(Sean Whaley/Nevada Business Bureau) – Nevada ranks well overall in an analysis by the nonpartisan State Budget Solutions of spending trends over the past decade, coming in 12thin the review of how states have managed their money in times of growth and recession.
The report, released last week, looks not only at general fund spending, but all types of spending, including federal funds. The review encompasses liabilities states face well into the future, including pension and health care costs, and the amounts borrowed from the federal government to pay unemployment claims.
Nevada has borrowed about $773 million in the current economic downturn to pay jobless benefits. The money will have to be repaid, and interest is now accruing on the loans. The interest payments will come out of Nevada’s already hard hit general fund.
“Our goal at State Budget Solutions is to explain just how states ended up where they are today, debunk the various myths and find real solutions for states to achieve fiscal responsibility,” said Bob Williams, president of the organization. “This research is vital to every state because it shows the significant holes that states create for themselves when they use accounting tricks and budget gimmicks to shift money out of other funds into their general fund.”
Among the best states for total fund budgeting are Wyoming, with a total funds surplus of 21.56 percent, followed by North Dakota with a 14.39 percent surplus. Nevada, at No. 12, had a total funds surplus of 2.2 percent.
The worst performing states in the total fund surplus ranking were Wisconsin with a 29.14 percent deficit, followed by Oregon at -12.42 percent and Ohio at -11.25 percent.
Nevada did not do so well in terms of its general fund ranking, however, coming in 40th with a 5.46 percent deficit.
The implication from this number is that Nevada is spending more general fund revenue than there is the ability to repay.
Tops in this category was New Hampshire with a 38.45 percent general fund surplus. Last was Wisconsin with a 29.14 percent deficit.
In a telephone interview with the Nevada News Bureau, Williams said Nevada ranks well overall in the analysis but still faces a number of challenges, particularly with the lack of jobs.
“What we see in your state the biggest problem is jobs,” he said.
Nevada is No. 1 in the nation in unemployment at 13.4 percent in August. When those who have given up looking for work and those who are working part time but who want to work full time are included, Nevada’s jobless rate is at 23.7 percent, again, highest among the states in this broader jobless measure.
At a meeting today to consider the unemployment insurance tax rate for 2012, Bill Anderson, chief economist for the Research and Analysis Bureau of the Department of Employment, Training and Rehabilitation, said Nevada can expect to see only modest job growth of about 1 percent next year.
“We’re moving sideways,” he said. “So the good news is that the dramatic job losses of previous years are behind us. The bad news is we just don’t see that upward momentum that we would like to be seeing.
“Right now we’re just bouncing along the bottom,” Anderson said.
Williams, a former Washington state lawmaker, praised the reform efforts of Gov. Brian Sandoval.
“Your governor has made a lot of progress,” Williams said. “But even though overall you rank very well, the problem is, most of the states, even the states that rank well, have problems in the future as you know in your last budget.”
In addition to the federal borrowing for jobless claims, Nevada faces a $2.3 billion unfunded liability for state retiree health care, and a multi-billion dollar public pension liability that could be as high as $33.5 billion based on one type of analysis, he said.
A big plus for Nevada was the approval in the 2011 session of a bill requiring performance-based budgeting, Williams said.
“If that is truly implemented that is going to really help legislators focus on outcomes rather than just income,” he said.
The decision by the Legislature and Sandoval to end a health insurance subsidy for new state employees hired after Jan. 1, 2012 was also a major achievement although it does not address the unfunded liability for current workers and retirees.
“There is a concern on general fund, but total funds – you fared better than most states and some of the actions taken by your governor are very impressive,” Williams said. “Plus the fact that they passed performance-based budgeting. The key will be, will he be able to get some of his other reforms through and we don’t know that yet. But I think you’ve got a governor who wants to go in the right direction.”
The SBS report analyzed both the general funds and total funds of each state, looking at each year in the past decade, comparing the general fund revenues and expenditures, drawn from the National Association of State Budget Officers’ “State Expenditure Report” to total government revenues and expenditures from the Census Bureau’s “Annual Survey of State Government Finances,” as well as looking at revenues and expenditures are from each state’s 2010 Comprehensive Annual Financial Report.
“State Budget Solutions is hopeful that state legislatures will look at these numbers and begin take responsibility for their budget crisis,” Williams said. “We can no longer afford to have states manipulate their budget and ignore their out-of-control spending habits, which is only sinking them deeper into debt.”