July 14, 2006
A STATE OF DECLINE:
What TASC Would Mean for Nevada
by Karen Lyons
If the proposed Tax and Spending Control (TASC) initiative— a constitutional amendment to limit expenditures similar to Colorado’s TABOR —had been effective since the 1991-93 biennium in Nevada, state services would have deteriorated substantially in the ensuing 15 years. By limiting state spending growth to a rigid population-growth-plus-inflation formula, TASC would have required cutting the actual budget by more than $4.6 billion over this period. Each year legislators would have had to make cuts in public services, such as education, health care, and public safety, in order to comply with the limit. The severity of these cuts would increase over time.
- By FY 2007, state expenditures would need to be $780 million lower than the current appropriation levels.
This report compares actual state expenditures to what state expenditures would have been limited to had TASC been effective beginning in the 1991-93 biennium budget, approximately the same time TABOR took effect in Colorado. Specifically, it focuses on FY 2007, when expenditures under TASC would have been $780 million lower than actual expenditures. This report illustrates the magnitude of this difference by showing hypothetical ways to reduce actual state expenditures in FY 2007 by $780 million. It assumes that such a reduction would be distributed proportionally across and within Nevada’s major budget areas: K-12 Education, Human Services, Higher Education, Infrastructure, Public Safety, Commerce & Industry, and Other. Thus since K-12 Education makes up 23 percent of the FY 2007 budget, it receives 23 percent of the hypothetical total expenditure reduction. Furthermore, since the Distributive School Account makes up 94 percent of all K-12 Education spending, it receives 94 percent of the K-12 expenditure reduction. 
While actual reductions likely would differ from this assumption, proportional reductions provide an indication of the types of reductions that would be required. (See Figure 1.)
The following sections detail both the proportional amount by which each major budget area would have to be cut, as well as potential ways to achieve these cuts, in order to lower the total state budget by $780 million. These examples are for illustrative purposes only— the author is not implying that such cuts are desirable or politically feasible. 
K-12 Education’s share of the total expenditure reduction would be 23 percent or $182 million less in state funding for FY 2007. The majority of that amount—$171 million —would come from the K-12 Distributive School Account (DSA), which provides direct state financial aid to K-12 public education in Nevada. A reduction in the DSA of this magnitude for the 2006-07 school year could be accomplished in a couple of ways.
Nevada public schools could employ 3,740 fewer teachers, reducing the number of teachers by almost 18 percent. This would consequently raise the pupil-teacher ratio from 20.5 children per teacher to 25 children per teacher and would lock in Nevada’s current rank of 50th in the nation in pupil-teacher ratio. The pupil-teacher ratio would continue to rise in subsequent years, as TASC would require greater reductions over time
Alternatively, Nevada could close school for 28 additional days each year—by having longer vacations or shortening the school year. Again, fewer and fewer days of school would be affordable in future years as the limit would continue to pinch funding.
Human Services, which includes community-based services to people with severe disabilities, mental health care, rural health clinics, Medicaid, and Nevada Check-Up, would face a proportional reduction in state funding of $173 million. Roughly 40 percent of this reduction would come from Medicaid and Nevada Check-Up, the State Children’s Health Insurance Program (SCHIP).
State funding for Medicaid and SCHIP—the main state-administered programs for health care assistance and coverage—would need to be reduced by $72.5 million in FY 2007. By reducing its Medicaid and SCHIP spending by this amount, Nevada would also forego $86.8 million in federal matching funds. Thus, Nevada’s health care providers would face a loss of Medicaid and SCHIP revenues of over $159 million.
Nevada would not be able to achieve reductions in these two programs through “efficiency savings.” Instead, it would have to take one or more of the following actions: (1) reduce eligibility levels; (2) reduce covered benefits; or (3) reduce payments to physicians, hospitals, nursing homes, and other providers. Because Nevada’s Medicaid income eligibility levels for children, nonworking parents, pregnant women, elderly, and disabled individuals are already as low as the federal government will permit, the state could not generate any significant savings by reducing eligibility levels.
Thus, to achieve a $72.5 million reduction in Medicaid and SCHIP funding the state could do all of the following.
Deeply cut the reimbursement rates for hospitals, nursing homes, and physician services. This would severely limit people’s access to these services, as many providers would either stop seeing new Medicaid patients or stop participating in the Medicaid program altogether.
