Use Additional Revenues to Reduce Debt, Not Increase Spending

(Michael Chamberlain/Nevada Business Coalition) – Turns out the state of Nevada may not be so broke after all. Well, we’re still pretty broke but tax revenues are predicted to come in higher than originally thought, which will give lawmakers more money to spend or save.

The Economic Forum, whose projections lawmakers are required by law to follow in their budgets, increased its revenue forecast for the next budget biennium by around $331 million. About $113 million is in funds that must be directed toward schools, while the remainder is available for the general fund.

There will be pressure on the governor and legislators to use this additional money to increase spending on government programs, spending which increased faster than the economy during the boom years. This would only increase the tendency of the government to continue unsustainable spending and reduce the desire to pursue reform and attack inefficiency, waste and duplication in existing programs.

It is unlikely that liberal legislators would have favored even the modest reforms they have this session were it not for the possibility of actual cuts to education and other programs. Restoring funding to these programs is liable to have the effect of killing any chance of meaningful reform and of stopping the unsustainable growth of government.

The state would do well to follow the advice offered by NPRI’s Geoff Lawrence. Lawrence argues against using increased revenue to boost general fund spending.

Part of the governor’s budget relies on using money from capital accounts and other areas that are not considered part of general fund revenues. This is money that has been borrowed and must be paid back at some point. Lawrence suggests that any additional revenue be used to replace these borrowed funds rather than using them to finance additional spending.

The economic downturn exposed the unsustainable path that increased government spending had been leading the state of Nevada down. It is important that legislators and the governor hold the line on spending and use any additional revenue to reduce borrowing rather than increase spending.

(Michael Chamberlain is Executive Director of Nevada Business Coalition.)