Gambling revenue was down 1.87 percent to $12.5 billion for the fiscal year that ended in June, the first fiscal year-over-year decline since 2002, when revenues were down 3.7 percent as a result of the post Sept. 11 fallout.

Still, casino owners and other Las Vegas boosters were grateful the monthly drop wasn't worse, considering the previous month's record decline of 15.2 percent.

"That ain't bad," said Michael Gaughan, owner of South Point on Las Vegas Boulevard south of the Strip. "The only problem we have is your expenses are going up and your revenues are going down."

Gaming Control Board analyst Frank Streshley said the gaming taxes the state received from casinos rose by 8.4 percent. He attributed the increase in part to gamblers paying off markers from the losses they suffered in previous months. Most casinos pay a 6.75 percent tax on their winnings from players.

In addition, Streshley said that at the beginning of each quarter, casinos are required to pay fees based on their estimates of revenue they expect to earn. When the quarter ends, they must make up revenue if their payments to the state were less than the amount they received. About 4 percentage points of the tax increase in June was due to casinos making tax payments to cover estimates that were lower than the money they actually received, according to Streshley.

Ben Kieckhefer, spokesman for Gov. Jim Gibbons, said the report, while showing a slight decline in gaming revenues both for June and the 2007-08 fiscal year, could have been much worse. Gaming revenues fell in the previous month by more than 15 percent.

"You never want one of your primary industries in the state to see a decline in revenue year over year," he said. "But in these tough economic times, we'll take a modest decline."

It will take until the end of August to get a sense of where the state is with tax revenues based on the new, lower projections, Kieckhefer said.

But the latest gaming report won't require any immediate action to make further budget cuts, he said. The current budget has been cut by $1.2 billion already, including $275 million at a special legislative session in June.

"Those cuts should carry us through to the 2009 regular session," Kieckhefer said.

Gambling revenue on the Strip was down 3 percent for the month to $486.4 million and 1.5 percent for the fiscal year to $6.7 billion, according to the monthly gaming win report from the Nevada Gaming Control Board.

The news was worse in Northern Nevada.

Washoe County posted a 19 percent decline for the month to $75.3 million and was down 6.9 percent for the fiscal year to $996 million.

It was the 12th consecutive month of decline for Washoe County, which includes Reno casinos.

"Washoe County has a very difficult month," Streshley said. "That market saw a substantial downturn in people spending."

On the Boulder Strip and in downtown Las Vegas, gambling win in June was up 25 and 10 percent, respectively. But those increases were attributed mainly to a reporting anomaly of some slot machine winnings from May not being reported until June, Streshley said.

For the fiscal year, downtown was down 0.4 percent and the Boulder Strip declined 2.4 percent.

Wendover, Elko County and Clark county locals casinos were the only segments that reported fiscal year increases, Streshley said. In Wendover the increase was 5 percent, Elko County as a whole posted a 4 percent gain and Clark County casinos outside the Strip, downtown, Boulder Strip and North Las Vegas markets were up 0.8 percent, he said.

Perhaps the most notable occurrence in the 12-month fiscal year was how quickly the boom turned into a historic bust.

Statewide, gambling win was up 1.7 percent in the first six months of the fiscal year. The last six months, however, were down 5.4 percent, Streshley said.

"People had a lot of money at the time, they were coming to the market and spending it," said Dennis Farrell, an analyst for Wachovia Capital Markets. "The pendulum has swung the other way."

That has casino owners who had grown accustomed to high room rates and free-spending guests facing the opposite scenario. That is, they now have to work harder to get the same or fewer returns.

Las Vegas occupancy rates for the first half of 2008 are 2 percent lower than they were in early 2007, but room rates are down more than 6 percent.

"You have to spend more to make about the same," Gaughan said.

The downturn coincides with the burst of the nation's real estate price bubble in late 2007. As the scope of the real estate woes grew, global credit availability shrunk from a gusher to a trickle.

At the same time, the price of oil started to shoot skyward, topping out at more than $140 per barrel this summer.

As the situation unfolded, the number of tourists coming to Las Vegas shrank and airlines started cutting flights to save money on fuel.

It all resulted in dramatic decreases in the value of stock in gambling companies like MGM Mirage, Boyd Gaming Corp. and Las Vegas Sands Corp.

"The stocks are more fearful about what is going to happen next," Farrell said.

Deutsche Bank analyst Bill Lerner said the downturn is real, but the precipitous decline in gambling stocks is disproportionately pessimistic.

Lerner said the latest gambling figures from the state support his argument that stock in Las Vegas casino companies is undervalued.

"Things aren't that bad given the value destruction in these gaming stocks," Lerner said. "We've lost a massive amount of market capitalization."

Contact reporter Benjamin Spillman at bspillman@reviewjournal.com or 702-477-3861. Review-Journal Capital Bureau Chief Ed Vogel and reporter Sean Whaley contributed to this report.