Eliminate or reduce coverage on prescription drugs or other services the state has the discretion not to cover under federal law. Research suggests that high copayments for prescriptions or lack of prescription coverage would lead to significant numbers of low-income persons forgoing their medications, with implications both for the individuals' health and for the cost of treating worsened health conditions in the future.
In addition to the $72.5 million reduction in Medicaid and SCHIP funding, other Human Services programs would need to be reduced by approximately $101 million in order to reduce the entire Human Services budget by the needed $173 million.
To save $36 million, the state could eliminate all state funding for the Desert Regional Center, the largest of three Regional Centers that provide assistance to people with developmental disabilities and their families.
To save $34 million, the state could eliminate all state funding for two mental health facilities: the Northern Nevada Mental Health Facility, the 2nd largest such facility in the state, and the Lakes Crossing Center.
To save $5 million, the state could eliminate the Senior Citizens’ Property Tax Assistance program, which provides tax relief to more than 16,000 Nevadans over the age of 62.
All of these reductions would have serious repercussions for thousands of Nevadan children, people with disabilities, people with mental health problems, and other low-income adults.
In order to reduce total expenditures proportionally by $780 million, Higher Education would need to be cut by $121 million. Nevada’s seven public institutions of higher education receive almost 80 percent of all Higher Education funding, so $94 million of the $121 million would come from these institutions — University of Nevada-Las Vegas, University of Nevada- Reno, Great Basin College, Western Nevada Community College, Community College of Southern Nevada, Truckee Meadows Community College, and Nevada State College at Henderson.
Nevada could proportionally reduce its general support to these seven institutions. Universities could absorb these cuts by eliminating instructional faculty positions. In order to make up for the declining state support, the University of Nevada-Las Vegas could eliminate all of its professor positions and roughly half of its associate professor positions; the University of Nevada-Reno could eliminate all of its professor positions; and the Community College of Southern Nevada could cut all of its full-time faculty positions. It should be noted that even after these cuts, there would not be any money to create new lower level teaching positions (e.g. assistant professor or lecturer). Instead, certain classes and possibly majors would have to be cancelled.
Rather than reducing the teaching staff, the state could eliminate its entire general support for Great Basin College, Western Nevada Community College, Truckee Meadows Community College, and Nevada State College at Henderson. To remain viable, these colleges would have to reduce class offerings, lay off professors, defer maintenance, or some combination of these options.
The proportional cut for state funding for Public Safety would be $63 million. Since a little over one-third of this funding goes to the state’s eight correctional facilities, their budgets would need to be reduced by $22 million. A reduction of this size would limit the state’s ability to follow current incarceration policies. It could be accomplished by taking one of the following actions.
Nevada could lay off 458 correctional officers, reducing the number of correctional officers by 30 percent. A reduction of this magnitude would have to be accompanied by the release of a substantial number of prisoners in order to avoid endangering the safety of the corrections personnel and the inmates.
Nevada could close some of its correctional facilities. To achieve $22 million in savings, it could close the Lovelock Correctional Center or both the Nevada State Prison and the Warm Springs Correctional Center. Of course, these savings would not occur if those prisoners were simply transferred elsewhere. These examples assume for the sake of illustration that the inmates would no longer be incarcerated.
Funding for other less-secure facilities would also be cut. The state’s 10 conservation camps, which provide prisoners who have served time in a more secured facility the opportunity to live in a minimum custody surrounding and work for the Nevada Division of Forestry, would face spending reductions of $2 million. While this may not sound like a huge reduction, consider that each camp receives an average of only $1.3 million in state funding. Thus, by closing one or two locations, the state could save the required amount.
In addition to the above cuts, the Department of Corrections would still need to reduce its budget by $15 million. The remainder of the proportional cuts to Public Safety would come from reducing the budget for the Department of Motor Vehicles by $10 million and the Department of Public Safety by $14 million.
Commerce & Industry
Commerce & Industry’s share of the total expenditure reduction would be roughly 4 percent, which translates into $34 million less in state funding for FY 2007. Reducing funding by this amount could affect economic development initiatives and the tourism industry. Such a reduction could be achieved by carrying out one of the following actions.
The service cuts detailed above in the areas of K-12 Education, Higher Education, Human Services, Public Safety and Commerce & Industry would have achieved approximately $573 million of the $780 million total expenditure reductions needed for actual expenditures in FY 2007 to equal TASC expenditures. The remaining $207 million in cuts would come from Infrastructure (which includes the Department of Wildlife, the Division of State Parks and the Department of Transportation), Finance & Administration, Constitutional Agencies, and Special Purpose Agencies.
