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Cathleen Allison, Associated Press
Gov. Brian Sandoval, general counsel Lucas Foletta, center, and chief adviser Dale Erquiaga work Tuesday May 31, 2011, at the Capitol in Carson City, Nev. After morning meetings with the Senate and Republican caucuses, Sandoval said talks were continuing and he remained optimistic a budget compromise could be reached.

CARSON CITY, Nev. — Republican Gov. Brian Sandoval and legislative leaders reached an agreement Wednesday on a $6.2 billion general fund spending plan that avoids deep cuts to education and critical human services while implementing collective bargaining and education reforms sought by Republicans.

The deal was struck after five days of intense negotiations and with just five days remaining in the 2011 legislative session.

"This afternoon, I am proud of Nevada," Sandoval said in a packed news conference with legislators crowded around him.

The agreement extends for another two years $620 million in temporary taxes that were set to sunset June 30. At the same time, about 70 percent of Nevada businesses will get a tax break with the elimination for small firms of the modified business tax.

Those tax breaks total about $60 million and will affect 115,000 businesses, the governor said.

Mining companies will have fewer tax deductions, bringing in an estimated $24 million over the biennium.

The budget also includes a $155 million line of credit as a backstop if needed.

Among reforms:

— Ends teacher tenure or deciding layoffs solely on teacher seniority.

— Allows local governments to reopen employee contracts during fiscal emergencies, and bars supervisors from collective bargaining.

— Allows governor to appoint state school superintendent and revamps state Board of Education.

— Eliminates retirement health insurance for new state employees hired after Jan 1, 2012.

"Make no mistake. These budget cuts are painful," said Assembly Speaker John Oceguera, D-Las Vegas.

But he said the budget protects education and "services for our most vulnerable."

Senate Majority Leader Steven Horsford, D-Las Vegas, the agreement shows "common sense" prevailed.

"Education is the lifeblood of any economy," Horsford said. "This budget maintains our commitment to education, and we have taken a big step toward making Nevada competitive again."

Marathon negotiations began Friday, the day after the Nevada Supreme Court ruled that the state couldn't siphon $62 million from a southern Nevada sewer district to help plug an $805 million budget shortfall last year.

While the ruling focused on the funds swept from the Clark County Clean Water Coalition, it sent shockwaves through the governor's office and legislative building because it called into question the source of $656 million contained in Sandoval's two-year spending proposal.

The governor had relied on taking money from school district bond reserve accounts and Clark and Washoe counties for the general fund.

State general fund spending will essentially remain at levels imposed during a 2010 special session. Sandoval said when all funding sources, such as money federal government is included, the two-year $17 billion budget is $500 million less than the current budget cycle.

Sandoval ran on a no-new-tax platform and opposed extending the tax sunsets. Republican legislators stood firmly behind him. But last week's court ruling was a game-changer.

Keith Rheault, state school superintendent, said the new plan adds about $400 more in per-pupil funding that proposed in January.

Dan Klaich, chancellor of the Nevada System of Higher Education, said the deal doesn't restore all funding to colleges and universities, but it will help preserve access.


Associated Press writers Michelle Rindels and Deb Weinstein contributed to this report.