The Economic Forum on Friday cut $450 million from the revenue projections it made in December, leaving lawmakers with just under $5.5 billion for the General Fund in the coming two-year budget cycle.
Gov. Jim Gibbons' recommended budget was $6.1 billion. State Director of Administration Andrew Clinger said the revenue shortfall approaches $900 million because the state must help local school districts hit with slumping sales and property tax collections.
Lawmakers must now match the forum's projected revenue total against what they see are the needs for state services. They already have added more than $60 million to the governor's recommended budget, saying additions in human services and other areas are vital to keep the state running.
Clinger said Gibbons will present lawmakers with budget amendments to match the new numbers. He said those decisions haven't been finalized but that the governor already has stated they will most likely include further salary reductions for state workers " possibly another 5 percent for a total of 11 percent.
Gibbons, who can fill part of the budget hole with about $350 million in federal stimulus funds, on Thursday renewed his threat to veto any tax increases that the Democrat-controlled Legislature approves to avoid some of the deep cuts he already has proposed.
If Gibbons does veto the legislators' budget plan, they're likely to attempt a veto override just before the scheduled June 1 end of the 2009 session.
Sales taxes take biggest hit
The biggest reduction came in projected sales tax revenues. The five forum members cut a total of $187 million out of revenues for the coming biennium and another $28 million from this year's projection " $215 million in all. The projected sales tax revenue for the biennium was set at $1.61 billion.
Member Bill Hartman, a retired CPA, said one issue is consumer confidence. He said until consumers are comfortable with their economic situation again, they may be reluctant to spend. The other point he raised was the amount of sales tax money that depends on construction " an industry that has completely tanked in Nevada.
"The piece that's in serious trouble for several years is construction," he said.
Member John Restrepo added that "there is a growing acceptance and understanding this is not a normal recession."
He cautioned other members that consumer fears from this deep recession may not fade for several years and that, instead of spending, people may decide to save more.
The Insurance Premium Tax took the next largest hit at $62.3 million. Forum members expressed concern that employers who are laying off workers are paying less in premiums, and consumers, holding on to their old cars rather than buying new, are seeing those premiums come down.
Projected insurance tax revenues are $489 million for the biennium.
Gaming tax revenues were reduced $55 million to $1.39 billion for the coming biennium and $663 million for this fiscal year " a smaller hit than many expected.
Forum members expressed confidence that, unlike sales taxes, casinos would be able to bring more customers back with marketing campaigns.
The Live Entertainment Tax, companion to the gaming tax, was actually projected to increase in the next two years " albeit by just $3.5 million. The tax should generate $249 million next budget cycle along with $116 million by the end of this fiscal year.
Contact reporter Geoff Dornan at firstname.lastname@example.org or 687-8750. The Associated Press contributed to this report.