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Brookings report says Nevada's economic, budget crises will last 10 years
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LAS VEGAS REVIEW-JOURNAL CAPITAL BUREAU
Updated: Jan. 5, 2011 | 8:40 a.m.
CARSON CITY -- A report issued today by a regional think tank concludes that Nevada will have a tough time economically over the next 10 years and that state government revenue shortfalls cannot be handled only by cutting spending.
The report predicts "an especially harsh budget climate throughout the decade" for Nevada, even though the economy will improve and the population will rise because of the "region's sunny climate" and reduced housing costs.
The report, titled "Structurally Unbalanced," examines budget problems in Nevada, California, Arizona and Colorado.
"Nationwide, the Great Recession is technically over. ... A halting and tentative economic recovery is underway," the study noted. "And yet, all is not well, and especially not in California and the Mountain states. Three years after the collapse of a massive housing 'bubble,' the deepest economic downturn in memory has exposed and exacerbated a massive public-sector fiscal crisis that is affecting all of the region's states."
With the region already down 2 million jobs, "the state budget crisis promises to bring the most painful next round of dislocations," according to the study, issued by Brookings Mountain West at the University of Nevada, Las Vegas, and the Morrison Institute of Public Policy at Arizona State University.
Nevada state government faces a $2.5\u2007billion to $3 billion revenue shortfall going into the 2011 legislative session but has constraints on its ability to raise revenue, the study says. Those constraints include the constitutional prohibition against income taxes and earmarks that mandate how more than 50 percent of state funds must be spent.
"You need to reset the revenue system to generate revenue in ways not so susceptible to the nature of the economy you have," said Mark Muro, one of the study's authors and a senior fellow and policy director at the Washington-based Brookings Institution.
But Brookings concluded that "massive budget gaps cannot be responsibly closed by only cutting spending."
It called for revenue diversification and broadening of tax bases, including looking at gross receipts taxes -- a tax rejected by the Legislature in 2003.
It also called for more flexibility for municipal governments and for building a state rainy day fund. Nevada had a $236 million rainy day fund that it spent in 2008 after the recession hit.
Gov. Brian Sandoval said Tuesday that he had not seen the study and would not comment on its conclusions.
Sandoval is preparing a new two-year state budget that includes no new taxes and will cut budgets of state agencies and salaries of state workers.
The state will have about $5.4 billion in revenue, down more than $1 billion from current spending. That would necessitate across-the-board cuts of about 17 percent, although Sandoval said some agencies will be cut more than others. State employees now must take one unpaid furlough day per month, and that probably will continue, based on comments by Sandoval.
He said again Monday that raising taxes would be the worst thing Nevada could do in dealing with the recession.
Nevada's economy might not return to previous peaks until the latter part of the 2010s, according to the report. Gaming will play a diminished role in the future Nevada economy, and the housing and tourism boom that preceded the recession "is not likely to be repeated anytime," the study found.
"Job growth will likely remain anemic, while unemployment rates will remain stubbornly high, perhaps through the entire decade."
The study found the problems in all four states were a mix of the cyclical problems of the recession and structural problems in state financing and policymaking.
It noted that California and Arizona have the worst structural problems and that recent permanent tax increases, including a sales tax increase, in Nevada have helped close the structural deficit.
Still, the study predicted the economies of the other states will recover much sooner than Nevada's economy.
Review-Journal reporter Hubble Smith contributed to this story. Contact Capital Bureau Chief Ed Vogel at evogel@reviewjournal.com or 775-687-3901.
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Get what they deserve? An improved economy across the country which is the ONLY thing that can help this state; yep, that's what they get. Why is it that people can't see past their own dumb noses? And "noitall" even though we discussed how misnamed you decided to make yourself, is there ANYTHING that I said that wasn't true? I mean, surely if you have so much vitriol to spew, you must have some FACT that I stated that was incorrect right? LOL
What should we cut??? put 50 kids in a classroom?? how about close the DMV three days a week?? How about cur NHP in half??? Really??? and by the way making state employees have 401k's will not save money for 20 years unless you want to break the law...if I pay 40% of my income in taxes and mining pays 6% of profits in taxes how much more of the load should I carry?
Well, the casinos supported Dingy, and the unions who will continue to cellect their pensions at taxpayer expense, voted for Dingy.
And Nevada reelected Dingy.
They all get what they deserve.
You better not even consider raising gaming taxes or the casinos will move to ???????????????????????
The past Legislature just kept spending. Giving away to any and all they liked. Free license plates for the Guard/Reserves will cost us millions for years to come. Increasing spending for K-12 as enrollment declined? Giving to "higher ed" when it benefits non-Nevadan students? I hope the new Legislators have some sense.
America went on a spending binge and most people thought debt was no problem.We bought the houses and cars with borrowed money so the bankers could make endless money that they borrowed from the govt. that borrowed it from the foreigners.Endless easy money....well here's the result.
I've looked at this report. It observes that, unlike the other States in the study, Nevada's spending went up as our revenues went down. The trend in expenditures in each of the other States is DOWN. Ours is UP. Among the report's conclusions is that we should diversify our tax base to revenue. It points out that an income tax is one such option. I'd say they missed the boat with regard to Nevada.
Aformerrepublican-even at the liberal university where I recieved a BSBA I never had an economic professor discplay such a close-minded view of Macroeconomics. Just wondering if you developed your understanding of economic principals at some institute of higher learning or in your own mind. Have you ever considered the fact that it's possible others on this site might have some insight into the discussion, or the fact that YOU DON'T KNOW EVERYTHING! Maybe you, and I'm using your words here, " demonstrate a clear lack of economic understanding."
The posters here, at least some of them, demonstrate a clear lack of economic understanding. Maybe if this report had stated that "an individuals budget problems are two-fold; first they spend too much, and second they earn too little" people might have understood better. Its as simple as that folks. If, on an individual basis, we have a "job" that pays less than we "spend" we have choices to make; we can "earn" more AND spend less, or we can "earn" more and spend the same, or we can "earn" more and spend less. Those are the options available IF we want to "balance" our budget. For anyone claiming that "earning" more isn't part of the choices that we have, is just ignorant. I believe what some people here are suggesting is that IF this state wants to be something MORE than we are today, which is to say the least educated, least diverse, least in most any other category you can name, we MUST spend more money. Now, to an individual its like saying that we can either be satisfied that we work at McDonalds, and will continue to work their because that's all we "can" do, OR we can "better" our skill set and "become" something more valued. The choices are there, but don't let anyone tell you that "earning" more isn't even possible because it is.
Ah, yes the problem can be solved by cutting spending and programs, cutting pension systems. The only hope is not raising taxes. The politicians and unions just keep spending the money like pigs at a trough. Vote Republican.