Financial growing pains are likely for 2009, but Gov. Jim Gibbons says Nevada will achieve economic recovery and the state must do everything it can now to prepare for it.

Speaking at a public policy forum hosted by the Reno-Sparks Chamber of Commerce on Tuesday, Gibbons said before things get better it will take tough choices to ride out a “perfect storm of economic conditions” through a diversification of industries in Nevada.

“Whether you want to call it an economic depression or want to call it a recession, it will have an end,” he said.

Gibbons defended his budget for the 2009-2011 biennium and addressed concerns from about 75 local business people.

Gibbons said he is challenged by the state’s withering economy and fast-rising unemployment rates. A report released by the Depart-ment of Employ-ment, Training and Rehabilita-tion on Monday said the unemployment rate in the state is up to 9.1 percent, the highest it has been since September 1983. Reno’s unemployed has reached 9 percent, or 21,200 without work.

The circumstances leave Gibbons with the predicament of replenishing the state budget without raising taxes, a promise he campaigned on in 2006.

Making that decision isn’t easy, he said. A recent television interview with a Las Vegas woman caught Gibbons’ attention.

“I listened to a lady with two children, a single mom, who had just been laid off,” Gibbons told Chamber members on Tuesday. “The money she was saving for Christmas gifts for her children had to be taken from that and put into her last mortgage. Do I take more from this lady who’s already lost her job with two kids or do I go back to the business that’s already laying off and tell that business to give more? ... There’s no easy answer. Everybody’s going to feel the pinch in this case.”

Gibbons and his staff also face the daunting task of providing the state’s most critical needs on a trimmed budget of $5.7 billion — a $2.3 billion reduction from the state’s typical expenditures of $8 billion, Gibbons said.

And the issue continues to decline as tourism and gaming, Nevada’s most prevalent sources of revenue, also take hits, causing the state government to make uncomfortable decisions, the governor said.

“Our ability to recover from this is going to be our ability to see and improve the state into a new, diversified economic infrastructure because we have depended so long on that tourism/gaming model that we’ve ended up having the worst of all impacts,” he said.

Gibbons said his vision is to look toward Nevada’s abundance of renewable energy, such as solar, wind and geothermal capabilities.

“We’ll be able to be like other states that are going through this economic downturn with little or no impact because it’s mitigated the depth of the severity of the economic downturn of their states when they’re an energy state,” he said.

Gibbons highlighted that one of the few areas of his budget to actually see an increase is health and human services, which he said saw an $81.3 million, or 4.2 percent, addition to the 2007-09 biennium appropriations.

But higher education took the most brutal beating in the executive budget. The Nevada System of Higher Education has been allocated almost $844 million for 2009-11, a 36 percent cut from $1.3 billion for the current biennium.

Gibbons was questioned sharply by Steven Laden, a Reno businessman, about his consideration of higher education in his budget.

“How do you sell that goal (of hiring qualified employees in state) when we’re looking at a 36 percent cut in education ... and we’re gutting our higher ed system?” Laden asked.

Gibbons explained that Nevada needs to first bring in renewable energy experts to set up an infrastructure and jumpstart the economy before turning to higher education to do so.

“We’re not trying to get the cart before the horse,” Gibbons said. “We’re trying to get the right mix. ... It doesn’t start with universities; it starts with business people like you.”

Laden said there are some high-achieving students in the area that could help contribute to the economy if they were persuaded to stay, but without a viable education system in place, they would go out of state.

“We can’t have every student we would like in the state,” Gibbons said. “Otherwise, the Harvards and Yales and Penn States and USCs and Stanfords wouldn’t have anybody there recruiting them.”

Gibbons said he remains optimistic that Nevada will survive the recession but that it will require extra teamwork.

“We have to want to be the state where businesses can come, that people want to move to, bring their families to, and yes, people want to come and get an education in this state,” he said. “It’s going to take a lot of work.”