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Nevada Mulls Pausing Health Science System Projects as State Economy Rolls Snake Eyes

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Nevada Gov. Jim Gibbons and state legislative leaders are considering delaying $127 million in projects for the University of Nevada Health Sciences System as the state scrambles to plug a nearly $1 billion budget shortfall.
 
The state blames the nation’s wobbly economy for the $898 million shortfall in the $6.8 billion, two-year budget that took effect last July. The downturn is reflected in year-over-year declines in nearly all of Nevada’s tax collections — especially its two largest revenue sources, sales taxes and gambling.
 
The declines have prompted Gibbons and lawmakers to carry on talks aimed at agreeing on a package of cuts to the biennial budget, which took effect July 1, 2007.
 
Among cuts Gibbons is considering, he told reporters at a briefing last week, is holding off on the health sciences system projects for UN’s Las Vegas and Reno campuses, including constructing two new buildings and renovating three existing buildings. The system is a network that aims to link the state’s health professional schools, such as UN’s schools of medicine and nursing, with the eight colleges and universities of the Nevada System of Higher Education, with improved public health and a stronger life sciences cluster among its goals.
 
Those are no small goals for a state eager to grow its own life-sciences community in the shadow of California. Also, neighboring Arizona [BRN, March 24] and Utah have forged emerging clusters by fusing research institutes and universities with a base of companies skewing toward medical device manufacturing.
 
Nevada has sought to grow its base of research institutes, from academic facilities to private nonprofits like the Nevada Cancer Institute, which has secured millions of federal dollars through US Sen. Harry Reid (D), the Senate majority leader. In recent years the state university system has sought to expand UNHSS. Last year Nevada’s health sciences system won approvals from Nevada’s legislature for a series of projects:
  • A $47.9 million, 51,579-square-foot Health Education Building at UN Reno, offering expanded teaching and laboratory space to the Orvis School of Nursing;
  • A $3 million renovation of the 7,500-square-foot former Savitt Library within UNR’s Savitt Hall. UN’s growing School of Medicine would use the space for faculty offices, patient simulation rooms, classrooms, and other medical-educational functions;
  • A $1 million remodeling of UNR’s 18,500-square-foot Edmund J. Cain Hall for the nursing school. The entire cost would be state-funded;
  • A roughly $59.7 million, 66,154-square-foot new Advanced Clinical Training and research Center set to rise on West Charleston Boulevard, within the Shadow Lane campus of the University of Nevada Las Vegas; and
  • An almost $15.8 million renovation at UNLV Shadow Lane of 31,500 square feet of the 93,519-square-foot Biotech Research Building, also known as Building B.
“Those projects are more on the applied side of health sciences, but they are important projects. We need more doctors and nurses for our healthcare system, and it is important that the healthcare system is tied together with biotechnology,” said John Laub, executive director of the Regenerative Medicine Organization in Las Vegas.
 
“We’re never happy to see retrenching in the health sciences. It’s not a good idea,” said Laub, a co-founder of the Nevada Biotechnology and Bioscience Consortium, also called NevBio.
 

“We’re never happy to see retrenching in the health sciences. It’s not a good idea.”

Building B is where the UNLV School of Nursing, Nevada State College School of Nursing, and University of Nevada School of Medicine plan to share clinical lab, teaching, and support space under an agreement announced last July. The renovation project would create a clinical skills/simulation center and associated support space.
 
UNHSS selected the architectural firm of Christiansen Kirkland, doing business as Smithgroup, to design the project. At the time of the announcement, UNHSS had planned to complete and occupy the renovated Building B space by the fall of 2009.
 
The planned Advanced Clinical Training Center is intended to accommodate “a significant portion of the relocation of the UNLV School of Nursing from the main UNLV campus to this new building on the Shadow Lane Campus,” as well as “provide space for educational, research, and clinical functions for the University of Nevada School of Medicine,” according to a formal request for qualifications for prospective construction contractors published last December and available here.
 
70-30 Split
 
Nevada agreed to pay $88.6 million toward the cost of all five UNHSS projects in the capital budget last year — $49.6 million for UNLV, the rest for UNR — with UNHSS agreeing to raise another $38.7 million in private funds for both programs. The sums reflected the legislature’s view that the state should fund no more than 70 percent of the UNHSS projects.
 
