CARSON CITY — Nevada is now experiencing the worst of times as far as tax revenues go, concluded the state’s Economic Forum on Monday.
The forum — made up of five business leaders who determine how much money the state government has to spend — projected that Nevada will have about $5.65 billion for the two-year budget that begins July 1, or nearly $1.2 billion less than the current $6.8 billion budget.
"Never (before) in my 30 years have I seen declines in everything," said veteran state employee Lynne Knack, a Department of Taxation administrative services officer who was at the meeting.
The forum arrived at its projection after more than six hours of reviewing statistics and listening to economists. Its analysis is binding on lawmakers and Gov. Jim Gibbons, who since January have slashed the current budget by $1.2 billion because of revenue shortfalls. Forum members expect to see significant declines followed by modest gains in tax revenues during the coming years that throw Nevada back to the level of state tax receipts collected in 2004-05.
"We’re in uncharted territory," said Janet Rogers, an economist with the state budget office who blamed the housing market collapse and the stock market crash for Nevada’s deepening financial crisis.
In the fiscal year that ends June 30, tax revenues are estimated to total $2.777 billion, down 9.1 percent from the $3.054 billion received in 2007-08. During the 2009-10 year, revenues are expected to increase by 0.2 percent to $2.782 billion and then climb by 3.3 percent to $2.874 billion in 2010-11. The forum will meet again in late spring to make its final predictions before the Legislature approves the 2009-11 state budget.
Economic Forum Chairwoman Cathy Santoro said the group took a conservative approach in estimating expected state tax revenue in what she described as "an unprecedented economic climate."
Still, forum member Linda Rosenthal repeatedly challenged the tax revenue predictions made by state economists as overly optimistic.
"We all hear in the news the reports about unemployment and layoffs," said Rosenthal, director of treasury operations for International Game Technology.
Sen. Randolph Townsend, R-Reno, agreed, saying legislators could adjust state spending below the forum projections.
"Being too optimistic is what got us here in the first place," Townsend said. "If we miss the mark, we will have dug ourselves even a bigger hole."
The forum’s projections show the economy in Nevada is bottoming out in terms of tax receipts. Global Insight, an economic consulting firm hired by the state, does not see a recovery for another two years.
Rogers also said she does not see much of a recovery in Nevada before late 2010.
Unemployment in the state, now at a 23-year high of 7.6 percent, is expected to nearly reach 9 percent in the 2009-11 period, according to Global Insight.
Nonetheless, Santoro, senior vice president and treasurer of MGM Mirage, sees some increases in gaming revenue coming with the opening of the City Center project in 2010.
"In gaming there are some events that clearly impact (positively) the 2010 situation," said Santoro, senior vice president and treasurer of MGM Mirage.
But during 2008-09, the forum expects gaming taxes to drop from $804 million to $715 million, an 11 percent decline. Gaming revenues will increase by 3.3 percent to $739 million in 2009-10, and by 3.9 percent to $767 million in 2010-11, according to the forum.
"Gaming requires disposable income to a large part," said Santoro, noting the industry’s response has been to lower room rates to attract customers.
Sales tax revenues down 8.6 percent to $901 million in the current fiscal year, will increase by 0.5 percent to $906 million in 2009-10 and by 3 percent to $933 million in 2010-11.
Gaming and sales tax receipts make up more than 60 percent of the tax revenue going to state government.
If there was any good news Monday, it was that legislators during a special legislative session next week only need to find funds or make cuts in the current budget to cover an additional $331 million deficit and not something higher.
State Budget Director Andrew Clinger last week estimated the budget deficit for the fiscal year ending June 30 would be $330 million, but worried that the Economic Forum would find an even higher total.
Gibbons said last week the shortfall can be covered by taking out a $150 million line of credit from the Local Government Investment pool, cutting budgets of some state agencies by 1.5 percent and cleaning out any surplus funds remaining in various state accounts.
Contact Capital Bureau Chief Ed Vogel at firstname.lastname@example.org or 775-687-3901.