After hearing from school officials, lawmakers argued Thursday there is a $425 million hole in Gov. Brian Sandoval's K-12 education budget.
The argument centers on Sandoval's plan to take $425 million from what he said are excess funds in school district bond reserve accounts. Those reserves provide districts with a full year of bond payments in case of economic problems. Sandoval said cutting that reserve requirement to six months would free up that much money to backfill operating funds for salaries and overhead.
But school officials told a joint Senate Finance and Assembly Ways and Means study committee Thursday taking that money would cause them long-term problems, almost certainly forcing them to either refinance their outstanding bonds or raise the property taxes that back the bonds.
Clark County School District officials said contrary to what Sandoval Chief of Staff Heidi Gansert told lawmakers, none of the $300 million the state wants to take from their reserve is available.
Chief Financial Officer Jeff Weiler said if that money is taken, the remaining bond reserve will be depleted by 2013, forcing them to raise property taxes by some 20 cents.
A rough calculation shows that would result in a tax increase of about $100 on a home valued at $150,000 for tax purposes.
Weiler said the alternative, refinancing the bonds, would just extend the payments 10 or more years, leaving the district with no capacity for new or maintenance and repair projects. Clark has identified more than $4 billion in needed repairs and upgrades to its schools.
"My answer is it will not be available," he told the subcommittee.
He added that the governor's plan could convince bond rating agencies to further lower the district's rating, making it more difficult and expensive to sell bonds in the future.
Clark County School Board President Carolyn Edwards said by taking the money, Sandoval is essentially forcing a tax increase.
"I cannot, under my watch, allow the undermining of the financial solvency of the district to ameliorate the fiscal condition of the state," she said.
Nye County Superintendent Rob Roberts, who is head of the state school superintendents association, said his county has three construction projects under way and, if the money is taken, won't have enough money to pay for them.
He said numerous districts have suffered from cuts over the past three years including Churchill, Lincoln and Nye, which have all closed schools.
Washoe Superintendent Heath Morrison said when added to the $630 million in other education cuts in the proposed budget, this brings the total reduction compared to the original 2009-10 budget to more than $1 billion. He said that could mean an increase of 5-6 students in each class and the loss of 400 teachers.
Clark officials said they may be facing an eight-student increase in class size under the budget.
Senate Majority Leader Steven Horsford, D-Las Vegas, and Sen. Sheila Leslie, D-Reno, both said they believe there is a $425 million hole in the governor's budget.
"And if this hole remains, what is the governor going to do?" Horsford asked.
He said the constitution requires the governor to present lawmakers with a balanced budget, "and this budget is not balanced."
While the reserve money is tax money to pay off the bonds, not directly bond proceeds, they argued that still violates the covenant with voters who approved the bond issue.
The bond question on the ballot said the bond proceeds were not to be used for operating costs.
Gansert said they believed the schools agreed the $425 million could be taken and put into operating costs in view of the state's financial crisis. She said they were working from data received from school ending fund balance sheets.
Gansert said they would recalculate based on more recent data sent from the districts in the past couple of weeks but, at this point, were sticking with the budget plan. She agreed to have new numbers to lawmakers next week.
Speakers also objected to other cuts in the Sandoval budget, particularly the 5 percent pay cut, and the requirement that teachers begin to help pay their retirement contributions.
Lyon Superintendent Caroline McIntosh said the 5 percent pay cut and 25 percent retirement contribution amounts to a 10 percent hit to teacher salaries.
Lynne Warne of the Nevada State Education Association said those cuts along with the elimination of step increases and other salary augmentations will end up costing the average teacher more than $6,000 a year.
She said that would reduce the starting salary for a new teacher in Carson City to $29,125 a year.
"The governor's budget shows teachers no respect, but contempt," she said.
Committee Chair Debbie Smith, D-Sparks, said there will be more hearings in the near future on the K-12 education budgets, which consume more than 35 percent of all general fund spending.