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ECONOMIC IMPACT: State tax revenue off mark

Scope of budget fix in question as collections fall short of projections

CARSON CITY -- State government's financial woes worsened Thursday, when the Department of Taxation released reports showing tax revenue falling further behind projections.

Revenues from four major taxes -- sales, business payroll, insurance and real property -- were below expected levels for July through September, the department announced Thursday.

As a result, Gov. Jim Gibbons might have to cut more than the anticipated $285 million from the state's $6.8 billion, two-year budget when he hacks state spending in January.

"It is certainly going to make the hole bigger," state Budget Director Andrew Clinger said.


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  • Gibbons has refused to identify where he might cut.

    Clinger denied that Gibbons has asked state agency directors to request employees voluntarily take two weeks off without pay to avoid layoffs. That option, however, might be gaining favor with department directors, he said.

    "The departments are looking at anything they can to make the cuts," Clinger said.

    The budget was built on projections made in May by the Economic Forum, a group of private business leaders, who foresaw tax revenue growing at an overall rate of 5 percent during the current fiscal year.

    The state reported that sales tax revenue fell $24 million below projections for July through September, the first quarter of the state's fiscal year.

    The Gibbons administration did not know until Thursday that revenue from the business payroll tax was off by $13 million for the same period. Insurance premium taxes fell $3 million short and real property taxes came in $6 million less than projections.

    Last week, the Gaming Control Board reported gaming taxes were about $3 million less than projected. On top of that, state government must find $15 million to cover a shortfall in sales taxes for public schools.

    Clinger said the administration might not announce the size of the shortfall until it makes cuts in January.

    Despite the shortfall, most state revenue sources, except for sales and real estate taxes, are generating more money than last year.

    Clinger attributes the revenue shortfall to the nearly 50 percent drop in home sales in Las Vegas during the past year and a growing unemployment rate. Nevada's unemployment rate is 5.2 percent.

    And as he has pledged since he campaigned for governor in 2006, Gibbons vowed in a statement Thursday not to support any tax increase to reduce the shortfall.

    Last month, Gibbons ordered most state agency directors to prepare lists showing how they would reduce their spending by 8 percent. He also ordered a state employee hiring freeze in October. The governor has exempted the prison system, children's programs, public safety agencies and public school education from budget cuts.

    Critics fear the administration is looking at mental health and Medicaid spending for reductions. University and higher education programs also probably will take a hit since statewide enrollment is down.

    Clinger would say only that the administration wants to reduce the hits on state agencies such as Health and Human Services and the Nevada System of Higher Education by postponing planned construction projects. That money would help offset projected cuts.

    Gibbons was not available Thursday for questions from the media about the growing shortfall, his press secretary, Melissa Subbotin, said.

    Republican legislative leaders have backed Gibbons' effort to balance the budget through spending reductions. They point out that even if Gibbons cuts $400 million from the budget, state government spending would be $600 million, or 10 percent, greater than under the previous budget.

    "If you don't have the revenue, you have to make reductions," said Senate Majority Leader Bill Raggio, R-Reno. "We have to have a balanced budget (under the Nevada constitution). There isn't any other option."

    However, Senate Minority Leader Dina Titus, D-Las Vegas, said Gibbons should consider tapping the state's $267 million rainy day fund.

    "You just can't hack 8 percent out of mental health and disability spending," she said. "Otherwise, they are never going to catch up. They already have long waiting lists."

    Titus said last week that Gibbons and legislators should agree in advance on a rainy day allocation and legislators could approve it during a one-day special session. Gibbons, however, has the sole power to call the Legislature into a special session and has ruled out using rainy days funds at this point, Clinger said.

    He might consider such an appropriation when the Legislature next convenes in a regular session in February 2009.

    Contact Review-Journal Capital Bureau chief Ed Vogel at evogel @reviewjournal.com or (775) 687-3901.

    FIRST-QUARTER STATE TAX COLLECTIONS
    (in millions of dollars)
    Tax Projected* Actual Difference
    Sales $266 $242 -$24
    Gaming** $260 $257 -$3
    Business
    payroll $77 $64 -$13
    Insurance $68 $65 -$3
    Real property $39 $33 -$6
    *Projections are based on Economic Forum estimates.
    **Gaming tax figures are for four months of the current fiscal year.
    Other taxes are three-month collections through September.
    Source: Nevada Department of Taxation


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    John wrote on December 01, 2007 11:56 AM: So the projected shortfall is over $258 million and we're already $49 million under expected. The democrats suggest tapping the $267 million rainy day fund right away, forget cutting spending, let's keep spending like drunken sailors, we can piddle it all away, we'll get more, we're the GOVERNMENT. The higher education system needs to cut their spending and building, they don't have as many students to serve. The local school districts need to trim the fat and bureaucracy out of their budgets, they serve no purpose but to waste taxpayer money. While they're at it, the schools can stop building so many new schools since the population isn't growing at breakneck speed anymore.


    Tom Turkey wrote on November 30, 2007 10:56 PM: Increase gaming tax to 67% like other states

    Tax all entertainment destinations in the Strip region based on the AVERAGE number of cars parked in their parking garages at midnight each night. Use revenue to extend monorail to airport faster and then increase monorail sales tax.

