The spending problem
Each time we hear about budget projections, the news is worse. The state is taking in less revenue, so that means more budget cuts. For the big-spending crowd, the response to this news is to call for tax increases. But the reality is that Nevada's budget revenue problem has little to do with either revenue or the tax structure.
The need for budget cuts has arisen primarily because our government spent way too much during more robust economic times, committing future spending to programs it could not afford.
This can be proven by examining what would have occurred had the state limited its budgetary growth, as most Nevadans desired, to the rate of population growth plus inflation. This method allows us to grant the state the same amount of funding per-person and control for economic factors.
If the state had adhered to such limits with FY 2004 general fund budget – increasing by inflation plus population growth instead of the 31.7% – just $16 million in budget cuts would have been needed in FY 2007-2008, with cuts of $472 million in FY 2008-2009.
Rather than $1.2 billion cut from its biennial budget, Nevada would have faced less than $500 million in cuts, for the state would not have spent and committed more than its actual resources. In other words, over half the budget-cutting resulted from spending beyond the state's natural rate of growth.
If the State of Nevada had limited its spending increases, taxpayers would have had an extra $2.1 billion to spend themselves from 2004-2007 – money that would have helped generate jobs, diversify the economy and soften the blow when the global economy soured. A portion could have been committed to a rainy day fund, possibly eliminating the need for budget cuts altogether.
Anyway you slice it, any plan to stop Nevada's boom-and-bust cycle of government revenue must include spending limits.
