Outlook for state budget remains gloomy

CARSON CITY -- The Gibbons administration is developing new revenue projections that could be far worse than a January report showing a $500 million-plus shortfall by mid-2009.

Analysts already have some gloomy reports on key revenue sources, including a March 7 Gaming Control Board report showing a 5 percent drop in the casino win in January compared with the same month a year ago.

By the end of next week, they should get another critical report on January sales. The most recent sales report, showing a 1 percent decline in December, came out at the end of February. Taxes based on gambling and sales are the main state revenue sources.

State Budget Director Andrew Clinger said Wednesday that "unofficial" word of a revenue shortfall nearing $800 million by mid-2009 is "not something I'm ready to talk about."

"We don't have anything official yet," Clinger said. "We're still working on our forecast. We're continuing to review the numbers as they come in."

If the official shortfall estimate approaches $800 million, Clinger said, more budget cuts would be needed atop the 4.5 percent cuts for most government agencies already ordered by Gov. Jim Gibbons.

"There's not a whole lot of places to go," he said, noting that all but about $35 million of the state's rainy-day fund for fiscal emergencies already has been tapped.

Some state building projects could be delayed in addition to others already on hold because of the budget crisis, Clinger said. Layoffs or furloughs of state workers have been avoided so far but remain an obvious option.

But Clinger said a special legislative session, in advance of the regular 2009 session, to find other revenue sources "is still out, for sure." While lawmakers can press for a special session, the governor has final say on whether to call one.

Gibbons, a Republican who ran for governor in 2006 on a platform pledging no new taxes, has said repeatedly that he won't call a special session to consider new taxes as a way to deal with the revenue slump.

The governor had estimated in the fall that the revenue shortfall would be less than $200 million, but that figure has soared mainly as a result of lagging sales tax and other revenue collections.

Besides gambling and sales taxes, an update at the end of February showed that insurance premium, real estate transfer and business taxes also are down, Clinger said.

In the July-December 2007 period, the insurance premium levy was down nearly 14 percent, the real estate transfer tax was down about 25 percent and the business tax was down about 9 percent compared with the same period a year earlier. That left the state about $50 million short of its estimate of revenue from those sources.

Besides the revenue reports, the state also got a March 10 analysis showing that Nevada's unemployment rate was 5.5 percent in January. That's a full percentage point higher than the rate in January 2007.

Although the various reports have been grim, Gibbons has said he's hopeful of the state's economy turning around. Economists say a new boom in Las Vegas megaresort construction could improve revenues dramatically starting in 2009.

The 4.5 percent budget cuts already in effect hit the state's K-12 schools and its human services programs the hardest. The K-12 system has had to deal with cuts of nearly $93 million, and the Department of Health and Human Services is cutting $82 million.

The state's university and college system is in line for cuts of nearly $58 million, and the prison system faces reductions of nearly $25 million.