Nevada in Budget Squeeze

Hard Choices in Store for State That Already Runs Lean; Some See Opportunity
February 22, 2010
By Alexandra Berzon

Wall Street Journal

Nevada’s $887 million deficit is puny compared with California’s $20 billion hole.

But in a state that operates one of the leanest budgets in the nation, that amounts to a 22% shortfall, a gap that has some worried that the state might fall further behind in such areas as education and health care, where it already lags behind other states. Others sense an opening to chart a new course in small government.

“We are working on solutions to turn this recession into an opportunity to reinvent our state’s government,” Republican Gov. Jim Gibbons said in an emergency State of the State address this month. “We may never have an opportunity like this again,” he said. Mr. Gibbons faces a tough primary battle this year and has had low approval ratings.

Limited government is as much part of the folklore of Nevada as cowboys and mobsters. Shortly before Nevada became a state, mining companies—then the dominant industry—ensured a tax cap for themselves in the constitution. The state has never had a personal income tax, and voters enshrined that ban in the constitution in the 1980s. The state legislature meets in regular session only for a few months every two years.

Nevada has been hit hard by both the foreclosure crisis and a sharp drop in gambling and tourism spending. The unemployment rate was nearly 13% in December, up from 8.4% a year earlier. Housing prices dropped 25% in the third quarter of 2009 from a year earlier, when they were already down 26%.

Mr. Gibbons, a conservative who faces a tough primary challenge, is among those who are trying to use the latest budget crisis as a way to ensure Nevada doesn’t stray from its small-government roots.On Tuesday the legislature begins a special session to close the shortfall in the budget it approved a year ago, which includes this fiscal year and next.

However, that’s a mighty task in a state as flinty as Nevada.

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