“What’s being discussed is potentially keeping it in the planning stage for a little while,” Ben Kieckhefer, Gibbons’ press secretary, told BioRegion News last week. “Any delays that are going to be made, the plan is to bring them forward as funding becomes available. Without the crystal ball telling us when the funding is going to be available, we couldn’t commit to a specific timeframe on any of the pieces that we’re looking at delaying.”
 
A delay, he said, could help UNHSS by giving it time to raise the $38.7 million before construction starts. The system needs to raise all of the non-state match before construction can begin, said Tessa Hafen Stewart, manager of government relations for UNHSS.
 
“We are working on some very promising leads but I do not have a specific update at this point,” Hafen Stewart told BRN.
 
Kieckhefer said a budget-cut package is expected to be wrapped up “hopefully within the next three weeks.”
 
“We’re trying to get something that everyone can live with, understanding the current economic situation,” Kieckhefer said.
 
Watching the talks closely is UNHSS: “Obviously we are waiting to see what will happen with the budget,” Hafen Stewart said. “We have been given every assurance that any changes will be delays and not cuts.”
 
Delaying Health Science System projects is one of several cost-cutting options under discussion as Gibbons and the Legislature look to plug the $898 million budget shortfall for the biennium ending June 30, 2009. Other cost-cutting options include:
  • Postponing construction on expansions of up to four state prisons, for a $90 million savings, though design work would continue;
  • Requiring an as-yet-undecided number of state agencies to cut spending by another 3 percent, or a combined $52 million.
  • Using only $40 million of $170 million in general fund revenue approved for an extension of Interstate 15 in Las Vegas, and funding the rest through state gasoline tax receipts;
  • Postponing a $36 million tax settlement payment to Southern California Edison for the Mohave Generating Station in Laughlin, Nev. The plant closed in 2005; and
  • Using the $35 million remainder of the state’s “rainy day” fund.
The budget cuts being discussed now mark the second round of spending reductions since last summer. Last November, Gibbons ordered state government agencies to cut their spending by a combined $285 million, or 8 percent, after initially contemplating a 5-percent cut.
 
As a result, Nevada’s higher-education system lost out on $57.6 million in funding — as well as an additional $7.2 million in furnishings, fittings, and equipment originally approved for three of the five projects.
 
But in February, NSHE regained $2.27 million for FF&E connected with the Building B Renovation at UNLV Shadow Lane. At the time, NSHE concluded it would not be able to finish constructing UNR’s Medical Learning Lab and UNLV's Advanced Clinical Training and Rsearch Center, and thus was unlikely to use the $1.9 million and $2.9 million, respectively, in FF&E for both projects.
In addition to cutting costs, the state has lowered its estimates for the money it expects to generate over the next two years from sales taxes and gambling. The revised projections include a $95.2 million, or 8.9-percent, drop in sales tax collections for 2007-08 compared to previous estimates, to a total $970.2 million; followed by a $155.2 million, or 13.6-percent, decline for 2008-09 compared to previous estimates, to a total $984.8 million.
 
Year over year, however, total sales tax collections are still projected to rise, but only 1.5 percent compared with the original projection of just under 7 percent. The budget’s original revenue forecasts were made in May 2007.
 
“Percentage fees” collected on the winnings of casinos are now projected to dip by just over $48.6 million, or 5.6 percent, in 2007-08, to a total $816.4 million; followed by a decline for 2008-09 of $61.8 million, or 6.7-percent, over earlier estimates, to $865.4 million. Percentage fees year-to-year are forecast to grow by 6 percent, compared with 7.2 percent originally.
 
During February, the most recent month for which figures are available, the state collected $11.8 million, or 12.6 percent, less in percentage fees on winnings made in January, compared with the year-ago months, skidding from $93.3 million to $81.5 million. “Unrestricted” gaming licensees — those not limited in what games they can offer gamblers — saw their total winnings fall by $53.1 million, or 4.75 percent, to almost $1.1 billion.

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