Study forecasts shortfall
CARSON CITY – Nevada’s state government has a hefty surplus now but could fall as much as $1 billion short of what’s needed to balance the budget by 2009, according to a Guinn administration study.
The long-term projected shortfall is based on conservative tax revenue projections by the state Budget Office.
”We are looking and seeing things that give us real concern,” said Scott Scherer, Gov. Kenny Guinn’s chief of staff. ”Until we do a complete analysis, we won’t know for sure.”
But Scherer said the state will have enough money if revenue increases at the rate it has over the past decade.
The Budget Office’s preliminary estimate projects just 4.2 percent revenue growth over the decade. State revenues have been increasing at an 8.6 percent annual rate in the past decade.
Starting in the 2001-02 year, the office expects expenditures will exceed revenue slightly and increase each year until by 2009 revenues are $1 billion below the expected $3.4 billion in spending.
The office assumes spending would increase at about an 8.5 percent annual rate as it has over the past decade. It also assumes a 3 percent annual inflation rate and a 3.2 percent annual population increase.
”That is a fairly extensive gap,” Scherer said. ”Governor Guinn has said he will support no tax increases except in a fiscal crisis. Part of the answer may be for us to get more efficient.”
Guinn’s final estimates will be released during a May 4-5 fiscal forum at the Community College of Southern Nevada.
State Sen. Joe Neal, D-North Las Vegas, said the potential shortfall shows why Nevadans should sign his petition calling for an increase in taxes on big casinos to bring in an additional $388 million a year.
Neal proposes to raise the gross gaming tax to 11.25 percent, up from the current 6.25 percent.
”We understand there very well may be a shortfall,” Neal said. ”There will be a shortfall as long as entities like gaming are not paying their fair share of the costs of government.”
Besides Neal’s gaming tax initiative, the Nevada State Education Association has proposed – but not yet begun circulating – petitions calling for a 3 percent tax on business profits.
Scherer said there will be no call for higher taxes within the executive chambers until the administration completes its analysis and lets legislators and others debate options starting in May.
Signs of coming shortfall already are present. Other than the reopening of the Aladdin on the Strip this fall, Scherer said there is no major casino construction under way.
The recent jump in gasoline prices may cause an increase in inflation, and the passage of the California proposition to legalize Indian gaming could reduce Nevada’s future gaming tax revenues, he said.
Guinn has asked the Budget Office to prepare new revenue projections that reflect Indian gambling and higher inflation. The administration also has consulted with legislative leaders and private business owners in its development of projected revenues over the decade.