Nevada agencies asked to prep for potential $687 million in budget cuts

CARSON CITY, Nev. — Gov. Steve Sisolak has issued an order directing state agencies and other recipients of state funding to prepare for potential budget cuts as a result of reduced tax collections caused by business closures due to the virus.

“One does not have to be a statistician or budget analyst to know that government budgets are taking significant hits as actual revenue will not meet our previous projected revenue expectations," the governor wrote in an April 3 letter.

All told, according to various reports, cuts could total $687 million over the next two years.

Sisolak directed Finance Director Susan Brown to send all affected agencies guidance on what they will be expected to cut over the biennium.

Sisolak said agencies should identify a 4 percent cut this fiscal year and a 6 percent cut in fiscal 2021 but added that there could be two additional 4 percent reductions in 2021 if the situation worsens.

He said, however, the cuts will be “surgical and thoughtful.”

“While we must have percentage targets to start this process, we will not just simply make a strict percentage cut across the board to our budgets,” he said. “All budgetary decisions made in the coming weeks and months will be made with an eye toward prioritizing our state resources to protect the health and safety of our citizens and to get us on the path toward a healthy recovery both physically and economically.”

The agency that would take the largest hit is Health and Human Services which gets more than $2.83 billion in state funding over the biennium. HHS would lose $145.7 million under the 4 and 6 percent reductions. If the added two 4 percent cuts were ordered, that agency would lose a hair over $258 million.

HHS is by far the largest state agency, managing programs including Medicaid. It isn't clear at this point what would happen to the federal funding that makes up the majority of HHS funding.

K-12 school funding would take the second largest reduction with the Distributive School Account losing $81.6 million in the first scenario and $104.8 million if the extended reductions are ordered.

That doesn't include reductions that would be imposed on the School Remediation Trust Account, Other Education Programs, New Nevada Education funding and School Safety budgets that, altogether, would lose more than $23 million from cuts of 4 and 6 percent. Total K-12 funding is more than $3.5 billion in General Fund dollars over the biennium.

The Nevada System of Higher Education would take the next largest hit under Sisolak's initial proposal. The basic 4 percent this fiscal year and 6 percent for 2021 would cost NSHE $69.1 million. With the two additional 4 percent cuts added on, the total would be $124.6 million. NSHE is budgeted for $1.38 billion from the state this biennium.

The Legislature wouldn't be spared either. With a budget of $76 million for the biennium, the Legislative fund would take a $5.28 million hit if cut 4 percent this year and 6 percent next. The added two 4 percent cuts would raise that to $6.7 million.

The Department of Corrections, which is budgeted at $632.5 million over the biennium, would have to cut about $32 million, $57.4 million under the worst-case scenario.

A number of budgets, however, take much smaller reductions, especially those containing large amounts of salaries for elected officials because it's unconstitutional to reduce an elected's salary during their term in office. One of the largest in that category is District Judges' salaries that cost the state $46.7 million over the biennium.

“I know it is an all too familiar exercise for many of you to be asked to review your budgets for recommendations to remove resources, contract desired expansions and set aside planned improvements all in the vein of shared sacrifice,” Sisolak said.

He said he is hoping that the state can “build a new paradigm so that we come out stronger on the other end.”

The letter to directors and administrators didn't lay out a specific timeline for submitting proposed reductions. Depending on the agency, its size and complexity, the process could take a couple of months.