Revenue forecasts conflict at economic forum


CARSON CITY -- Outside economists predicted Friday that Las Vegas is only a year away from returning to an economic boomtown.

But a state board that must tell the Legislature how much money it has to spend over the next two years isn't buying the prediction.

And state economists said the Nevada economy will improve only slightly during that time.

Moody's Analytics economists Gus Faucher and Dan White stunned Nevada Economic Forum members and state analysts by predicting the Las Vegas economy will be back to its boom days by 2012.

"We see a light switch going on," Faucher said. "Las Vegas is going to be the area that pulls Nevada out of the recession."

The Economic Forum, made up of five private business leaders from Nevada, must weigh this and other projections in making its own determination of how much tax revenue the 2011 Legislature will have to spend. It plans to make that decision Dec. 1.

Based on presentations Friday from state agency officials, that figure should be in the $5.3 billion range, or about $100 million more than Gov.-elect Brian Sandoval has been mentioning. But that comes amid a projected shortfall of about $3 billion.

Faucher and White predicted the nation's gross domestic product will increase by about 4 percent a year over the next two years and that the economy will create 400,000 more jobs per month.

Faucher said that once the national economy surges, tourists will flock back to Las Vegas and begin to gamble more money. Visitor volumes already have risen, but players aren't gambling as much as they used to.

The two economists projected casino revenue will increase 9.4 percent in the 2012 fiscal year, which starts July 1, 2011, and 13.1 percent in 2013, growth rates that occurred regularly in the past.

And the state's unemployment rate, the worst in the nation right now, will improve, they said.

"I don't think these are unreachable growth rates," White told forum members.

Economic Forum Chairman John Restrepo and other forum members were reluctant to accept the projections by Moody's Analytics.

"Believe me, we want to believe," Restrepo said.

Forum member Andrew Martin pointed out airfare rates are higher and fewer flights are available. He questioned how visitors can gamble more if they cannot find a flight or must use more of their disposable income to get to Las Vegas.

Alan Schlottmann, an economics professor at the University of Nevada, Las Vegas, warned forum members not to plug Moody's predictions into the budget.

"Consider a real conservative change in the state budget," he said.

Schlottmann questioned how Nevada can have a "robust economy again" when California is the gaming industry's biggest customer and its economists don't see a recovery there for at least two more years.

"I see nothing but a slow rate of growth for Nevada," Schlottmann said. "Be careful folks."

Not all forum members were so pessimistic. Member Matthew Maddox, the chief financial officer for Wynn Resorts, said his company is seeing positive signs of recovery and a big increase in room bookings for the coming year.

Michael Lawton, senior research analyst for the Nevada Gaming Control Board, predicted a 4.2 percent increase in gaming revenue in fiscal year 2012 and a 6.3 percent increase in 2013.

But a much more bleak picture of Nevada's economy over the next two years was drawn by Dino DiCianno, state taxation director, and Bill Anderson, the chief state economist.

DiCianno said the number of businesses that collect sales taxes has dropped during the recession.

DiCianno projected less than a 1 percent annual increase in sales tax revenue in 2012 and 2013.

"It will be flat because there is no job growth, no new businesses," he said. "We will have stagnant growth."

Anderson predicted the Nevada economy will add only 25,000 jobs in the next three years -- after losing 190,000 jobs in the past three years.

"The economy will bounce along the bottom," Anderson said.

Sandoval has vowed to balance the 2011-13 budget on existing tax revenue.

State government has been operating on a current, two-year budget of about $6.4 billion, but it includes federal stimulus funds and about $800 million in tax revenues that expire next year.

Some legislators have been talking about estimates that the state faces a $3 billion revenue shortfall. That is based on ending furloughs and wage freezes, continuing the expiring tax increases and covering social service caseload and other growth.

Sandoval must present his budget to legislators by mid-January.

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

 

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