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Monday, April 25, 2011

Yes Mr. Greenspun, words have meanings: or, understanding Nevada's budget shortfall

Mr. Brian Greenspun is the editor and owner of the Las Vegas Sun, a newspaper that did a poor job predicting the state's current budget shortfall last year. They wrote that the shortfall was "half the size of the current budget" - not an entirely untrue statement given how dishonest the state calculated the budget shortfall in the first place. However, they assumed, incorrectly, that the state's general fund revenue would fall to around $3 billion because the Las Vegas Sun staff did their math backwards. Let me explain.

The state's budget shortfall was calculated by taking the CURRENT BUDGET adding in INFLATION, POPULATION GROWTH, PAY RAISES FOR EMPLOYEES and other ROLL UP COSTS and then subtracting this sum by the projected revenue. State officials calculated they would need $8.3 billion (A RECORD SETTING BUDGET) in order to "sustain" current services. In other words, state officials wanted a 29.6 percent increase in spending in order to "sustain" services.





The Sun, like so many others, were tricked into believing the budget calculations were current budget minus projected revenues. This is why the Sun assumed future revenues would be down around $3 billion, thus requiring a "50 percent budget cut" (YES THE SUN REALLY CLAIMED THIS!)

The Sun should have known better, especially after I contacted multiple reporters to explain how the calculations were being done. To be fair, even the Review Journal, Reno Gazette Journal and Nevada Appeal reporters were equally confused - just not for as long and without as many embarrassingly bad predictions.

In fact one reporter told me that they did understand the budget calculation issue, but that since they've been doing it the old way for so long, it would take up too much time to explain to their readers. (GREAT JOB FOURTH ESTATE!)

Anyway....the Las Vegas Sun continues to mess up on the budget issues. This time Sun editor Brian Greenspun once again demonstrates his ignorance on budget definitions (it could be an honest mistake, but he's done this more than once).



Let me explain.

Deficit - spending more money than you take in revenue. Nevada cannot do this, our constitution does not allow it. We aren't even doing it now.

Shortfall - the difference between desired spending (or current spending if you're intellectually honest) and future revenues. This is the current issue. We have a budget shortfall, not a deficit.

Republicans claim the shortfall is somewhere around $1 billion to $1.5 billion. This is the difference between current spending and future revenues. Brian Sandoval's plan is a combination of budget cuts and fund sweeps that will ultimately cut $600 million from current spending, i.e. drop spending from $6.4 billion to $5.8 billion.

Democrats and the Las Vegas Sun claim the budget shortfall is over $2 billion. This is simply the difference in how much they want to spend ($7.3 billion to $7.8 billion - record setting amounts) and future revenues. In other words, Democrats want to raise spending from $6.4 billion to over $7.3 billion (at least rhetorically. They know this would be impossible so they're really shooting for $6.4 billion to $6.8 billion so they can appear as if they compromised and cut the budget when in fact they cut squat).

I swear, we've cut to the bone, there is no more fat to cut!

Before I (and a few others) helped blow the whistle on the dubious accounting measures used to calculate the shortfall, everyone in Nevada assumed the budget shortfall would be over $3 billion - ie the state wanted to spend over $8 billion (a record setting amount). Happily this ridiculous $3 billion shortfall figure is no longer present in any discussion - even Democrats have distanced themselves from that bogus figure.

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