Bad budget news

Remember the collective relief of the political and public-sector classes when the Legislature wrapped up its $6.9 billion, two-year spending plan just over two months ago? That relative comfort is history, along with any prospects of the state budget remaining balanced, for either the nearly concluded biennium or the one to come.

The Nevada Department of Taxation reported Wednesday that May's taxable sales fell 21.1 percent when compared with the same month a year ago. Consumers spent $4 billion in the run up to summer last year. This year, with unemployment cracking 12 percent, they spent only $3.2 billion. The year-over-year drop was the state's worst in almost 30 years.

With one month remaining in the current fiscal year, state sales and use tax collections are more than $8 million below projections. Sales have declined even faster than the steep declines predicted by the Economic Forum three months ago. Cigarette and liquor tax collections are well below forecasts as well. Combine all that news with 17 straight monthly declines in the amount of money casinos have collected from gamblers, and Nevada lawmakers are again hearing the two words that have consumed their attention for nearly two years: revenue shortfalls.

"They did expect things to be pretty bad for the remainder of fiscal 2009, but things might still be a little worse on average than they expected," said Russell Guindon, a Legislative Counsel Bureau fiscal analyst.

No doubt the state will come up with some accounting tricks to balance the current spending plan, or perhaps borrow against its constitutionally dubious line of credit.

It will be another two months before the state reports economic activity from July, the first month of the new budget cycle and the higher taxes that come with it. No one expects the fiscal news to get better. In fact, UNLV economist Keith Schwer says Nevada's recovery will lag behind any national improvements in consumer spending because our unemployment and housing woes are so much worse than the country's as a whole.

That means the $6.9 billion figure lawmakers set as the least amount of money they could possibly spend has almost no chance of being realized. That means lawmakers will need to cut many of the programs and one-shot expenses they insisted couldn't be cut.

Anyone want to set the over/under on the number of months before Gov. Jim Gibbons has to call a special session of the Legislature? Six? Three?


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