FY20 and $82 million in FY21.

— A 2% merit salary increase is included in the DSA for each year of the biennium totaling $55.7 million in FY20 and $112.6 million in FY21.

— Medical inflation (health insurance) of approximately 4% per year is included in the DSA totaling $10.6 million in FY20 and $22.4 million in FY21.

— Funding is included to continue new teacher incentives ($5.2 million per year), ZOOM/EL schools ($49.9 million per year). VICTORY schools ($25 million per year), and Nevada Ready 21 Tech Grants ($10 million per year).

— Full-day Kindergarten funding within Basic Support.

— The budget includes a near doubling of funding for the state to support a “weighted funding model” where ALL students in need of added support receive additional funding. Funding for this effort grows from $36 million per year to nearly $70 million per year. This investment will ensure that ALL schools with students performing within the bottom quartile will receive additional funding (approximately $1,200 per student) to provide targeted support.

— A new budget account (2698) is created to address recommendations from the School Safety Task Force created by Executive Order. Marijuana tax revenue (10% retail tax) is redirected from the Rainy Day Fund to this newly created school safety account. Total budget for the coming biennium would be approximately $76 million; and include funding to near double the number of school social/behavioral health workers, provide for additional resource officers (police) and fund physical infrastructure improvements.

— $22.4 million is recommended to increase funding for Read by Grade 3 learning strategists so all elementary schools have this resource.

— $35.6 million in General Funds is recommended to replace the loss of grant funding for Pre-K programs to ensure access to quality pre-school development programs.

— $2.3 million is added to continue Jobs for America’s Graduates (JAG) program at current levels.

NEVADA SYSTEM OF HIGHER EDUCATION:
— Funding is included for student enrollment growth of approximately $22 million per year.

— The FY19 (current year) budget includes approximately $10 million for institution specific Capacity Building initiatives. The coming biennium budget includes additional funding to grow these projects further, totaling $18.2 million in FY20 and $22.45 million in FY21. All eight institutions have projects to build educational capacity.

— University of Nevada, Las Vegas, School of Medicine ramp-up costs require an additional $4.2 million in funding in FY20 and $10.1 million in FY21. This funding is on top of $10.6 million of Base Budget funding. The UNLV Medical Schools will have 240 enrolled students by FY21.

— Funding is included for summer school to increase options for degree completion, limited to specific STEM/CTE programs. $15.4 million is included for FY21 only.

SCHOLARSHIP PROGRAMS:
The Sandoval 19-21 Budget funds the following existing scholarship programs:

— Shore up the Governor Guinn Millennium Scholarship Program with marijuana funding ($31 million) being redirected from the Rainy Day Fund

— Silver State Opportunity Grants ($5 million per year)

— Fund the Nevada Promise Scholarship program ($3.5 million)

— Re-establish the $20 million tax credit for the Nevada Educational Choice Scholarship Program to supplement the existing tax credit program of $7 to $8 million per year.

— Fund the Teach Nevada program ($2.5 million per year)

— Fund the Nevada Institute on Teaching and Educator Preparation at UNLV ($2.5 million for the biennium)

— Continue funding for the Nevada Teach program at UNR ($300,000)

HEALTH AND HUMAN SERVICES:
— The decreasing amount of Federal Matching Assistance Percentage (FMAP) will result in the need for a significant increase in the amount of State funding to operate current health care programs. Decreasing FMAPs will result in the need for additional State funding of approximately $41 million in FY20 and $73 million in FY21. The decreasing FMAPs are related to the Affordable Care Act implementation over the past five years (specifically the newly eligible population FMAP decreasing from 100% to 90% and CHIP programs losing the 23% FMAP bump) and the increase in Nevada’s per capita personal income which results in a decrease in FMAP.

— Caseload growth in the Medicaid program (roll-up and forecasted growth) result in the need for additional GF of approximately $47 million if FY20 and $60 million in FY21. Medicaid is serving approximately 660,000 Nevadans per month, and an additional 28,000 children covered by the CHIP/Nevada Check-up program.

— Mandatory rate increase in services such as prescriptions, hospice, federally qualified health centers, rural health centers, and Indian Health Services will result in the need of approximately $23 million in additional GF in FY20 and $47 million in FY21.

— Requested staff and programing with the Division of Child and Family Services related to the Prison Rape Elimination Act (PREA) result in the need for 97 new full-time employees phased in over the biennium, costing $3.7 million in FY20 and $7.9 million in FY21.

— Nearly $7 million in combined funding is included to address the Autism Treatment and Assistance Program (ATAP) waiting list projected to be 381 clients. Six additional staff are needed to help manage the workload.

— $3.7 million in combined funding is included to expand Elder Protective Services to a full Adult Protective Services program. Nine new positions are needed.

— The Silver State Health Insurance Exchange (SSHIX) budget includes enhancements of $5.7 million in FY20 and $5.2 million in FY21 to contract with GetInsured for an integrated online health insurance exchange; to allow Nevada to move off the federal facilitated exchange. Source of funding is premium fees.

— Nine new staff are included in the SSHIX budget for project management office, consumer assistance, quality assurance, marketing coordination, and more.

PUBLIC SAFETY:
— $5.2 million of combined funding is provided for in the Parole and Probation (P&P) budget for increasing caseload supervision (27 new staff are requested). All together the P&P Division is requesting 31 new full-time employees.

DEPARTMENT OF CORRECTIONS:
— $5.5 Million for 52 new Correctional Officers to support medical and transportation posts.

BUSINESS AND INDUSTRY:
— The Athletic Commission would be transferred from the Department of Business and Industry to the Governor’s Office for supervision/oversight, and reclassification of key personnel to be comparable to other regulatory division heads.

— Taxicab Authority will reduce staff by ten full-time employees, from 54 to 44, as a result of declining revenue and ridership, resulting in a $1.6 million revenue reduction over the biennium.

PUBLIC EMPLOYEES RETIREMENT SYSTEM (PERS):
— PERS has announced the need for retirement contribution increases

— Regular Employer/Employee paid would increase from 14.5% to 15.25% each side (0.75% increase).

— Police/Fire Employer/Employee paid would increase from 20.75% to 22% each side (1.25% increase).

— Cost of the PERS increase to the General Fund is estimated at $36.8 million (includes DSA which is $21 million)

COST OF LIVING ADJUSTMENT (COLA):
— Recommend either 2 percent per year or 3 percent one-time COLA for state and university employees, and employees of local school districts.