Gaming tax collections sink

CARSON CITY -- At a time when Gov. Jim Gibbons, legislators and everyone else in Nevada would have welcomed good news about the state economy, they got an even more depressing report.

The Gaming Control Board reported Thursday that gaming tax collections in June plunged 22.8 percent from June 2007, the worst drop in at least 10 years.

The $64 million in taxes were collected on the revenue casinos won from players in May.

Winnings for May were just under $970 million, a 15.2 percent drop from $1.143 billion a year earlier, which pummeled the stock prices of the industry's largest casino operators.

That was the largest decline since 1984, when the control board began monthly tracking of gaming revenue.

A couple of hours after the report was released, Gibbons said the statistics mean the state budget may have to be cut even more.

"This is an incredibly difficult time for the state of Nevada, and it appears that we may need to prepare for an additional shortfall to our general fund for the fiscal year that just began," Gibbons said in a statement.

He already has asked state agencies to determine whether they can make an additional 14 percent in cuts and to prepare for zero growth budgets over the next two-year period.

On the Strip, gaming revenues were $513.4 million in May, a drop of 16.4 percent, compared with $614.5 million in May 2007.

Statewide gaming revenues are down 6.2 percent through May, while Strip gaming revenues are down 5.4 percent for the first five months of 2008.

"Understanding the various economic pressures facing tourism currently, from fuel prices to higher national unemployment, it's essential that we continue doing whatever we can to entice visitors to come to Nevada," Gibbons said.

As he does almost daily, he reiterated he will oppose any move in the Legislature, which begins its 2009 session in February, to raise taxes.

"I will continue to balance our budget without looking to taxpayers for more money when they're already struggling in their own lives."

But Assemblywoman Sheila Leslie, D-Reno, called Gibbons' consistent anti-tax message simplistic and said he is out of touch with voters.

"Where do we cut?" she asked. "We can't keep going on like this. This is like a yo-yo."

"I don't think most rational people oppose taxes. Paying taxes is the price of living in Nevada. Taxes are not evil. We are at a point where people are so overwhelmed about the lack of services in the state."

Assembly Speaker Barbara Buckley, D-Las Vegas, said she is looking at what taxes are levied in other states to see if Nevada could follow suit. Buckley has vowed to re-examine the state's financial structure.

"This is crazy," she said. "We are having to close down satellite college campuses because we don't have the money. I am asking all the people of the state to join me so we don't have to repeat in the future these Draconian cuts."

Buckley said she is getting support from Republicans for her plan to look at the state's financial structure.

Just two weeks ago, the state Economic Forum, five business leaders who advise the state on how much tax revenue will be available for spending purposes, predicted the state would collect $786.6 million in gaming taxes for the fiscal year that ended June 30.

But as a result of the huge June decline, actual tax collections were $771.8 million, nearly $15 million less than the forum's prediction.

Based on the forum's projections, the Legislature in the June 27 special session approved $275 million in additional spending cuts on the state's two-year, $6.8 billion general fund budget. The cuts were on top of $914 million already approved by the governor and legislators.

It would take a two-thirds vote of both houses to override a Gibbons veto of any bills that would raise taxes. Democrats now hold a 27-15 majority in the Assembly, while Republicans have an 11-10 edge in the Senate.

To find additional revenue, Leslie said, lawmakers might consider withdrawing sales tax exemptions received by lawyers on payments received from clients and from advertising placed by businesses.

Control Board Senior Analyst Frank Streshley said the June gaming tax picture may be less dire than it appears.

Tax collections declined in part because of increased credit play, he said. The state will receive more tax money in coming months as people pay off their markers.

Streshley noted the decline in June was even more severe than after the Sept. 11, 2001, terrorist attacks, the last major outside event to hamper Nevada's tourism industry. The gaming win in 2001 declined 1.3 percent and was down 0.3 percent in 2002.

He said visitors are gambling less. He attributes that to the national economic slowdown. Slot play was down 4.6 percent, while wagering on table games fell by 9 percent.

"The trend that is really alarming to us is the decline in spending," Streshley said.

He said gaming resorts have responded by offering lower room rates to attract customers, but that strategy could attract less affluent people.

"Everything hinges on the economy," Streshley said. "It is tough to gauge what further increases in gas prices will bring. But Las Vegas is amazing at marketing. Las Vegas is still a bargain tourist spot."

MGM Mirage President and COO Jim Murren said it's clear the nation's economy is not going to turn around in the near future, but his company, which operates 10 casinos on the Strip and is building the $9.2 billion CityCenter development, is taking steps to bring in business.

He said the MGM Mirage's performance in May "didn't mirror what Nevada reported." Still, the company has seen its revenue per available room, one way to gauge profitability, dip from a year ago.

"The market has been pretty rough, and we have reduced room rates," Murren said. "We need to be aggressive in general to get people to Las Vegas. We always have a mountain of promotions going on all the time in an economic cycle but we're not doing anything extraordinary."

Gaming revenues in May fell throughout Clark County, including a 29 percent drop in North Las Vegas and a 30 percent drop in the Boulder Strip, which includes some casinos in Henderson.

Downtown casinos suffered a 17.3 percent decline in gaming revenues.

Contact reporter Ed Vogel at evogel@reviewjournal.com or 775-687-3901. Contact reporter Howard Stutz at hstutz@reviewjournal.com or 702-477-3781