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Economic slump cuts tax revenues as needs increase

Grim and grimmer.

That’s how forecasters described Clark County’s troubled economy and budget woes.

The worsening recession will choke off tax revenue, creating a financial shortfall that could be severely compounded by the state’s proposed budget cuts, county officials told commissioners Tuesday.

Reduced state funding could take bites out of medical, social services and child welfare programs as the slumping economy increases the number of poor residents who need these services, officials said.

After years of robust growth, every facet of the local economy is skidding — employment, housing, construction and tax revenue — and won’t rebound until at least mid-2010, said Jeremy Aguero, a principal in the consulting firm Applied Analysis.

“We are in for a rocky road for the next 18 months,” he said.

Aguero presented stark numbers to the Clark County Commission, showing how a once cresting wave of prosperity has crashed.

Aguero’s research found:

• Clark County added 2,000 jobs in 2008, a sharp decline from the nearly 120,000 jobs created in 2004-05. The market will gain few, if any, jobs in the coming year.

• The jobless rate, now above 7.5 percent, will flirt with 9 percent in the coming year.

• Home prices are down 36 percent from three years ago and more than 14 percent from just three months ago.

• Office vacancies are at 17 percent and are expected to reach 21 percent next year.

• New consumer spending that could be taxed reached $4.4 billion in 2004. It fell to a negative $312 million this year.

• The population grew by 5 percent a year for a decade, adding about 765,000 people to the area. But the growth ebbed to 0.8 percent in the past year and will probably slip to 0.5 percent.

Aguero noted that no official research has pegged the number of people moving out of Nevada, though it is probably on the rise.

One bright spot was tourism. Gaming receipts, hotel occupancy and room rates tapered somewhat from last year but hovered at 2006 levels.

Tourism eventually will pull the economy out of its funk, Aguero said. But it will have to pull harder than it ever has before, he said.

The area’s economy will recover, he said, just as it did in the past three recessions.

“I remain very optimistic about the future of Southern Nevada and its ability to grow,” Aguero said.

Still, county officials took little comfort in his cheery outlook, foreseeing painful cuts in services as state lawmakers prepare to reduce funding.

County Finance Director George Stevens said the county’s general fund could shrink by at least $37 million next year because of declining tax revenue.

Some of that loss is linked to diminished property-tax revenue in the struggling real estate market, Stevens said.

University Medical Center, which already is showing a loss of $50 million-plus for the year, could rack up more hefty costs from Medicaid cuts, he said.

Kathy Silver, the hospital’s chief executive, said the initial $8 million loss from the state’s reduction in Medicaid reimbursements led the hospital to slash services such as the oncology clinic. But the state is proposing other changes in the program that would disqualify the hospital as an authorized Medicaid representative, costing it an additional $18million a year, she said. Other services, such as the indigent accident fund, also are on the chopping block, she said.

All told, the hospital could lose $43 million in state funding, Silver said.

Representatives from the county’s Family Services Division and Social Service Department also decried pending cuts in financial aid for disadvantaged children and adults.

If the state compels family services to trim 11 percent from its budget, the agency would have to eliminate 187 jobs, said Tom Morton, the agency’s director.

Sixty-eight or more cases would be piled onto each worker, pushing the agency back to the darker days of 2004 when children died from abuse or neglect because caseworkers were too busy to protect them, Morton said.

Such a high workload leads to “drive-by sightings” of children, Morton said, “rather than meaningful interactions with the kids.”

Contact reporter Scott Wyland at swyland@reviewjournal.com or 702-455-4519.

 

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