Assembly fiscal staff brief lawmakers on Nevadas Great Recession and pandemic-era responses, federal funds and revenue options

Assemblywoman Monroe Moreno, chair of the Assembly Committee on Ways and Means, convened a committee briefing in which Legislative Counsel Bureau fiscal staff summarized Nevadas budget actions during the Great Recession and the COVID-19 pandemic, described the scale and concentration of federal funds the state now receives, and listed statutory levers and policy options the Legislature might use to produce additional revenue.

The presentation was framed as an informational briefing rather than a bill hearing.

The fiscal staffpresentation traced the 20072011 Great Recession responses, noting emergency forecasts, two special legislative sessions and multiple sweeps and transfers of state accounts to close multi-hundred-million-dollar shortfalls. Staff recounted early deficit projections presented to the Interim Finance Committee (IFC) and subsequent actions such as agency-directed budget reductions, the creation of the SAGE Commission to recommend savings, transfers from the rainy-day fund and numerous statutory revenue changes enacted across special sessions and regular sessions in 2009 and 2011.

"This is not your typical hearing on a bill or anything else," Chair Monroe Moreno said when opening the briefing, emphasizing the committee's goal to have a shared starting point for possible future action.

Why it matters: fiscal staff told the committee that Nevada now receives and depends on very large federal funding streams and that many of the state's contingency tools are finite or one-time. The briefing highlighted how prior recessions were handled and catalogued revenue and expenditure choices the Legislature has used historically and could use again.

Key takeaways from the historical overview

- Great Recession actions: fiscal staff described a sequence of emergency forecasts, an emergency convening of the Economic Forum, and multiple special sessions in 20082009 that produced transfers, account sweeps and spending reductions. Staff cited early shortfall estimates (hundreds of millions of dollars) that grew rapidly as revenue collections fell. Director Andrew Klinger (then Director of the Department of Administration) and other executive branch officials directed agencies to propose cuts; the Legislature approved a range of revenue changes (temporary increases to the local school support tax, modified business tax adjustments, business license fee changes, and other measures) and large appropriation reductions and furlough programs.

- Pandemic-era actions and federal relief: staff said the state accepted CARES Act funding (noting an acceptance of $836.1 million) and later received American Rescue Plan Act (ARPA) allocations (staff cited Nevadas ARPA allocation as about $2.739 billion). Fiscal staff described the 2020 special session and subsequent appropriations and reversions that cut operating appropriations, reserved reversions, canceled or scoped-down capital projects, and implemented furloughs and other statewide personnel or program changes to balance immediate needs.

- Legal and judicial constraints: fiscal staff reviewed litigation that affected revenue actions (for example, the Clean Water Coalition fee transfer of roughly $62 million that was later overturned by the Nevada Supreme Court). Staff repeatedly warned that some revenue sweeps and reallocations were subject to legal challenge and that court decisions could reverse some actions.

Federal funds and concentration

Fiscal staff provided a recent inventory of federal grants and projected authorized federal fund authority for the coming biennium: federal fund authorizations were shown at roughly $7.6 billion to $7.8 billion annually in the 202527 biennium projections, with roughly 80% of federal fund authority concentrated in Health and Human Services programs, primarily Medicaid (Division of Healthcare Finance and Policy). The staff memo and slides to the committee listed about 628 federal grants reported by state agencies, with the U.S. Department of Health and Human Services the largest single grantor.

"None of this was on the description of our jobs when we were hired," Michael Nakamoto, chief principal deputy fiscal analyst, said when summarizing the historical record and the depth of staff work to assemble the forecasts and tables.

Revenue levers and statutory constraints discussed

Fiscal staff walked the committee through the largest revenue sources that comprise the State General Fund and the State Education Fund and the statutory or constitutional constraints that apply to each. They highlighted 16 major State General Fund revenue sources (sales and use tax; gaming percentage fee; modified business tax; insurance premium tax; commerce tax; live entertainment tax; interest income; cigarette tax; business license fee; real property transfer tax; secretary-of-state commercial recording fees; short-term auto leasing tax; various collection allowances; unclaimed property; liquor tax; Transportation Network Company fares) and summarized possible technical or policy changes for each that would increase revenue. Staff also reviewed the nine major State Education Fund sources (including the local school support tax and room tax proceeds) and options to increase or reallocate those funds.

Specific proposals and illustrative options included: - Changes that require a constitutional amendment or voter approval (for example, any change to the base Sales and Use Tax Act or a state-run lottery because of constitutional or referendum requirements). - Tax-rate or base changes that the Legislature can enact by statute for certain revenue sources (for example, increases to the local school support tax, adjustments to the governmental services taxdepreciation schedule, modified business tax rate or exemption thresholds, or changes to the commerce tax filing threshold). - One-time or timing measures used in prior downturns, such as prepayment of net proceeds of minerals, temporary suspensions of transfers to the rainy-day fund, or tax amnesty programs. Fiscal staff noted these measures produce revenue in a single year but generally shift revenue timing rather than provide permanent new resources. - New or alternative revenue sources that have been proposed previously: excise on digital goods, a tax on selected services, additional vehicle registration fees for alternative-fuel vehicles, a state lottery (which would require voter approval), and other targeted fees or credits changes. Staff provided rough illustrative estimates for several proposals (for example, a prior analysis of a digital-products excise estimated total systemwide receipts in the tens of millions annually, and an electric-vehicle registration surcharge filed in a prior session was estimated to generate roughly $33.8 million in a full year under current registration counts).

Tax credits and obligations

Staff listed existing tax credits and committed transferable credits that constrain available revenue (examples include commerce-tax credits against the MBT, film and affordable housing transferable credits, college-savings matching credits, and project-specific credits such as the Major League Baseball stadium credits authorized by recent special-session legislation). Staff noted that many credits already authorized or contracted create multi-year obligations and that some programs (for example, the Nevada New Markets Job Act credits) have multi-year payout schedules that cannot be quickly reversed.

Questions and next steps

Committee members thanked staff and asked clarifying questions. Assemblymember Brown-May asked whether staff could provide a road map of past division name changes and attachments so the committee could track historical data series across reorganizations. Assemblymember Anderson asked whether proposed changes might affect federal matching funds; staff said they would follow up. Speaker Yeager asked staff to check the status and availability of a published local-government pooled investment line of credit that had been authorized in a prior session and -- staff indicated they would research and report back.

No committee action, motion or vote was taken at the briefing; the session was informational and concluded with public comment.

Ending

Fiscal staff left the committee with a detailed briefing packet and slide deck intended to serve as a "toolbox" for lawmakers as budget closings approach. Committee members and staff said they expect to use the materials in any future special session or budget deliberations and requested additional follow-up on specific technical questions posed during the Q&A.