Gov.: Revenue can’t meet demands
The governor and 2015 Legislature will have $6.33 billion in General Fund revenue to spend on the fiscal 2016-2017 state budget.
That’s the total projected by the five-member Economic Forum on Wednesday.
Chairman Ken Wiles described the projections as “cautiously optimistic,” a description agreed to by the other members as well.
That number is roughly a half billion more than the $5.8 billion the forum approved at its May 2013 meeting — at the end of the 2013 Legislature.
But it is well below the $7.7 billion that state agencies have requested in General Fund cash.
A good share of the difference is the result of a statute requiring the forum to use an existing statute in developing its projections. That means it can’t count the $1.184 billion in revenue diversions and sunsetted taxes used to balance the current two-year budget.
If those sunsets are extended and that money put back into the equation, Gov. Brian Sandoval and lawmakers would have $7.51 billion to meet the needs of state agencies. As one state official who asked not to be named put it, “that’s probably doable.”
Sandoval has not yet said whether he will, for the third time, extend those sunsets.
He issued a statement after the forum adjourned that didn’t answer the question: “Today’s Economic Forum report reminds us yet again that our revenue structure is not built to meet the demands of our changing economy nor our continued increase in statewide population.”
“Before I finalize and submit the state budget, I will ask my Cabinet to further scale back agency budget requests so that we can factor into account today’s projections.”
The biggest single piece of the revenue puzzle is the sales and use tax, projected to generate just under $2.25 billion. That is a 5.6 percent increase in 2016 and 5.9 percent more in 2017.
That is followed by the Gaming Percentage Fee (the tax on casino winnings) at $1.5 billion, based on a more modest 2.6 and 4.3 percent increase in the two fiscal years of the budget.
Most of the rest of the pie is made up by the other five taxes that make up the so-called “major revenues — the gaming Live Entertainment Tax, Insurance Premium Tax, Modified Business Tax and Financial Institution MBT and the Real Property Transfer Tax. The remainder of the revenue comes from a long list of more than 70 “minor revenues” that, collectively, bring in nearly $800 million.
The one members were most confident about is the Insurance Premium Tax which they projected will grow by 9.6 percent in 2016 and 9.3 percent in 2017. Part of that is driven by taxes on health insurance premiums paid under Obamacare. Altogether, the forum projects that tax will raise $670.5 million over the biennium.
Matt Maddox, vice chair of the forum and President of Wynn Resorts, said he feels the gaming tax could come in higher than expected in the “mid level resorts” where he said more regular gamblers may be starting to return to southern Nevada. the high rollers and Baccarat, he said, are much more difficult to project accurately.
He agreed with Russ Guindon, chief economist for the Legislative Counsel Bureau, that while there are more shows and events coming, they are more and more being held at arenas, not inside the major resorts and, therefore, are exempt from the Live Entertainment Tax.
Even so, Maddox and other forum members projected between a 3.4 and 3.8 percent increases in that revenue over the biennium for a total of $319.5 million to the state.
The Real Property Transfer Tax, which has grossly underperformed during the recession because of the collapse of home prices, was projected to improve dramatically in the coming two years, growing 7.6 percent in 2016 and 8 percent in 2017, bringing in $146.5 million in revenue.
Pointing to that tax and the sales tax, member Linda Rosenthal of International Games Technology said home construction and prices have again risen as has commercial construction.
“I think there are a lot of projects coming to Nevada that have yet to be announced,” she said.
The forecasts, by law, must be used to develop the governor’s recommended budget and the final budget approved by the Legislature. But due to changing conditions, they will get an update in May near the end of the 2015 session.