Economic Forum examines state revenue projections
Economists and business analysts dissected Nevada’s dismal economy Friday – joblessness, population loss and a ravaged housing market – while trying to project state revenues to build a budget for the next two years.
During a daylong meeting, the five-member Economic Forum heard detailed reports from the governor’s office, state agencies, legislative analysts and outside consultants, who gave forecasts on sales taxes, casino taxes and the effects that record unemployment, bankruptcies and foreclosures will have on consumer spending power – and ultimately state coffers.
The panel opted to delay making projections until their next meeting, when they will have another month and first-quarter tax reports to consider.
Under state law, the forum, an independent panel of business leaders and financial experts, must make final revenue projections by Dec. 1. Their forecasts must be used by the governor and legislators to base a budget for the two-year spending cycle that begins July 1.
Gov.-elect Brian Sandoval has said he wants to reset the budget to reflect 2007 revenues, roughly $5.2 billion – about $1.2 billion less than the existing budget – and has said he won’t raise taxes.
Bill Anderson, chief economist for the Department of Employment, Training and Rehabilitation, said Nevada’s unemployment rate – which leads the nation at 14.4 percent – has shown signs of stabilizing as job losses ease.
Still, when the number of people who’ve stopped looking for work or those underemployed in part-time jobs are factored in, the statewide jobless rate is about 22 percent, Anderson said.
“Unfortunately, we don’t see anything on the horizon” to push the state toward job growth in the near future.
“We will continue to bounce along the bottom,” he said. Since December 2007 when the Great Recession began, Nevada has lost 190,000 jobs. Anderson said the state’s jobless rate is “in the process of peaking,” but predicted it will remain in the high single digits into 2014. He projected the state will add only about 25,000 jobs over the next three years.
And while national economist have said the recession ended in June 2009, Nevada’s economy – highly dependent on discretionary spending by tourists and gamblers – remains strangled.
“We actually never did have Nevada come out of recession,” said Augustine Faucher of Moody’s Analytics.
Moody’s offered the rosiest forecast for the immediate future, predicting Nevada would transition into recovery next year, led by increases in the leisure and hospitality sector.
Dan White, a Moody’s economist, said visitors are starting to return to Las Vegas, the tourism engine in the state. He described the return as “pent-up demand” by people who scrimped but see their financial situations beginning to improve. But he said those visitors are still trying to save money and are spending less.
Forum members were skeptical of the forecast.
“Believe me, we want to believe,” said John Restrepo, forum chairman.
Moody’s projected casino taxes, which account for about a third of general fund revenues, would increase 9.4 percent in fiscal year 2012 and 13.1 percent in 2013, bringing in about $1.5 billion.
The Nevada Gaming Control Board, administration and legislative analysts were more conservative in their estimates, which ranged from $1.3 billion to $1.4 billion.
Moody’s also projected a 12 percent increase in sales and use tax collections over the biennium, forecasting revenue of $1.7 billion. Other estimates were around $1.5 billion on projected gains of 1 percent to 2.8 percent.
The housing market continues to drag on the state’s economy, and while it may be “nearing bottom,” it remains in serious distress, White said.
Statewide, one in 62 homes is in foreclosure. In Las Vegas, the ratio is one in 58, he said.
Median home prices have fallen 58 percent since their peak in 2006, he said, and could fall another 11 percent before foreclosed homes are cleared off the market, allowing prices to begin to rebound.