(Updated at 5:42 p.m. on 12-1-10 with comments from Gov.-elect Brian Sandoval)
CARSON CITY – A panel of private sector fiscal experts today projected the Nevada state general fund will have about $5.3 billion in tax revenues to spend on government services for the next two years.
The Nevada Economic Forum spent the day making projections for gaming, sales, business and other major tax revenues for use by Gov.-elect Brian Sandoval and the Legislature in crafting a balanced budget for the two years beginning July 1, 2011.
The revenue forecast, which can be modified a final time by the five-member panel in May next year, must be used by state officials in creating a balanced budget.
The panel projected modest growth for gaming and sales tax revenues because the state continues to suffer from the effects of an ongoing recession. The revenue is about $1.1 billion lower than the current budget.
It is also about $3 billion lower than the agency funding requests submitted earlier this year. Nearly $500 million of this total can be eliminated if the Legislature votes to continue a one-day-a-month unpaid employee furlough program and salary freezes.
Sandoval has said repeatedly he will not raise taxes and fees to balance the budget.
In a statement released after the forum concluded its work, Sandoval said the panel’s projections will require state government to make about $1.2 billion in spending reductions in the upcoming two-year budget.
“While the Economic Forum projection is an improvement over what some have predicted, it plainly indicates that many difficult choices are still ahead,” he said. “State spending cannot get in the way of economic growth by imposing new taxes.
“I recognize there will be challenging decisions ahead and I pledge to continue to work hard every day,” Sandoval said.
Sandoval will be sworn in as Nevada’s newest governor early next month.
Members of the panel cited the state’s difficult job situation and the lagging housing market as reasons for their projections of modest revenue growth.
The panel rejected a rosier economic outlook presented by Dan White, an economist with Moody’s Analytics.
The panel did hear some modest good news, that Nevada’s first in the nation unemployment rate may finally have hit bottom.
Bill Anderson, chief economist for the Department of Employment, Training and Rehabilitation, said, “it looks like the worst is behind us.” Evidence of stability is emerging in the job market, but the best the state can hope for over the next two years is no further weakening, he said.
There is no evidence of any catalyst that would cause noticeable job growth, Anderson said.
Nevada will not get back to pre-recession levels of employment anytime soon, he said.
In addition to the weak job market, Nevada’s housing market is not expected to recover anytime soon. The state leads the nation in foreclosures and until the surplus properties are sold, the residential construction market will not recover.
John Restrepo, chairman of the forum, said the panel was concerned about sales tax projections in particular because of uncertainty over consumer behavior and spending patterns as a result of the recession.
The panel forecasted only modest growth in sales taxes, one of the major revenue sources for the state budget. The panel is projecting only a 1.2 percent increase in the revenue in fiscal year 2011-12, and a 3.2 percent increase in 2012-13.
Gaming revenues are projected to grow by 2.7 percent and 3.3 percent in the two years of the budget.
A big decrease is forecasted for the modified business tax because an increase in the rate for large businesses will sunset on June 30, 2011. The increase was approved by a majority of the 2009 Legislature to balance the current budget over the objections of outgoing Gov. Jim Gibbons.
The forum based its projection on the tax levy returning to pre-2009 rates. As a result, the business tax will bring in an estimated $204 million in the first year of the new budget, down from the $351 million projected for the current year.
The state general fund will also lose revenue from room taxes used by the 2009 Legislature to balance the current budget. About $104 million is coming into the general fund from the tax this year, but it is not available for the coming two-year budget.