Friday, March 2, 2012

The Woes at Home


Reno is facing a potential $7 million budget shortfall next year, according to preliminary budget figures presented to the Reno City Council Wednesday.

In all, the city is facing $152 million in estimated costs for 2013, down from $166 this year, and only $145 million in revenue to pay for them, representing a $21 million decrease in total general fund revenues.

The decline is largely the result of Washoe County ending its 12-year-old contract with the city and the $11.3 million it sent Reno each year to pay for fire services in the Truckee Meadows Fire Protection District.

Other factors include an estimated $2 million, or 5 percent, decline in property tax revenues, falling income from things like sewer and water fees and federal and state grants expiring.

As you can clearly see, it's not just the state that's facing major revenue problems. It's now "trickling down" to the local level as well. Clearly, the City of Reno faces even more difficult decisions ahead. However, the budget blues don't stop at the Washoe County line.

Henderson's largest employer is cutting jobs again. The City Council recently approved $5 million to fund a fifth round of the Voluntary Employee Severance Program, which is expected to result in the vacancy of close to 100 jobs, projected to save the city $5.3 annually.

Since the program's inception in January 2009, 242 of the city's 1,839 full-time employees have accepted the buyout package, resulting in a savings of $31 million, according to Richard Derrick, the city's financial director.

Fred Horvath, the human resources director, is not surprised that so many Henderson employees have chosen to participate.

"I've done this six times in the private sector before I came to the city of Henderson," said Horvath. "We built it so it would be attractive to people, because if you really want to see people take advantage of it and leave the organization, you have to make it worth their while to do so. Because they're leaving, for many of them, the best job they'll ever have."

As we've been seeing lately, Henderson has faced some extraordinary problems lately. The police chief is stepping down after the revelation of a horrifying display of police brutality (used against someone suffering from diabetic shock!), and the City Council is now trying to recover from the resignation of Kathleen Vermillion. Yet even as the city has had to deal with more high-profile and salacious scandals, Henderson still has that pesky budget deficit to close as well.

So what caused all this? Basically, local governments were betting on "The Growth Machine" to keep fueling more real estate speculation, thereby continuing to fill up their coffers. But once the real estate bubble imploded and the overall economy collapsed, what was once thought to be "reliable" cash flow suddenly disappeared.

And in case that wasn't bad enough, the Legislature raided local governments' treasuries by turning many services that had been funded by the states into unfunded mandates that the counties are expected to carry out. So now local governments will have to provide services that used to be handled by the state, further hurting municipal budgets. (Remember that there's likely a "domino effect" in additional service requirements handed down by the state forcing local governments to cut funding elsewhere.)

If anything, our cities and counties need more support to continue functioning properly. But instead, the state has been eyeing their money as an "easy way out" to fill the state's deficit. And this brings us back to what we were discussing earlier this week: Why are giant multinational corporations still getting bailed out while our counties and cities are getting hosed down?

It's easy to complain to the city or county when police service isn't adequate, or when some road is decrepit, or perhaps when a park is in disrepair. But when the city/county had money that was supposed to take care of all that taken away by the state, what is the city/county supposed to do?

Desert Beacon pondered this over a year ago, when Brian Sandoval was proposing even deeper cuts and even more shifting of burdens to the local level.

There is another question implicit in the whole notion of rankings — what is the balance between state and local collections? Are the collections 5% state and 95% local? Are they 50%-50%? This does make a difference. In Nevada, where it is quite possible that the state will seek to shift the burdens of enforcement, application, and implementation to the local level — does the local government have the tax revenue resources to take on the responsibilities thus shifted?

If the local governments do not have the revenues necessary to enforce, apply, and implement public programs then the cuts cascade down from the top. If, for example, the state no longer subsidizes the inspection of foster homes or ambulatory surgical centers, or the testing and reporting of water quality standards — then does the local or county government have the revenue resources available to take on those responsibilities? If not, then it’s reasonable to conclude that what we have is “less government” but not necessarily “better government.”

Going forward, Nevada will really have to fix this ongoing problem. And yes, I do believe it will have to involve changing our tax structure. Again, why do the likes of Barrick and Wal-Mart keep getting tax breaks while local governments are forced to do more with less? That's a question we really need to ponder more.

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