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Sandoval projected to have $1 billion less in budget, but he says he won't raise taxes
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CATHLEEN ALLISON/SPECIAL TO THE LAS VEGAS REVIEW-JOURNAL
Nevada Economic Forum members, from left, Matthew Maddox, Mike Alastuey and Chairman John Restrepo listen Wednesday to staff reports in Carson City. The forum estimates that state tax revenues and fees will generate about $1 billion less than the current two-year spending level of $6.4 billion.
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CARSON CITY -- In 2011, Gov.-elect Brian Sandoval will have to build a new state budget with tax revenues that are $1 billion shy of what the current budget contains.
The Economic Forum estimated Wednesday that state tax revenues and fees will generate $5.33 billion in the two-year budget cycle that begins July 1.
That is more than $1 billion less than the current two-year spending level of $6.4 billion and represents a 17 percent decline in revenue. State agencies are seeking a combined $8.3 billion for the next two years.
Despite the deep divide between resources and demand, Sandoval quickly issued a statement declaring that he will not raise taxes because any increases would hurt the state's economic recovery.
"While the decisions which lie ahead will be trying, we must commit ourselves to them," the Republican said. "Nevada families and businesses are suffering, and our budget cannot worsen the problem. State spending cannot get in the way of economic growth by imposing new taxes."
Neither Senate Majority Leader Steven Horsford nor incoming Assembly Speaker John Oceguera, both D-Las Vegas, responded to calls for comment on the revenue forecast.
"We need to wait and see his (Sandoval's) proposal," said Senate Minority Leader Mike McGinness, R-Fallon. "We need to see the details."
It's been apparent for weeks that the forum would find a $1 billion decline in tax revenue. Even state Budget Director Andrew Clinger mentioned that figure in early November. Outgoing Gov. Jim Gibbons already has asked state agencies to prepare for a 10 percent cut.
Sandoval has said he does not favor across-the-board cuts. Reducing the budget by slightly more than $1 billion would be roughly equivalent to a 17 percent cut to all state agencies.
It also would be equivalent to reducing all support to Nevada's colleges and universities, which now receive a combined $1 billion in state funding.
Public schools receive $2.6 billion in state support. Cutting K-12 spending by 17 percent would mean that public schools would get $442 million less.
Last summer, Horsford said that he was expecting spending cuts of $1.5 billion and that tax increases of $1.5 billion would be necessary in 2011. In a more recent interview, Horsford did not mention tax increases, saying he wanted to first see the budget Sandoval prepares.
On top of the $5.33 billion in expected revenue, funds that can be used to create the 2011-13 budget will include about $70 million in reversions, or unspent funds from the current budget. That would bring potential revenue to slightly more than $5.4 billion.
State law requires the projections made by the forum, a group of five private business leaders, be used by Sandoval and Gibbons to create the proposed budget that will be presented to the Legislature on Jan. 24. The forum meets again May 1 to make a new estimate of tax and fee revenues. Those figures must be used in the final budget approved by the Legislature.
The $5.33 billion Economic Forum projection actually is an improvement over what some had predicted, according to Sandoval, who still anticipates making $1.2 billion or more in budget cuts.
It's already apparent the state needs to increase Medicaid spending by more than $200 million. Medicaid is the free health care program for the poor, blind, disabled and some elderly. More than 279,000 Nevadans are on Medicaid, and that number is expected to exceed 300,000 over the next two years.
During the six-hour meting Wednesday, Economic Forum members deliberately took a conservative approach to making their estimates of tax revenue.
The forum members rejected projections by Moody Analytics analyst Dan White that the state economy is about to boom, with big increases in employment and in tax revenue.
Instead, forum Chairman John Restrepo emphasized that members were "erring on the side of realistic conservatism." They projected a modest 3 percent growth in sales taxes and a 6 percent increase in gaming taxes during the July 1, 2011, to June 30, 2013, budget period.
Total state revenue in the current fiscal year is expected to reach $3.087 billion. That's a 2.7 percent decline from the previous year that ended June 30.
The forum's two-year revenue forecast was not that much less than the $5.5 billion in revenue it forecast in May 2009 for the 2009-11 budget period.
But during the month after the 2009 meeting, legislators approved temporary tax increases that were projected to bring in more than $800 million. Because the recession held down spending, the actual return on those increases was about $500 million.
All of the temporary tax increases -- a 0.35 percent increase in the sales tax rate, the near doubling of the business payroll tax, increased auto registration fees and the doubling of the annual business license fee -- expire June 30 unless reauthorized by the Legislature.
