Most every government in Nevada has been living high on the hog over the past 15 years, blissfully fattening their budgets at rates that dwarf economic growth in the private sector. In Clark County, local governments have become dependent on such prosperity, predicting annual revenue increases that outstrip optimistic projections from the state Department of Taxation.
Over the past couple of months, however, those governments have received a clear signal that they shouldn't continue to buy bigger and bigger belts.
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Consolidated tax revenues, which include sales, alcohol, motor vehicle and real estate transfer levies, aren't pouring into various treasuries at the rates governments had hoped. Sales tax revenues are relatively flat when compared with figures from a year ago, and the housing industry is sputtering.
The state advised the city of North Las Vegas that it could bank on a 7.4 percent increase in consolidated tax revenue for fiscal year 2006-07. The city budgeted a 10 percent increase. Instead, North Las Vegas revenues are down 0.1 percent from the first four months of last year. The city of Henderson decided it could expect an 8.8 percent increase, rather than the 5.8 percent foreseen by the state. Now revenues are down 1.9 percent. Las Vegas budgeted an 8.7 percent increase instead of the 8 percent advised by the state. Revenues are up just 0.7 percent.
Only Clark County government, which has the biggest general budget of the bunch at $1.2 billion, decided to ignore the state's advice and play it safe. It based its budget on almost no increase in consolidated tax revenue, although the state suggested the county could expect growth of 8.5 percent.
Imagine building your household budget on the expectation that you'd receive an 8 percent raise in your base pay. Such a fiscally irresponsible approach to life smacks of entitlement. And when the optimism isn't realized, costs have to be cut.
For the valley's municipal governments, however, cutting back means slowing hiring, delaying projects and tapping reserves. In other words, government continues to grow, only not quite as quickly.
"Is this a temporary blip or a current trend?" asked Mark Vincent, finance director for the city of Las Vegas. "That's the question we're all watching."
Rather, the question Mr. Vincent and his peers should be considering is: How do we get a handle on costs so our governments won't need to depend on unsustainable revenue growth?
