Guinn warns lawmakers Nevada's tax system won't meet growing needs

Gov. Kenny Guinn warned Nevada lawmakers Friday that state revenues aren't growing nearly as fast as needed.

That means the state must either change the tax system or radically change how it budgets for services to Nevadans, Guinn told a meeting of legislative leaders.

"We're in better shape than we've ever been," he said, pointing to low unemployment rates and other indicators of the state's record-breaking economic health. "And we're squeezing, cutting our services."

The irony of a booming economy that isn't providing enough tax support was pointed out in a recent national study. It showed Nevada's tax structure more likely to fail to meet the state's future needs than any other state.

The study ranked Nevada's tax structure as vulnerable because there is no personal income tax and nearly half the state's revenue comes from sales taxes, which can fluctuate widely with the economy. Property and income taxes are regarded as more stable and better indicators of economic wealth.

Nevada spends about $3.2 billion in its general fund and $10.9 billion in other expenses in its two-year budget.

Guinn made it clear, however, that changing the tax structure doesn't necessarily mean increasing taxes.

In fact, his senior policy adviser, Denice Miller, said, state revenues per capita have declined since 1995 at the same time Nevada experienced spectacular economic and population growth. She said projections may soon show expenditures exceeding revenues in the next five to six years unless changes are made.

"We're going to have to make some really tough decisions," Guinn told legislative leaders. "And I know you're going to help me because, if you don't, I'm going to do them myself."

He is inviting lawmakers into the budget process more than ever before. And he said after his staff completes a fundamental review of how state agencies operate, they will begin revamping how they do business.

Starting this year, he said, he wants state agencies to find ways to pay for new programs and expansions with savings from other parts of their budgets.

New money in the budget, he said, must be reserved for the state's "super priorities" - set by the governor with help from lawmakers.

Legislators will be asked to submit budget recommendations as the next two-year spending plan is being built, instead of past practices in which the governor's budget was revealed to them for the first time in the State of the State address at start of each legislative session.

"If we have, for example, a $300 million surplus, we want to stack that money on the side and give everybody an equal chance to prove their priorities," he said.

He called for legislators to make recommendations on existing agency budgets, as well.

"We'll give your recommendations the same value, the same consideration as anybody else's."

"If you don't change anything you do today, then 98 percent of the budget is fixed," he said, adding that the remaining 2 percent doesn't provide much room for change.

Guinn, who campaigned on bringing his business experience to bear on state government, said state leaders must decide which services government should provide and how best to provide them. Then, the task is to decide how to pay for those services.

State agencies will have to live with what they have, or less, Guinn said - unless their needs fit into the "super priorities."

Some programs, Guinn has said repeatedly, should go away.

"Government cannot and should not meet every need," Miller told lawmakers. "That's not what we ever envisioned as the mission of government. Government should instead identify those essential things it should do - and then it should do those things well."