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Dec. 02, 2008
Copyright © Las Vegas Review-Journal

State tax revenue predictions bleak

Economic Forum releases estimates

By ED VOGEL
LAS VEGAS REVIEW-JOURNAL CAPITAL BUREAU

CARSON CITY -- Nevada is now experiencing the worst of times as far as tax revenues go, concluded the state's Economic Forum on Monday.

The forum -- made up of five business leaders who determine how much money the state government has to spend -- projected that Nevada will have about $5.65 billion for the two-year budget that begins July 1, or nearly $1.2 billion less than the current $6.8 billion budget.

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    • "Never (before) in my 30 years have I seen declines in everything," said veteran state employee Lynne Knack, a Department of Taxation administrative services officer who was at the meeting.

    The forum arrived at its projection after more than six hours of reviewing statistics and listening to economists. Its analysis is binding on lawmakers and Gov. Jim Gibbons, who since January have slashed the current budget by $1.2 billion because of revenue shortfalls. Forum members expect to see significant declines followed by modest gains in tax revenues during the coming years that throw Nevada back to the level of state tax receipts collected in 2004-05.

    "We're in uncharted territory," said Janet Rogers, an economist with the state budget office who blamed the housing market collapse and the stock market crash for Nevada's deepening financial crisis.

    In the fiscal year that ends June 30, tax revenues are estimated to total $2.777 billion, down 9.1 percent from the $3.054 billion received in 2007-08. During the 2009-10 year, revenues are expected to increase by 0.2 percent to $2.782 billion and then climb by 3.3 percent to $2.874 billion in 2010-11. The forum will meet again in late spring to make its final predictions before the Legislature approves the 2009-11 state budget.

    Economic Forum Chairwoman Cathy Santoro said the group took a conservative approach in estimating expected state tax revenue in what she described as "an unprecedented economic climate."

    Still, forum member Linda Rosenthal repeatedly challenged the tax revenue predictions made by state economists as overly optimistic.

    "We all hear in the news the reports about unemployment and layoffs," said Rosenthal, director of treasury operations for International Game Technology.

    Sen. Randolph Townsend, R-Reno, agreed, saying legislators could adjust state spending below the forum projections.

    "Being too optimistic is what got us here in the first place," Townsend said. "If we miss the mark, we will have dug ourselves even a bigger hole."

    The forum's projections show the economy in Nevada is bottoming out in terms of tax receipts. Global Insight, an economic consulting firm hired by the state, does not see a recovery for another two years.

    Rogers also said she does not see much of a recovery in Nevada before late 2010.

    Unemployment in the state, now at a 23-year high of 7.6 percent, is expected to nearly reach 9 percent in the 2009-11 period, according to Global Insight.

    Nonetheless, Santoro, senior vice president and treasurer of MGM Mirage, sees some increases in gaming revenue coming with the opening of the City Center project in 2010.

    "In gaming there are some events that clearly impact (positively) the 2010 situation," said Santoro, senior vice president and treasurer of MGM Mirage.

    But during 2008-09, the forum expects gaming taxes to drop from $804 million to $715 million, an 11 percent decline. Gaming revenues will increase by 3.3 percent to $739 million in 2009-10, and by 3.9 percent to $767 million in 2010-11, according to the forum.

    "Gaming requires disposable income to a large part," said Santoro, noting the industry's response has been to lower room rates to attract customers.

    Sales tax revenues down 8.6 percent to $901 million in the current fiscal year, will increase by 0.5 percent to $906 million in 2009-10 and by 3 percent to $933 million in 2010-11.

    Gaming and sales tax receipts make up more than 60 percent of the tax revenue going to state government.

    If there was any good news Monday, it was that legislators during a special legislative session next week only need to find funds or make cuts in the current budget to cover an additional $331 million deficit and not something higher.

    State Budget Director Andrew Clinger last week estimated the budget deficit for the fiscal year ending June 30 would be $330 million, but worried that the Economic Forum would find an even higher total.

    Gibbons said last week the shortfall can be covered by taking out a $150 million line of credit from the Local Government Investment pool, cutting budgets of some state agencies by 1.5 percent and cleaning out any surplus funds remaining in various state accounts.

