Will the State Raid the Current FY 19-20 Budget?
Such a thing would be considered unconscionable, however, dramatic revenue shortfalls are rippling through state and local government yielding ominous possibilities. A raid would only happen by a special session of the legislator signaling that both the Governor and the Interim Finance Committee (IFC) did not have enough power to manage the fiscal impact.
State of Emergency Official
Both the Governor and now the Interim Finance Committee have declared states of economic emergency because of the COVID-19 pandemic. These declarations are necessary to empower the Governor to access emergency “Rainy day” funds. Nevada’s replenished rainy day fund holds approximately $400 million.
2009 Redux: Subcommittee to Manage Federal COVID Cash
At it’s May 13, 2020 meeting, the Interim Finance Committee (IFC) approved revisions to state budgets triggered by the receipt of federal stimulus dollars. Speaker Frierson proposed that the IFC form a subcommittee to focus on the handling, emphasizing the oversight, of the federal dollars. He offered the 2009 interim “Subcommittee for Federal Stimulus Oversight” as precedent. While this idea was not discussed at this meeting because it was not noticed, the Speaker indicated that this idea has been part of ongoing discussions with the Governor’s office. This subcommittee would be charged with overseeing the anticipated $836 million in Federal funding
The Governor’s office provided estimates for the impact of lost tax revenue on the FY 2020 state budget. The document provided high and low range impacts. Generally, these changes ranged from less than 1% to 25%.
Revenue shortfalls are triggering these intense considerations. Nevada’s Tax scheme is extremely sensitive to fluctuations in sales and use taxes. It’s been nearly two months of zero revenue for gaming taxes. Senator Kieckhefer asked which revenue sources (taxes) and how much from each account. Fiscal analysts did not have a detailed projection but noted that for gaming alone, there has been zero revenue for a period of time the economic forum had anticipated $652 million in revenue.
Is a Special Session Imminent?
The Governor’s office and Legislative leadership have now publically uttered these foreboding words. It is now on the table, but imminent is not clear yet because of the following reasons:
A special session would be necessary only if the Governor and the IFC lack enough power to make the budget modifications caused by the dramatic revenue shortfalls and the receipt of massive Federal dollars.
Only the Governor can call a special session and he sets the items they can consider. If a session was called, it would be narrowly focused.
Whether they meet for one day or more, a special session will cost money. The justification for such expenditure to conduct business that couldn’t wait until the regular session in February.
The political impact of special sessions, active campaigns. At present every Assembly seat is up for election, and those who are current legislators would enter a blackout period for raising campaign cash surrounding the special session. Candidates would be prohibited from accepting campaign donations starting at the moment the special session is called, ending 30 days after the special session adjourns sine die.
A special session would raise the profile of sitting legislators to have direct engagement with the economic fallout of COVID-19. It’s a risky position to be a party to what could be seen as a life-saving intervention or held responsible for the lost jobs. Not an enviable position.
The IFC adjourned with much more to come as the dust settles, revealing the wake of COVID-19.
Special sessions in other states?
According to the National Conference of State Legislatures, only a few states have held COVID related special sessions. In all cases, theses sessions were needed to address election-related issues. By now, all Nevada voters should have received their mail-in ballots ahead of the June 9, primary.
We are experiencing the most unprecedented and usual time in our State’s history. Although it gets hard to maintain a cool head during the constant swirling of bits of information, a cool head is what we must have. There is no doubt, though, that the next legislative session will have the unenviable task of tackling the enduring impact of COVID-19. It is expected that there will be greater competition for what’s left of state revenue. The impact may be similar to 2007 - which reminds us that we have seen this before, and survived.
At Group Six, we will do our best to prepare for a variety of contingencies. And we are most grateful to work with each of you because the work you do is important to our communities regardless of a global pandemic. Thank you for keeping calm and carrying on.