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Nevada's economic shortfall growing

Forum predicts lower revenue through 2010

CARSON CITY -- State officials will have to make steeper budget cuts or increase taxes far more than anticipated since Nevada's economy will continue to tank heading into 2010, according to tax revenue forecasts made Friday by the Economic Forum.

The shortfall, taking into account newly revised estimates from the panel as well as unanticipated declines in local property tax and sales tax revenue, comes to about $900 million.


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  • "I don't know what we are going to do," said State Budget Director Andrew Clinger, adding Gov. Jim Gibbons will submit a revised budget plan to the Legislature in the near future.

    Clinger said Gibbons' plan could include 11 percent salary cuts for state employees, teachers and college and university workers. The governor had proposed 6 percent salary cuts in January.

    "It is horrible," added Assembly Majority Leader John Oceguera, D-Las Vegas, about the shape of the state economy. "It is the worst we have ever seen."

    Legislators feel the gap could be even higher. Oceguera said the preliminary legislative analysis is the state has $955 million less than earlier projections because of the dismal economy.

    An example of how bad things are: The $2.75 billion in general fund tax receipts the state will take in during the fiscal year that ends June 30 are virtually the same as its receipts in the 2004-05 fiscal year.

    Oceguera said there will be dramatic cuts in spending before the Legislature adjourns June 1.

    He added, however, that tax revenue also must be increased because the Legislature will not support Gibbons' plan to cut spending to the University of Nevada, Las Vegas, and the University of Nevada, Reno, by 50 percent, or permit him to close 11 mental health clinics.

    He added legislators cannot back 11 percent salary cuts for employees, since the hit on them would be even greater since Gibbons also wants to cut their health care benefits.

    "This is unbelievable," Oceguera said.

    On Friday, the Economic Forum revised its Dec. 1 projections of state tax revenue over the next two years downward by $380 million, and by $26 million in the current fiscal year that ends June 30. The state will have to find revenue to make good on current budget expenditures.

    The forum is a group of five private business leaders who by law estimate the amount of tax revenue available for state government.

    Members also reduced by $72 million what Gibbons believed a 3 percentage point increase in room taxes would bring in when he submitted his budget in January. The room tax was approved in March.

    But after the Economic Forum adjourned its day-long meeting, Clinger delivered more distressing, and totally unexpected, news.

    On top of the forum's estimates of revenue reductions, he said the Legislature and governor must find another $400 million to cover unanticipated declines in local property tax and sales tax revenue going to the public schools.

    He said county property taxes will drop over the next two years, requiring the state by law to make up this share of revenue.

    Because the Economic Forum predicts continued declines in sales taxes, and schools directly receive about one-third of all sales taxes, the state must also cover that as well, Clinger said.

    The panel estimated that revenues would start to trend upward in fiscal year 2011.

    About the only immediate good news Clinger could offer was that he was notified by the U.S. Department of Education earlier Friday that Nevada next week will receive $264 million in federal stimulus funds that could be used for education shortfalls.

    He expects another $132 million in September.

    Oceguera said legislators believe Nevada ultimately will receive nearly $700 million in federal stimulus funds that can be plugged into the budget.

    Still, he said, some tax increases are needed.

    Gibbons' communications director Daniel Burns emphasized that Gibbons will veto any proposal coming out of the Legislature that includes tax increases.

    "All you have to do is drive down the street and see the shut down businesses and the people looking for money on the corners," Burns said. "You can't raise taxes now. We are trying to stimulate the economy, not kill it."

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

    ECONOMIC FORUM TAX PREDICTIONS

    Tax FY 2009 Change Fiscal Year 2010 Change Fiscal Year 2011 Change
    Sales $873.2 million -11.4% $815.0 million -6.7% $832.7 million 2.2%
    Gaming $699.6 million -13.0% $725.6 million 3.7% $740.7 million 2.1%
    Business $264.2 million 0.1% $250.7 million -5.1% $249.4 million -0.5%
    Insurance $235.4 million -8.5% $231.9 million -1.5% $238.8 million 3.0%
    Entertainment $125.3 million -5.0% $129.7 million 3.6% $138.7 million 6.9%
    Cigarette $99.2 million -10.2% $94.0 million -5.2% $94.5 million 0.5%
    Liquor $39.7 million -0.4% $39.9 million 1.7% $40.9 million 2.4%
    All revenue* $2.752 billion -9.9% $2.720 billion -1.2% $2.783 billion 2.4%


    *Includes all taxes and fees, not just those listed in the chart.

    Revenue for the 2010 and 2011 fiscal years would have been lower except for a 3 percentage point room tax increase that goes into effect in July 1. Without this increase, revenue would have been $105 million lower in fiscal year 2010 and $115 million lower in fiscal year 2011

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    Cut_spending wrote on May 03, 2009 07:07 AM: why don't you check the Prison system and tell me how many people are there for your "victimless" PCS crimes.