    Contact Capital Bureau Chief Ed Vogel at evogel@reviewjournal.com or 775-687-3901.

    STATE TAX REVENUE (IN MILLIONS)
    Major Tax Sources* 2007-08 2008-09 2009-10 2010-11
    Mining $35.1 $33.6 $28.1 $26.6
    Sales $985.7 $900.1 $905.5 $932.7
    Gaming $803.9 $715.3 $738.9 $767.4
    Live entertainment $131.8 $125.9 $129.9 $137.2
    Insurance $257.4 $252.8 $254.1 $261.4
    Cigarette $110.4 $100.8 $102.3 $102.3
    Business $284.7 $282.9 $269.5 $279.4
    Real estate transfer $85.9 $66.6 $70.0 $72.1
    Secretary of state fees $100.6 $96.6 $97.1 $97.7
    TOTAL** (in billions) $3.054 $2.777 $2.782 $2.874
    *Does not include minor tax sources.
    **Totals include tax revenues not listed on the chart.
    Note: Actual revenue figures provided for 2007-08. The remaining years list revenue projections from Economic Forum forecasts
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    Mike wrote on December 03, 2008 09:12 PM: How come Nevada's second largest industry, mining, pays the least amount in tax revenue? Where is all that money going?


    Troy wrote on December 02, 2008 06:19 PM: Hey, How come the state does not tax media advetising. How come Rogers gets a pass! Gaming pays 6.75% plus loads of FEES (taxes in disguise), Live Entertainment Tax is 17.75% off the top off all sales where music is played.

    All them millions of Political media and corporate advertising, straight to Rogers pocket. Tax that and shut this guy up!


    Fafner wrote on December 02, 2008 02:12 PM: That's a rhetorical question, right?


    use some logic wrote on December 02, 2008 12:59 PM: yes helen, please layoff more people, that always helps the economy. When people have no job usually that means they have no money to spend. Are u an idiot?


    Ken wrote on December 02, 2008 12:47 PM: The best part of this will be listening to Perry Rogers whine on daddy's TV station about how the school system his father has ruined need more money.

    Between that and the parasites who moved here with no job and no ambition yet suck every social service dry, we are in for some fun times.

    We should all bow our heads and pray that the Mesiah comes to Nevada before the next time he needs to be elected for something, and help us. Where are you great Obama? Perry Rogers used his daddy's money to support you. It's payback time!


    HELENWEILS wrote on December 02, 2008 09:19 AM: Let the layoffs begin. It's unrealistic to expect the poor taxpayers to pay even more so the state employees get their 10% raises this year. Cut 10% of the jobs now and stop the bleeding.


    PUNISH BUSINESS wrote on December 02, 2008 09:14 AM: ILLEGAL WORKERS

    NOW HOLD 1 OF 3 AMERICAN JOBS & SUPPORT A BLACK MARKET ECONOMY


    CLOSE THE BORDER NOW !!!


    Auslander wrote on December 02, 2008 08:29 AM: Only three years ago the state was sitting on a $320 million budget surplus. I expect this was due to the economy and not the superlative performance of the state government, but that surplus would certainly come in handy now. Instead, it was squandered. Sad.


    Wayne wrote on December 02, 2008 08:24 AM: "Forum members expect to see significant declines followed by modest gains in tax revenues during the coming years that throw Nevada back to the level of state tax receipts collected in 2004-05."

    So spending needs to be cut to the level it was at less than 5 years ago. The state was not in dire straights in 2004-05, so I'm sure cutting spending to that level will not decimate necessary services. Of course the state's population has grown over the last five years (and inflation has occurred around 3% per year), but they act like we are cutting spending to never before seen levels. I’m sure lawmakers can figure out a way to cut spending to the level it was 5 years ago without raising taxes and cutting necessary services.


    ms wrote on December 02, 2008 06:45 AM: We are experiencing some tough economic times for a number of reasons, but the situation our state budget is in is not actually due to the current economy. For decades too many of our legislators have viewed the biennial legislative session as an opportunity to find an ever expanding array of new programs and items to spend Nevada's citizens' tax dollars on. If our legislature had not been treating Nevada's state coffers as an unlimited resource for years we would have more than enough now for our needs.


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