    Increase sales tax to 10%

    Eliminate all property taxes (to help seniors hurt by sales tax increase and to draw buyers/consumers to move here into existing vacant homes).

    Increase seller transfer tax on all properties along Las Vegas Boulevard (eg, high-rise condos).

    Moratorium on new construction permits so we can help real estate values and cancel 3bn dollar water pipeline project; cancel Pat Mulroys TV ads; end xerascaping reimbursement program; sell excess water to California until/unless it is REALLY needed.

    Sell RFID bumper-stickers to permit cars with only one occupant to use the new HOV lanes.

    Require open-liquor licensees to keep track of how many normalized alcohol drinks each of their patrons has purchased at their establishment in past 12 hours using ultraviolet hand stamps, membership/players cards and/or $99 fingerprint scanners and impose a 50% sales tax on the forth and subsequent normalized servings, whether the drink is complimentary or not. (Also will reduce insurance rates, public safety and indigent healthcare expenses.)

    Develop visually stunning and world-class (but low cost) business parks around UNLV and CSN-Henderson on par with Hughes Center (sans the italian marble and excessive open space between buildings).


    Herb wrote on November 30, 2007 03:58 PM: My dream is drastic cuts on everything except prisons.


    It's Raining Now wrote on November 30, 2007 03:30 PM: It's nice to see that by Early 2009 we might see some relief from the "rainy day" fund. In the literal and figurative sense it is raining now! Tap it now!

    Explosive growth and constant underfunding has put our State in a horrible position in Education, Mental Health, infrastructure, and the list goes on. How are we supposed to have a healthy economy and draw in businesses when we have an uneducated workforce, mentally ill crowding our emergency facilities and congested roads. Any "increases" in those areas are necessary to keep up with growth. Saying that you can just chop the increase doesn't take in account the reality that the State is serving more people and our needs are greater than before. Clark County will reach 2 Million people by the end of the biennium. If you think these problems are bad, just wait till 2009.

    If Gibbons wasn't such a Big Republican spender and if he had a basic understanding of how to lead our State, I would have some hope. Too bad that isn't the case.


    MJB wrote on November 30, 2007 01:01 PM: As a current state worker, I'm compelled to add my two cents here. Many comments reflect a hostility towards state government, and the impending shortfall and cutbacks are merely just desserts.

    Having served in the federal system for 23 years (I'm retired military) and working in State government for the past three, I can honestly say that from what I've seen, Nevada's government is frugal to the point of being archaic. Granted in any large and growing system there will be isolated instances of waste and abuse; however, I definitely have not seen a systemic trend towards overspending. If anything, as the fastest growing state in the nation for over a decade, the state is behind the power curve in some respects.

    The business model comparison so often put forward by state government detractors is invalid. Businesses exist to make a profit. Period. Government entities exist to serve the needs of a collective, civil society. It’s an apples to oranges comparison. Deciding just what those needs are and how to best achieve those goals smartly and economically is a question for serious, well reasoned debate.

    However, as much as we all dislike paying taxes, there's no escaping the reality even modest inflation, compounded over the years, inevitably increases the cost of government services. Our agency handles hundreds of complaints and questions per year. And while it might be tempting to envision shrinking government down to a size it can be “drowned in a bathtub,” as some anti-tax crusaders propose, when people need government to investigate their complaints or answer their questions, they won’t feel particularly empowered when the person who would have helped them isn’t there and their phone message, letter or e-mail is at the bottom of a mountainous pile.


    Jason Voorhees wrote on November 30, 2007 10:04 AM:


    Yes M, the GOP (Gibbons in Congress) and Bush have made fools of everyone with their credit card spending, only it's our credit and we have to pay it back.


    "M" wrote on November 30, 2007 09:51 AM: stop spending money you dont yet have.

    That's like a dealer saying he's gonna make a $100.00 in tokes today. So he goes out and buys a $100.00 coat. But he only makes $80.00. Now he's 20 bucks behind.

    Why don't you people wait on the money you get before ya start spending it.

    How dumb can ya be!!!!


    Dave L wrote on November 30, 2007 09:25 AM: 1. Tim, if you had a homebound child that depended on a State paid nurse to come into your home everday to help care for that child, would a two week break of service be okay with you?

    2. Critical care issues aside, I hope State employees were asked under the Miller Administration to take a 2 week unpaid leave to avoid layoffs, they didn't, they got the layoffs.

    3. Dina probably means that mental health and diability assistance in this State have been so lacking for so long, it's like the quarterback is on the 20 yard line but the offensive line is still back at the 40 yard line.

    4. I heard this monring that Mtro got a grant from the State to pull people over and ticket them for not wearing a seat belt. I thought we were tightening our belts? Now we have to give State money to a local law enforcement agency to enforce their laws in their own communities? This is a STUPID waste of money that could have been much better spent on something truley important.


    Col. Tom wrote on November 30, 2007 09:20 AM:

    Gibbons was for unfettered spending (in Congress) before he was against it for the people of Nevada.

    This guy flip-flops more than Willard Romney.


    JD wrote on November 30, 2007 08:56 AM:

    A standard response if you have a pre-existing agenda.

    A logical response is to consider all possible options and to discuss the options with those involved. Not to dictate a set reduction in services for the people, like it or not.

    Gibbons never tried to cut spending in Congress, but that was a different peosonal agenda.


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