The midterm election results will certainly have a major impact on Nevada’s budget policies, as Democrats solidified control of the Legislature and took the Governor’s Mansion for the first time in two decades. But a more low-profile development just two days after the balloting also carries major ramifications for how the state directs its financial resources.
On Nov. 8, the five-member Economic Forum met in Carson City to discuss state revenue projections. The forum — created 25 years to ago to keep lawmakers from rigging fiscal forecasts to indulge their penchant for spending — consists of private-sector economic experts charged with reading the tea leaves to predict how much money will be available to build the budget. Under state law, the governor and Legislature must use the panel’s projections, which will be finalized Dec. 3, to devise Nevada’s biennial fiscal blueprint.
With the state economy booming, legislative Democrats no doubt have an expensive wish list. But a Moody’s analyst warned the Economic Forum that caution is the best approach when forecasting tax revenues, given that the nation could be overdue for a recession, particularly in the second year of the budget cycle. History also warns that Nevada lawmakers have a tendency to spend, spend, spend during the good times, building higher costs into baseline spending plans that exacerbate the severity of the crashes during downturns.
In response, the Nevada Appeal reports, Linda Rosenthal, the International Game Technology executive who chairs the panel, asked staff to “develop a scenario that includes the potential impacts of a recession for forum members in December.”
Good. Because the numbers the forum are currently tossing around include double-digit increases and seem optimistic, to say the least.
The Appeal reports the panel heard reports that state sales tax revenue will grow by somewhere between 8.6 percent and 11.4 percent over the two-year budget cycle that begins July 1. Gaming revenue, the forum was told, is projected to rise as much as 5.2 percent. These two taxes make up more than two-thirds of state revenue.
Throw in the take from all other sources, and general fund tax collections could reach $8.9 billion, up almost 8 percent from the current general fund budget of $8.1 billion.
Remember this the next time you hear special interests complaining that Nevada’s tax system is broken and doesn’t generate enough money to pay for necessary “services.”
But even the healthy increase isn’t enough to sate state bureaucrats. In October, Nevada government agencies submitted spending proposals that would require the general fund to balloon to $9.5 billion. Yes, many of these requests will never be fulfilled. But the exercise provides state taxpayers with a glimpse of how high their obligations could soar.
Members of the Econonic Forum will gather again next month to finalize their projections. Their goal must be to look beyond the short term and to protect the state from a potential economic slump through responsible revenue forecasts that recognize the importance of restraint and caution in the budgeting process.