Lawmakers and Governor Continue to Look for Solutions to Massive Budget Shortfall

CARSON CITY – As Gov. Jim Gibbons and lawmakers continued to work today toward a plan to balance the state budget, a number of potential solutions were called into question during a hearing today.
Ideas to reduce the deductions available on the net proceeds of minerals tax to raise $50 million, collect as much as $100 million in unpaid taxes owed to the state and expand sales tax collections on internet sales all were questioned by some lawmakers, administration officials and industry representatives.
But new potential solutions were also brought forward at a meeting of the Legislature’s Interim Finance Committee, including a suggestion to make more state agency operations self-sufficient by increasing industry fees, which would free up general fund revenue to reduce the level of cuts now being contemplated for education and state programs.
Another proposal is to establish a new tax amnesty program to bring in additional revenue to offset budget cuts.
Senate Minority Leader Bill Raggio, R-Reno, proposed an auction of state buildings in exchange for a long-term upfront lease agreement fee, saying it could bring in $250 million quickly to help with the shortfall. He said between $200 million and $300 million in cuts proposed by Gibbons to balance the budget are not doable.
Buildings would be appraised and perhaps auctioned off in a single day with the lease agreement fee, calculated over a 20-year period, being paid in full at that time by the successful bidder, he said. The state would then make payments back to the successful bidder during the time of the lease agreement, Raggio said.
“We’re not selling these buildings,” he said. “We would be leasing them out at a fixed amount of payments over a period of time. At the end of the 20-year term, the state would again take back the building.
“It’s not a perfect solution but it is certainly a concept that I think is worthy of at least consideration,” Raggio said.
He noted Arizona recently completed such a process and brought in more than $700 million.
Assembly Minority Leader Heidi Gansert, R-Reno, also supported taking a look at the concept, saying the current budget balancing plan has a lot of holes.
Gibbons and lawmakers are working to come up with a bipartisan solution to an $888 million budget shortfall. Lawmakers are scheduled to begin a special session Tuesday to address the fiscal crisis.
Raggio questioned the suggestions that more tax revenue could be generated by collecting unpaid taxes or by increasing internet sales tax collections. He called some of the budget proposals put forward by different interests as “smoke and mirrors.”
“I’m not going to be part of a process that plugs in something that is unrealistic,” he said.
Dino DiCianno, executive director of the Department of Taxation, said much of the $100 million in taxes owed to the agency cannot be collected because of bankruptcies and other factors. The suggestion was not one of Gibbons’ proposals to balance the budget.
“We will never be able to capture that money,” he said. “Especially with respect to debt that has been discharged by a court. It is truly written off. It is gone.”
Budget Director Andrew Clinger said he has not put a figure on what potentially could be generated from improved internet sales tax collections because there is too high a level of uncertainty surrounding the issue.
And mining industry representatives also testified before the Legislature’s Interim Finance Committee, saying they are willing to help in the current fiscal crisis but that Gibbons’ plan to change the rate of deductions allowed for the minerals tax is a non-starter.
Political consultant Pete Ernaut, representing the Nevada Mining Association, said the industry is willing to help, but Gibbons’ plan to change the deductions on the net proceeds is unacceptable to the industry.
“We understand the number that you all are shooting for, and we’re doing our darn best to get there,” he said.
Assembly Speaker Barbara Buckley, D-Las Vegas, advocated both for a new tax amnesty program and a shift to make more state agencies self sufficient through the use of fees rather than general fund support.
She asked Dennis Neilander, chairman of the Gaming Control Board, if a fee increase of some level could be put in place by July 1 if authorized by the Legislature. The gaming agency received $31.7 million in general fund support in fiscal year 2009.
Neilander said such a timeline could be accommodated. He could not comment on what size of a fee increase would be feasible, noting that the gaming industry is suffering in the current economic slowdown like all other sectors of the economy.
Buckley said such fees should be considered by all regulatory agencies and programs, from the Labor Commissioner to the Equal Rights Commission, to free up general fund money for education and other critical programs.

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