Forum projects $5.8 billion in revenues for upcoming biennium
Nevada’s Economic Forum on Friday projected a total of $5.8 billion in General Fund revenues for the governor and lawmakers to spend in the coming two-year budget.While that is some $350 million less than the current budget cycle’s $6.16 billion, the difference is almost entirely caused by sunsets on the tax increases approved by the 2011 Legislature to balance the current budget.The forum, a panel of five financial experts appointed to project state revenues, is legally required to base its projections on existing law so, even though the governor has indicated a willingness to consider extending some of those taxes, the panel must assume the increases all sunset.Those revenue streams were enacted after the Nevada Supreme court ruling in the Clean Water Coalition case took $62 million out of the budget. Both the governor’s office and lawmakers agreed that ruling applied to a number of other revenue streams taken from local governments as well — which left the state with a financial hole of more than $600 million they filled with the increases. But they agreed to sunset all of the increases.Without those sunsets, the projections approved Friday for major revenue sources actually increase by $353.8 million over the current projections.Sales tax revenues, for example, are projected to come in some $173 million higher in the coming two years than the current cycle — $1.9 billion in all — and gambling taxes at about $1.4 billion — up $97.3 million from this biennium. The state’s 2 percent sales tax generates nearly 33 percent of total General Fund revenues and gaming along with the Live Entertainment Tax accounts for another 29 percent of the total.Of the sunsets, the biggest hit comes from the Modified Business Tax on all businesses except financial institutions. Dropping that 1.17 percent rate back to its original 0.63 percentage cuts state revenue by $212.2 million over the biennium.State Budget Director Jeff Mohlenkamp said the projections are the first of three pieces that will build Gov. Brian Sandoval’s recommended budget.“These numbers give us clarity for him to make a decision,” he said.The next step, he said, is for the governor to decide what if any sunsets will be extended. He said Sandoval has indicated he will consider extending sunsets and other revenue generators to protect education and human services from further cuts.The final step, he said, is to lay out the expense side — how and where the available money will be spent.Forum Chairman Ken Wiles said the panel will return to true up the projections May 1, a month before the end of the 2013 Legislature.“We are in a period of significant financial uncertainty,” he said. “It’s always a challenge to forecast when so much is occurring outside of our purview.”The 3.5 percent Insurance Premium Tax, projected to generate $547 million over the biennium, was one area the forum had serious questions about — specifically the impact of the Affordable Care Act on tax revenues. In a nutshell, how many more people will be buying insurance depends in part on whether the governor agrees to expand Medicaid coverage. Doing so would reduce the number of people and businesses forced to buy health insurance and, since Medicaid coverage isn’t taxed, reduce insurance tax revenues by an estimated $43 million over the biennium.There is also a question as to how many businesses will decide the federal penalties are less costly than providing health insurance for their workers.The Insurance Division estimates the federal law will require more than 300,000 uninsured Nevadans to get coverage either on their own or through their employer.Wiles said experts from the Insurance Division would be invited to make a presentation on the subject at the May 1 forum meeting.He said that by May the governor will have made his budget and tax decisions and the state will have a much better idea about the impact of federal legislation on the state’s revenues.The General Fund makes up about a third of the total state budget, with most of the rest coming from the federal government for major programs including Medicaid, welfare and Medicare. There is also a significant amount of highway fund money along with numerous fees and other revenue streams dedicated to specific purposes.