Forecast dry on revenue increases
Lawmakers hoping the Economic Forum would bail them out of the fiscal crunch with a significant increase in projected revenues got almost no help Wednesday.
The forum added just $7.9 million to revenues for the remaining two months of this fiscal year and $36.7 million for the coming two-year budget cycle. Senate Finance Committee Chairman Debbie Smith, D-Sparks, said the minimal increase was about what she expected after being briefed by staff.
“It’s disappointing because I still don’t believe we have enough revenue in this current budget to start restoring our education cuts,” she said. “We can’t fix any of these things with $36 million.”
Since the $7.9 million will be rolled into the coming budget cycle, the new forecasts actually give lawmakers a total of $44.6 million in new money to spend.
Gov. Brian Sandoval said the money should be spent on his established priorities.
“In keeping with the priorities of my proposed budget, I will propose that the $44 million increase be directed to K-12 education, health and human services, economic development and the rainy day fund,” he said in a statement.
The forecasts raise the total projected General Fund revenues for the coming biennium to $5.85 billion, less than the $6.17 billion in revenues forecast and actually collected during the current budget cycle. In addition to the seven major revenue streams, that includes nearly 100 smaller sources totaling some $1.67 billion.
But Legislative Counsel Bureau Economist Russ Guindon said the difference is those tax increases scheduled to sunset at the end of this fiscal year. When the 2011 tax increases Sandoval agreed to extend another two years are added in, the total General Fund revenue available to spend in 2014 and 2015 comes to $6.42 billion. Those increases, according to the documentation presented to the forum Wednesday, are worth $566.2 million during the biennium.
Most of the major revenues were either left at the levels set when the Forum met Nov. 30 or increased just slightly.
Sales taxes, which make up some 33 percent of the General Fund, were upped just $12.95 million for the coming budget cycle to $1.92 billion. The main gaming tax paid by casinos was left at the Nov. 30 projections — a total of $1.42 billion.
The largest additions were to the Modified Business Tax — $8.8 million over the biennium — and Real Property Transfer Tax — $15.1 million. Another $1.9 million was added to the MBT paid by financial institutions.
But the forum members took $6.1 million out of the gaming Live Entertainment Tax.
The most problematic tax for forum was the Insurance Premium Tax, which is projected to generate more than $250 million a year.
Forum Chairman Ken Wiles said the problem is the impact of the Affordable Care Act that makes thousands of Nevadans eligible for coverage and mandates many of them buy insurance. He said the forum doesn’t know the rules, when or how it will be implemented, who is eligible for coverage under the act, the premiums, how many uninsured will sign up for coverage or the act’s impact on overall employment.
The act will increase the number of people buying insurance but, those who qualify for Medicaid will reduce state insurance revenues since Medicaid coverage isn’t taxed. The other issue is how many businesses will pay federal penalties rather than provide health insurance for workers.
“With all these unknowns, we don’t even know the things we don’t know,” he said.
Forum Member Marv Leavitt said the uncertainty is greater than with any of the other revenue streams.
“On this particular one, we’ve just got a dartboard and we’re just throwing darts at it,” he said.
In the end, they settled on a forecast that comes in just $633,000 less than the November projections for 2014-15.
“There are significant components in the estimates today that are subject to things we just don’t know,” Wiles said in wrapping up the meeting.
He said afterward there is just so much that is unknown it’s “very difficult to forecast with any precision.”
Guindon said after the meeting that the forum’s projections will change other parts of the state’s revenue stream as well including the Local School Support Tax. That could impact the General Fund since statute mandates the state make up any shortfall in LSST. But since the projections are expected to increase that revenue source, the state could conceivably back out some money from LSST and use it elsewhere.
The small amount of the increase, however, is expected to spur discussions between the two political parties over how to fund some of the things each side wants over and above the governor’s recommended budget.