Economic Forum projects $8.5 billion in revenue for next budget cycle
The Economic Forum on Thursday projected General Fund revenue totaling just over $8.5 billion for the coming biennial budget cycle.
After all adjustments, that comes to $4.116 billion in fiscal 2022 and $4.392 billion in 2023.
That total is just about $1 billion less than the $9.33 billion approved by the 2019 Legislature, a difference caused entirely by the economic shutdown resulting from the coronavirus pandemic.
Of that total almost $7.2 billion comes from the seven so-called “major revenue streams” — the Sales and Use Tax, Gaming Percentage Fee, Live Entertainment Tax, Insurance Premium Tax, Modified Business Tax, Real Estate Transfer Tax and Commerce Tax.
The remaining $1.34 billion over the biennium comes from the 60-plus revenue streams referred to as the “minor” revenues.
Hardest hit by the economic shutdown was the gaming industry and its live events/shows and convention business. In fact, forum members were told that the Live Entertainment Tax was pretty much wiped out by the pandemic shutdown going from about $100 million in fiscal 2020 to just over $1 million in fiscal 2021 as even nightclubs were forced to close down.
While forum members were cautious and very conservative in their projections for the rest of this fiscal year, they were a bit more confident about fiscal 2022 and predicting a pretty solid rebound in fiscal 2023.
Member Linda Rosenthal pointed to data from Gaming Control Analyst Mike Lawton that shows Washoe County and Nevada’s small rural markets have almost completely recovered as they depend significantly on local gamblers and drive-in customers.
The Las Vegas Strip, she said, was “impacted much more greatly than other places in Nevada,” because of its heavy reliance on customers who come by air — including high-rollers from overseas.
LCB Economist Russell Guindon pointed out that much of the Strip needs conventions, trade shows and events that bring in midweek customers to fully recover.
The Sales and Use Tax was also hard hit by closure of bars, restaurants, retail stores and other businesses. Sales taxes are Nevada’s largest contributor to the General Fund, generating more than $1.2 billion a year. Revenue from taxable sales, the analysts said, will finish this fiscal year down but will recover in 2022 and 2023.
Another revenue stream hard hit by the economic shutdown is the Modified Business Tax, which businesses pay per employee. With huge layoffs, that funding dropped significantly this year. But the forum predicted it would increase by more than $140 million to $744.4 million by fiscal 2023.
The most stable major revenue stream is the Insurance Premium Tax since most insurance is required. That tax generates nearly $500 million a year and is expected to top that in 2023, generating $518.3 million. Insurance premium collections actually increased this fiscal year and are projected to rise 3.6 percent next year and 4.4 percent in fiscal 2023 producing more than $1 billion altogether.
Also in good shape is the Real Estate Transfer Tax that is projected to collect $106.5 million this fiscal year, a 6.2 percent increase. But it is predicted to decrease a percent in 2022 and by three-tenths in 2023.
While the Commerce Tax is predicted to decrease 6.4 percent this year, it will increase 4.7 percent next year and 7.7 percent in 2023.
The forum, a five-member panel of financial experts and business executives, is charged with making that projection ahead of each legislative session. The governor and lawmakers must use those projections to build Nevada’s budget. If they want to spend more, they have to raise taxes to cover the difference.