TASC contains the three provisions that make Colorado’s TABOR the most restrictive budget limit in the country. In Colorado, TABOR led to a deterioration in the quality and quantity of public services. TASC can be expected to have similar effects in Nevada. This paper provides examples of the magnitude of service reductions necessary if TASC had been effective beginning in the 1991-93 biennium, including fewer teachers and correctional officers, and more limited and less adequate health care services. While many of these specific reductions might not be implemented, there would not be painless options for cuts of this magnitude. Thus, TASC would cause significant damage in Nevada.
Sources and Methodology
The base expenditures used in this analysis try to adequately reflect “biennial spending” as defined in the Tax and Spending Control (TASC) initiative. They include Appropriations for Nevada Operating Funds (General Fund plus Balance Forward and Other Funds) less Appropriations for Industrial Insurance System, Professional Licensing Boards, Highway Funds, Federal Funds, and Education Trust Funds. An analysis by the Legislative Council Bureau of Nevada uses a similar base, although they also include one-time funds.
Specific program area reductions are based on the FY 2005 Appropriation Reports available at http://www.leg.state.nv.us/lcb/fiscal/...
Estimated teacher reductions were calculated as the total K-12 Distributive School Account shortfall divided by the average annual Nevada teacher salary in FY 2006 adjusted for inflation. Source: Nevada Department of Education, 2006 Research Bulletin. Available at http://www.doe.nv.gov/resources/researchbulletins.html
Estimated number of teachers and student to teacher ratio based on the ratio of 20.5:1 used in the Nevada Department of Education (NDE) Student Enrollment and Forecast Model. This information was given by Gary Horton, Distributive School Account (DSA) Administrator.
Estimated number of school days lost was computed by dividing the total K-12 Distributive School Account for by the number of school days per year (180). The result was an average cost per day of operating all Nevada public K-12 schools. According to the National Education Association’s June 2005 “Ranking and Estimates” Report, for the 2003-04 school year, Nevada ranked first in having the largest number of “Students in ADA per Teacher in Public K-12 Schools” (see Table C-7). Available at: http://www.nea.org/edstats/images/05rankings.pdf
Medicaid and SCHIP estimates are based on reports filed by the state to the federal government about Nevada's projected Medicaid and SCHIP expenditures in FY 2007 and historical data about expenditures and enrollment, which were adjusted to correspond with projected 2007 levels.
Tuition, number of FTE undergraduate and graduate students by residency level, average faculty salary by rank, and number of faculty by rank were obtained from each of the school’s website or institutional research department. In certain cases, projections were calculated by adjusting for inflation or for previous average growth.
Estimated inmate reduction calculated from average cost per inmate per day and projected inmate population in state correctional facilities. Source: CBPP analysis of data in Governor's Executive Budget for 2005-2007. Available at http://budget.state.nv.us/bb0607/BB0507DOC.pdf
Number of correctional officers cut was computed using the average salary for Corrections Officer (pay grade 33) in 2006 adjusted for inflation. The current number of correctional officers was obtained using data from the Nevada Department of Corrections (www.doc.nv.gov)
Number of inmates at Conservation Camps taken from the Governor’s Executive Budget for 2005-2007.
 In order to become part of Nevada’s state constitution, TASC would have to be approved by voters in 2006 and in 2008.
 Nevada operates on a biennium budget cycle, which means that the state enacts separate annual budgets for two fiscal years at the same time. The State Spending Limit in TASC applies to biennial spending. The FY 2007 budget represented approximately 53 percent of the total 2005-07 biennium budget and it is assumed that it would receive 53 percent of the biennial budget cuts.
 Other is composed of Finance & Administration, Constitutional Agencies, and Special Purpose Agencies.
 Cuts are distributed within program areas, only if there are large expenditures within an area’s budget, i.e. Medicaid and SCHIP within the Human Services budget.
 It should also be noted that had TASC been adopted, legislators would have had to make these types of cuts over time, i.e. they would not have had to make such a large cut in one year.
 Specifically, Youth Alternative Placement, C&FS Juvenile Correctional Facility, Caliente Youth Center, and the Nevada Youth Training Center.
 This includes the Southern Nevada Women’s Correctional Facility which is privately run, but receives state funding.
 This includes funding for the Commission on Economic Development, the Nevada Film Office, Rural Community Development, Procurement Outreach Program, Commission on Tourism and Nevada Magazine.