Taxable sales cup half full or half empty

CARSON CITY -- A long-awaited tax report expected to signal whether Nevada's budget crisis is improving or teetering on the brink of disaster showed neither Wednesday.

The March taxable sales report did not worsen, but did not improve, the state's overall financial picture, said Ben Kieckhefer, press secretary to Gov. Jim Gibbons.

"The report we got today isn't that bad," Kieckhefer said. "It's bad in that sales are still declining, but it is pretty much in line with our revised projections."

As a result, there is no need to react immediately by calling a special session of the Legislature or by implementing a new round of budget cuts, Kieckhefer said.

The plan now is to wait for the April gaming revenue report, due in the middle of June, to make another evaluation, he said.

"We're still off (the revised projections) by about $29.6 million," Kieckhefer said. "It was a net zero. There were some pluses and some minuses versus our projections. It's nice to say we're not deeper in the hole."

The March taxable sales report showed a decline of 3.9 percent over March 2007, with most major categories, from auto sales to restaurant business, in the negative.

Other important revenues for the state budget, including the modified business tax and the real estate transfer tax, showed mixed results.

The report issued by the Department of Taxation showed that the business tax for the third quarter of this the 2007-08 fiscal year increased by 5.4 percent over the same quarter in the previous year.

For the nine months of the fiscal year, taxable sales are down 2.5 percent.

But the real estate transfer tax is down in the third quarter by 36 percent over the quarter ending in March 2007, a sign of Nevada's ongoing housing market woes.

Statewide taxable sales totaled $4.3 billion in March, down from the $4.5 billion reported in March of 2007. It was the 12th consecutive month taxable sales declined, not counting an October report that showed minuscule growth of 0.06 percent.

Clark County had taxable sales totaling $3.2 billion, down 3.4 percent from the $3.3 billion reported in March 2007.

Eleven of Nevada's 17 counties recorded a decrease in taxable sales for March 2008 compared to March 2007.

Many major taxable sales categories showed March declines. The motor vehicle and parts dealers category showed a 12.6 percent decline; home furniture and furnishings showed a drop of 14.3 percent; bars and restaurants declined 15.9 percent.

But there was some good news in the report.

The construction industry category was up 18.2 percent; general merchandise stores were up 7.8 percent; clothing and accessories stores were up 4.5 percent; and accommodations were up 7.5 percent.

That reflects what Patty's Closet owner Patricia Barba sees at her boutique on Rainbow Boulevard near Robindale Road.

She said the store has experienced a steady increase in customers looking for deals.

"Even with all the talk with the economy not being so great, we haven't noticed a difference," said Barba, who in November opened the shop, which caters to teen girls and young women.

"In our business, girls feel safe that they're not going to overdo it in our store. In a way, our prices ease their mind."

Barba said she sees other small stores going out of business as she drives the neighborhood.

However, she added, "Girls probably won't ever stop spending money on clothes," no matter what the economy.

Other reactions were measured.

"We just don't know where this is going," said Mary Lau, president and CEO of the Retail Association of Nevada, a nonprofit trade association representing 1,300 companies.

Lau said hiring is not up as usual for the season and that the price of gasoline is affecting not only customer flow but also supply flow to the stores.

People are not spending the government's stimulus checks, she said.

"What we're seeing is it's back to Reaganomics, the trickle-down effect," Lau said. "The trickle down is starting where people are not doing shopping. Even if they wanted to or needed to, they're going to hold off and see where the economy is going until later on."

Gibbons, in remarks accompanying the report, said it shows Nevada's economic slump continuing.

"This was partially offset during the period by positive consumer spending shown in the general merchandise and clothing store categories, as well as continued growth in commercial construction activity in Southern Nevada," Gibbons said.

Sales taxes make up the largest share of the state budget at nearly 33 percent. Business taxes make up 7.6 percent, and real estate transfer taxes make up 5.4 percent.

The slump in state revenues over the past several months has caused Gibbons and lawmakers to reduce spending and use reserves and various tricks to fill a $913 million hole in what was projected as a two-year, $6.8 billion budget.

The budget that will end on June 30, 2009, will be less, although by how much is a work in progress.

The budget will still show some level of an increase over the previous spending plan.

Gibbons also has asked state agencies and public education to cut their budgets for the next two years by 14 percent, because revenues are not expected to rebound by the time the spending plan takes effect on July 1, 2009.

This upcoming two-year budget will be the major subject of the 2009 legislative session that will begin in February.

Contact Review-Journal Capital Bureau reporter Sean Whaley at swhaley@reviewjournal.com or 775- 687-3900. Contact Review-Journal reporter Arnold Knightly at aknightly@reviewjournal.com or 702-477-3893.