Gov. Brian Sandoval will present a major budget amendment today in response to a Nevada Supreme Court ruling that taking the Clean Water Coalition money to help balance the current budget is unconstitutional.
That ruling left the biennial budget, which ends in a month, $62 million short - which the state will have to make up.
In a statement, Sandoval said the ruling "raises questions about certain assumptions in the proposed executive budget."
The attorney general's office, Sandoval's own legal counsel and the Legislative counsel were all working out how far that ruling reaches into the budget. In addition to the Clean Water Coalition money, it could bar the state from taking the bond reserves from school districts - most recently estimated at $134 million - and the 9 cents worth of property tax revenue from Clark and Washoe counties - another $121 million.
If those too are off the table, Sandoval's recommended budget has developed at least a $317 million hole.
But if legal counsel says the ruling also extends to the room tax revenue collected under Initiative Petition 1, that total would grow by another $220 million for a total of nearly $540 million.
Ways and Means Chairwoman Debbie Smith, D-Sparks, said that would "blow a huge hole in (the governor's recommended budget)."
All factions involved - including Senate Republicans who have been strongly opposed to any measures that would increase taxes - agree the simplest answer would be for Sandoval to agree to lift the sunsets on tax hikes approved by the 26th Special Legislature a year ago February.
He is reportedly considering doing just that in his amended budget plan.
Latest estimates indicate that would generate a net of $640 million in revenue, primarily from the Modified Business Tax and the raised portion of the sales tax going to public schools.
Sandoval said in his statement Thursday afternoon that the ruling has "far-reaching implications for how Nevada governors and legislatures will do business from this date forward.
"As a former federal judge, I am cognizant of the legal issues," he said. "As governor, I am forced to deal with their ramifications and I am responding by reworking the state budget."
Two Republican lawmakers gave indications after being briefed on the situation they too might be in a situation where the sunsets are the best or only available answer for the short term despite their pledges not to raise taxes.
One said the ruling "does give cover for the sunsets." The other described the ruling as "a game changer."
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