    I never heard of a "PCS" crime. Good data on what exactly convicts are in prison for is hard to find. State prisoner data is completely opaque. I've read numerous times (and from sources that I respect) that at least HALF of federal prisoners are there for non-violent drug offenses. That seems entirely credible to me because constitutionally, the federal government is only supposed to be prosecuting folks charged with piracy, counterfeiting, and treason. When federal agents bust down the doors of alleged traitors it's such rare and big news that we hear about it. Like a jet crash. Seems like every week the LVRJ publishes a story or two about a federal case against Vegas suspects charged with "money laundering", "drug possession", "wire fraud" and other non-crimes.


    Bobman wrote on May 02, 2009 10:48 PM: Ok, I get your point. But why don't you check the Prison system and tell me how many people are there for your "victimless" PCS crimes. It's not as many as you think. The drug users are in prison for Forgery, Burglary, Possession of Stolen Vehicle and so on. That is what these people do to get high. Now the drug dealers on the other hand are another story. Well, unless you think that selling these "vices" is also victimless which you probably do. Anything to support your argument I guess.


    county paramedics get a raise next month...yahoo wrote on May 02, 2009 08:58 PM:
    paramedic union local 1908 can't be beat


    Thomas Jefferson wrote on May 02, 2009 07:09 PM: The central bank is an institution of the most deadly hostility existing against the Principles and form of our Constitution. I am an Enemy to all banks discounting bills or notes for anything but Coin. If the American People allow private banks to control the issuance of their currency, first by inflation and then by deflation, the banks and corporations that will grow up around them will deprive the People of all their Property until their Children will wake up homeless on the continent their Fathers conquered."
    -Thomas Jefferson


    Root of the problem wrote on May 02, 2009 07:06 PM: All the perplexities, confusion and distress in America arise, not from defects in their Constitution or Confederation, not from want of honor or virtue, so much as from the downright ignorance of the nature of coin, credit and circulation.
    -John Adams

    Watch this:
    http://video.google.com/videoplay?docid=-2550156453790090544&ei=8vL8SYfmC4ycrQKg3Py5Dg&q=money+as+debt&hl=en&redirectFromSignIn=true


    DAN wrote on May 02, 2009 06:42 PM: Patrick,

    NPRI has nice graphs and all, but does not PROVE what it alleges is going on. WHERE'S THE MEAT?! GIVE US LINE ITEMS THAT WERE INCREASED ABOVE WHAT WAS AUTHORIZED BY THE LEGISLATURE WHILE IN SESSION! WERE THE INCOMING FEDERAL FUNDS? TRANSFERS BETWEEN AGENCIES? YOU HAVE GOT TO SHOW YOUR WORK PRODUCT!

    You do know that the whole of the Legislature authorizes millions of dollars in revenue to be spent at the discretion of the IFC, right?


    dan wrote on May 02, 2009 06:35 PM: Gee Patrick, did the govt actually spend all those revenues? no, some went into rainy day funds etcetera.

    Here is the State of Nevada Revenue Reference Manual, dated January 2009:



    General Fund Revenues, Actual;
    FY/ Amount/ Change from prior year
    2005/ $2,742,665,021/+14.1%
    2006/ $3,058,803,459/+11.5%
    2007/ $3,145,042,636/+2.8%
    2008/ $3,054,267,831/-2.9%

    "Members of the 74th Legislature
    May 1, 2007
    Page 2
    The net result of the May 1, 2007, revision is a reduction from the November 30, 2006,
    forecast in General Fund revenues of $21,224,352 in fiscal year 2006-07.."
    NEF letter


    Cut_spending wrote on May 02, 2009 06:18 PM: Law 101: a "crime" requires a victim. If a guy hot-wires your car, the crime is theft, not driving. If he trades it for drugs, the crime is possession and sale of stolen property, not drug possession. The fact that crooked politicians choose to criminalize vice (and blockhead juries convict) does not mean that justice is being served. What's next -- laws against sex with your wife?


    Bobman wrote on May 02, 2009 05:32 PM: "non-crime crimes like drug possession". First of all, nice phrase! Who decided that is not a crime, you? Last time I checked there is a NRS that makes that against the law. Victimless? Have you seen the sh*t that tweekers do to get their dope? I don't believe that victimless is the word. If you are going to argue your point, at least be practical and not in dream land.


    Cut_spending wrote on May 02, 2009 05:16 PM: our prison population will increase by 10 times.

    Oh, yeah. Stop enforcement of victimless crimes. Less overtime for cops. Fewer billable hours for laywers. More freedom for individuals. Start respecting due process rights. Fewer prosecutions. Fewer people wrongfully convicted. Lower court costs. Empty the prisons of folks convicted of non-crime crimes like drug possession. Free up jail cells for the real psychopaths to serve their full sentences. Overall, that still reduces costs for the Dept of Corrections. Small government begets *more* respect for the law, not *less*.


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