Nevada’s revenue drop not the worst

CARSON CITY -- If there is good news in a report released on the declining economies of the states, then it is that Nevada has a lot of company in its misery.

Even with all the foreclosures, lack of tourists and high unemployment, Nevada isn't the state that has been hit the worst by the recession.

Arizona and New Hampshire have suffered even worse revenue declines in the current fiscal year, according to the National Conference of State Legislatures' report released Thursday.

And the economies of six other states will fare even more poorly than Nevada during the next fiscal year, according to the report.

Of the 50 states, all but 12 are reporting declines in expected revenue during the current fiscal year.

The report places Nevada's current revenue shortfall, or "spending gap," at 10.5 percent. Spending gaps represent the difference between the expected revenue of a state and its actual tax receipts.

Because of Nevada's spending gap -- which NCSL places at $337 million based on talks with legislative fiscal officers -- the state Legislature will go into a special session Monday to come up with ways to handle this deficit. Under the state constitution, Nevada must have a balanced budget.

But it is even worse in New Hampshire, which has a 15.3 percent spending gap, and Arizona, 12.3 percent.

California has a mammoth spending gap of $8 billion, according to NCSL, but that is only 8 percent of its anticipated revenue. Utah's spending gap is 6.4 percent.

"It isn't as if we needed people to tell us things are bleak," said Daniel Burns, the communication director to Gov. Jim Gibbons. "When you are the fastest growing state year after year, and things go down, it is going to be difficult."

In all, the states face additional cuts of $32 billion in the current fiscal year after earlier cutting expenditures by $40 billion.

Since January, Gibbons and legislators have reduced state spending by nearly $1.2 billion. Nevada operates under a two-year, $6.8 billion budget.

"These budget gaps are approaching those seen in the last recession, which were the worst since World War II, and show every sign of growing larger," said William T. Pound, NCSL's executive director.

Nevada's tax revenue declined by 9.1 percent to $2.77 billion during the last fiscal year, compared with the previous year. That was the first time in at least 30 years that Nevada tax revenue did not increase from the previous year.

The NCSL said sales, personal and corporate income tax revenues are shrinking as consumer confidence plunges, unemployment rates rise and businesses continue to close.

Nevada does not have income taxes, but gaming industry revenues have dropped as tourism has declined and visitors have less disposable income. The state's 7.6 percent unemployment rate is the worst since 1985.

Even after the Sept. 11, 2001, terrorist attacks, Nevada tax revenue showed a 1 percent increase.

NCSL predicts at least 15 states will have double-digit revenue gaps during the next fiscal year, led by Arizona at 24.2 percent, New York, 20 percent, and California, 18 percent.

Nevada is not on the double-digit decline list, but only because NCSL did not have time to respond to revenue projections made Monday by Nevada's Economic Forum.

The forum determined tax revenue for the state in the 2009-10 and 2010-11 fiscal years will be $5.65 billion, or $1.2 billion less than anticipated during the current two-year budget cycle.

The NCSL's preliminary analysis shows Nevada will have to cut state spending next year by 14.1 percent.

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