State sees big jump in revenue from sales tax

Tuesday, Dec. 22, 1998 | 11:03 a.m.

CARSON CITY -- With revenue from sales taxes for October posting the highest gains since 1996, a ray of hope has entered the state fiscal crisis that has resulted in a hiring freeze and predictions of a $120 million deficit.

Although the state economy overall is growing faster than the national average, Gov. Bob Miller two months ago ordered a hiring freeze after learning that fiscal year 1998 tax revenue fell short of predictions by $23 million and that tax collections for fiscal year 1999 are predicted to fall short by $50 million.

Last month, state agencies were asked to slash more than $88 million from their budget requests to the 1999 Legislature. And earlier this month, saying that Nevada's tax shortfall is actually in the area of $120 million, Gov.-elect Kenny Guinn vowed to slash programs rather than raise taxes.

But indications of a turnaround came Monday with the announcement that Nevada merchants rang up $2.2 billion in sales in October, posting the highest percentage gain since December 1996.

For the fiscal year that started July 1, sales tax collections have shown a gain of 8.1 percent, compared with the Economic Forum's May 1997 prediction of 8.7 percent. The Economic Forum, composed of five lay experts in finance, is the state board that projects tax revenues for the purpose of building budgets.

In May 1997, the forum had predicted a 6.9 percent gain in gaming revenue, when in fact the gain has been 4.8 percent.

The 1997-99 budget was built on the forum's 1997 estimates and, unless there is a consistently dramatic upturn, there will still be a shortfall this fiscal year.

State Budget Director Perry Comeaux cautioned that the latest figures represent one month and do not ensure long-term economic health.

"It doesn't mean anything except 'hot dog diggity damn,' " Comeaux said.

But if this continues, Comeaux said, the forum could raise its predictions in April when it gives an updated forecast. That would allow the budget to be revised upward and perhaps lessen the talk of slashing programs and continuing the hiring freeze.

For now, however, Guinn is stuck with those predictions in building his budget.

Guinn cannot, for example, simply note that current sales and gaming taxes -- now feeding off the opening of the Bellagio -- are enough to justify increased spending. It would be tempting, however, as earlier this month the state Gaming Control Board announced that tax receipts for November rose 12.8 percent.

And consumer spending has been up for the past three months.

"We're looking pretty good," Michael Pitlock, director of the state Department of Taxation, said.

"There's been a continuation of strong retail buying," Pitlock said. "And we've gotten a rebound in tourism related items. Part of that is due to the opening of the Bellagio." Business in bars and restaurants statewide rose 11.4 percent and amusement and recreation jumped by 32.6 percent.

Taxable sales in Clark County reached $1.6 billion, up 10.4 percent, the biggest gain since January 1997.

"Consumer confidence is still high," Pitlock said. With low unemployment and a stable national economy, he said, "People appear to be spending." He's more optimistic that merchants will enjoy a good Christmas.

In Pershing and Washoe counties, there were significant purchases of machinery for manufacturing and mining, and that goes a long way to support a prediction for long-term gains, he said. Heavy construction sales skyrocketed 145.2 percent.

Statewide, sales in retail stores rose 11.6 percent; car purchases were up 8.9 percent; business in general merchandise stores increased 10.9 percent; home furniture sales jumped 13.2 percent; and food store sales gained 9.8 percent.

In Clark County, the bar and restaurant trade jumped 13.9 percent as the Bellagio opened in mid-month. Car sales were up 14.8 percent; general merchandise stores showed a 14.5 percent increase; apparel clothing sales rose 13.2 percent; home furniture sales were up 12.1 percent; and food purchases increased 12.8 percent.

Some of the smaller gains in Clark County included the wholesale trade of durable goods, which increased by only 1.6 percent, and sales of building materials, which rose only 4.5 percent.

Taxable sales in Washoe County rose 7.7 percent; Carson City was up 6.2 percent; and Douglas County recorded a 9.7 percent gain.

The department reported, however, that sales fell in Elko County by 10.1 percent; in Eureka by 32.5 percent; in Humboldt by 17.6 percent; in Lincoln by 16.4 percent; in Mineral by 11.5 percent; in Nye by 4.4 percent; in Storey by 26.6 percent; and in White Pine by 6.4 percent.

Collections from the sales and business tax rose to $160.8 million, up 11.5 percent from October 1997. Receipts from the cigarette tax rose by less than 1 percent, but receipts from liquor taxes increased by 8.6 percent.