Legislators also put into effect a Nevada State Education Association initiative petition raising the room tax that brought in $200 million. That money went to the general fund last year but in the future can be used only for teacher salaries and education improvements.
Sandoval has pledged to veto any attempt to reauthorize the temporary taxes.
During the Economic Forum meeting, chief state economist Bill Anderson said the Nevada economy is close to bottoming out with its worst-in-the-nation 14.2 percent unemployment rate and population losses of 70,000 in the past year.
But he added he sees "no catalyst to put us on a growth cycle."
Moody's White came under fire from forum members, including Matt Maddox, chief financial officer of Wynn Resorts, for his rosy picture of Nevada returning to a boom cycle. White projected a 12 percent or more increase in gaming revenue in the 2012-13 fiscal year.
Maddox strongly disagreed.
"Net profits for this industry this year will be a $1.5 billion loss," he said. "They (casinos) will be very reluctant to hire more people, given these losses."
He added that Moody projects a full recovery within 24 months, even though Nevada casinos face international and increased domestic competition, and tourist spending is down.
Forum member Andrew Martin repeatedly urged other members to select the lowest possible growth numbers for sales and other taxes.
"I don't think people are going out and spending more," Martin said. "We must use caution. I don't want to be labeled Dr. Doom, but I see so much downward pressure."
Contact Capital Bureau Chief Ed Vogel at evogel@reviewjournal.com or 775-687-3901.
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SMOKERS pay more tax than the entire FREAKING MINING Industry! Billions and billions of dollars are taken out of the Alaska ground and Alaskan citizens get MONEY for that. Mining takes billions and billions out of the Nevada ground and all we get is screwed.
Now that the budget crunch is about to become a reality and painful the politicos still want to take it out on teachers. The latest barb is declaring that a master's degree has not benefit or influence on teacher effectiveness. This ploy is to reduce and/or eliminate pay raises based on advanced degree education. This is a very neat political move to reduce teacher pay scale and then claim that only the outstanding and proven test driven teachers will get a pay raise. Reduce the pay scale than give them a pittance raise as a reward on the merit scale. There will be no improvement in what teachers can earn in the so-called merit pay system; it will simply put them further down the pay scale. What a great idea!
We will reduce your salary scale then you can earn it back by proving your students, some of whom can't read or speak English, can achieve a certain level on standardized state tests.
The economies of states with higher overall tax levels actually grow faster than the economies of states with lower tax levels. The most business-friendly states (low overall taxes, low regulations) grew slower than the least business-friendly states. This is what the statistics demonstrates and supports. This is what is true.
Don't even think cutting education will be possible without a fight this time. No teacher will take a hit to their paycheck. Go ahead and layoff teachers if you may. Remember one thing, lawsuit. Just see the example in Kansas, Schools for Fair Funding. We will be next. Nevada is one of three states that their Legislature has not been sued over funding for education. As former state legislature, Republican Bob Beers told Republican Governor Gibbons, don't fund that research about Nevada schools, it could come and haunt you and us(Republicans). The reearch showed exactly the same information used by the plaintiffs in the Kansas lawsuits. In fact, it was done by the same firm used by Schools for Fair Funding. It will be just a matter of time. Enjoy!
Brody wrote,"YES!!! Cut education!!! 45 up from 40 students in each class won't affect anything." The only thing that it will affect is breaking fire codes. We will see how long CCSD will put too many students in a classroom. My guess is as long as no one complains.
What is the english translation of the word "Sandoval"? Gibbons
That $521 million budget surplus just 5-6 years ago is coming back to haunt. How we celebrated to get $200 from the DMV-deducted by the IRS.
It would have been better for the state to hang on to that surplus in the good times to cushion us for the bad.
We don't do long-term planning very well in Nevada do we? We love instant gratification of $200 today and worry about tomorrow when it comes.
No new Taxes. So he'll just raise the old ones!!!
It's easy to throw blame at the local politicos but the problem goes way beyond the boundaries of NV. We have unfunded mandates by the Feds to do such things as provide health care and education for illegals. We are also paying back the debts of the private bankers that gambled with derivatives and lost. Do they suffer? No, we bail them out but they to suffer serious consequences while they come in with their bailout money and buy up our assets.Stop paying for the illegals and stop paying for the banks and we'll be fine. Iceland stood up to them why can't we?
For more scare tactics see: GerryJicklei