Dismal revenue projections create headaches for state leaders
The Economic Forum meets today to set in stone a dismal revenue projection for the rest of this year and the coming biennium.
The forum is charged with making projections for revenues which must, by law, be used to build the state budget. But the forum members ” all newly appointed ” stumbled in their first test November 3 as they refused to make specific estimates for the seven major revenues the state treasury relies on.
Only after Director of Administration Andrew Clinger basically pleaded with them did they come up with a ballpark number for the rest of this fiscal year. While they set that at $2.4 billion, they refused to even estimate what revenues would be for the coming two years, saying they didn’t have enough information.
They don’t have that option today when the law requires they settle on projections that can be used to build the governor’s proposed 2010-2011 budget.
The forum will be followed immediately by a meeting of legislative leaders who must find a way to balance the budget for the rest of this fiscal year. At this point, they are about $330 million in the red.
The forum makes its projections after receiving estimates and presentations from the agencies which collect the revenues, the budget division, the consulting firm Global Insight and the Legislative Counsel Bureau’s fiscal division.
In the past, the budget division’s December projections have been the most optimistic, seeking more money for the governor’s programs. That reverses in the May forum when, with lawmakers looking for money to spend, fiscal tends to be more optimistic.
This year, none of the projections is expected to be very rosy and, in contrast to the past, the budget division has been the most pessimistic in early estimates.
In estimating the long list of so-called minor revenues last month, LCB saw the economic situation flattening out next fiscal year and turning around the following year. Budget, however, has basically predicted the trend will continue down next year and flatten out, possibly gaining in a few areas during the second year of the biennium.
The seven major revenue sources feeding the state General Fund are led by the sales and use tax and gaming taxes. Sales and use taxes produced nearly $986 million in fiscal 2008. Gaming fees and taxes brought in $804 million plus another $122 million from the casino live entertainment tax for a total of about $920 million.
The Modified Business Tax and Insurance Premium Tax each brought in more than $250 million a year. The Real Estate Transfer Tax generated another $86 million.
The remaining major revenue source is the cigarette tax, which produced about $110 million in FY 2008.
With the exception of the insurance premium tax, all of those revenue sources have been down dramatically. Most disappointing has been the real estate transfer tax which is off double digits due to the collapse of the residential real estate market in Nevada.
But the biggest impact is from the nearly 5 percent decrease in sales and use tax collections thus far this fiscal year and the whopping 9.4 percent drop in gaming tax collections for the last quarter.
The forum makes its own judgments to set the major revenue projections, but is expected to accept the recommendations of its technical advisory committee for the long list of so-called “minor” revenue sources. The largest of those, however, may get moved into the major category Monday. That is the $100 million collected annually by the secretary of state’s office.
The treasurer’s office has thrown lawmakers and the governor a lifeline of sorts suggesting they could cover at least part of the shortfall for the next six months by using $150 million from the Local Government Investment Pool as a line of credit. The state would have to pay back any money taken from the LGIP.
The LGIP is money belonging to local governments which is held and invested by the state, which can get a better rate of return than the local government could get on its own. There is currently about $770 million in that pool.
The forum meets at 9 a.m. in Room 4100 of the legislative building.
Contact reporter Geoff Dornan at firstname.lastname@example.org or 687-8750.
The Economic Forum, which meets at 9 a.m. in Room 4100 of the legislative building, consists of five appointed members who cannot be employees of state government, including publicly supported institutions of higher education. The governor appoints three of the members, one member is appointed by the Senate majority leader, and one member is appointed by the speaker of the assembly to serve for a two-year term.
The current members serving from February 2008 to February 2010 are:
– Chairman Cathy Santoro: Appointed by Gov. Jim Gibbons
– Bill Hartman: Appointed by then-Senate Majority Leader Bill Raggio
– John Restrepo, vice chair: Appointed by Gibbons
– Michael R. Alastuey: Appointed by Assembly Speaker Barbara E. Buckley
– Linda Rosenthal: Appointed by Gibbons