Nevada faces $70 million budget shortfall as gold prices decline

CARSON CITY — Nevada’s state general fund is going to take a hit this year of more than $70 million due to declining gold prices and lower production.

But Mac Bybee, spokesman for Gov. Brian Sandoval, said Monday the shortfall is not expected to affect the state’s ability to meet its day-to-day obligations.

There are other revenue streams that fund the state government, including sales and gaming taxes, that are much more significant than the revenue from the net proceeds of minerals.

“Gov. Sandoval is working to address the shortfall from the net proceeds, and has directed the Budget Office to work with the (Legislature’s) Fiscal Division to formulate options,” Bybee said.

“This deficit is a result of the net proceeds tax revenue falling short of the Economic Forum’s projections for this fiscal year,” he said. “It is important to note that this reduction will not affect the state’s ability to meet its day-to-day obligations. Legislative leadership has been notified and will continue to be a part of the discussions as we move forward.”

Tim Crowley, president of the Nevada Mining Association, said in a statement that the drop is due to significant declines in gold values and increases in mining costs.

“While less than the record net proceeds contributions from 2009-2012, Nevada mining continues to contribute tens of millions in Net Proceeds of Minerals taxes as well as more than $100 million in other generally collected taxes to Nevada’s general fund,” he said.

The Nevada Economic Forum, which sets revenue projections for the state budget, finalized the revenue estimates from the mining tax May 1, 2013. The estimate was $93 million but is now expected to reach $20 million this fiscal year. The forum will be updated on the projection for the tax, along with other revenues, when it meets June 3.

Crowley said another aspect of the declining tax revenues is that production is coming from lower-grade ores.

“We will be mining lower grade ores for some time to come, with much tighter margins,” he said.

Contact Sean Whaley at swhaley@reviewjournal.com or 775-687-3900. Find him on Twitter: @seanw801.