Sagging revenue hinders Guinn’s budget

Friday, Jan. 19, 2001 | 11:07 a.m.

CARSON CITY -- Gov. Kenny Guinn unveils his $3.74 billion budget Monday, but there are already warning signs that there may not be enough tax revenue to pay for all of his programs.

Nevada's economy has softened in the past few months, illustrated by collections from sales and casino taxes lagging behind predictions.

Those two tax sources produce more than 70 percent of the general fund revenue used in the state budget.

And energy costs are expected to rise in the next six months. Southwest Gas Corp. is reportedly preparing a request for a rate increase to add to the 30 percent hike already this year.

That hits the state budget particularly hard in fuel used for prisons, mental health centers and the University and Community College System of Nevada.

The December predictions of the Economic Forum, a panel that sets estimates of state revenue that are used to build the budget, are proving too rosy.

"Gaming seems to be a problem," Legislative Deputy Fiscal Analyst Ted Zuend said. The forum predicted the casino tax collections would show a 5.9 percent increase this fiscal year. So far, the tax receipts are up only 0.5 percent.

To reach the estimate, Zuend said, the tax collections will have to average 11 percent to 12 percent for the final six months of this fiscal year.

Sales tax revenues in the first five months of this fiscal year have increased by 4.8 percent over the last fiscal year. The forum estimated the gain this year would be 5.8 percent.

Budget experts are waiting for the sales tax figures from December to show whether Christmas shopping helped push the revenues back up to the predicted levels.

Zuend, who makes recommendations to the forum for the Legislature, also said nobody is certain about the national economy and whether it will rebound from its recent softening. In addition, the energy problems in California could cause a downturn in that state, which supplies a good share of Nevada visitors.

The Economic Forum returns April 30 to update its predictions, which will be used to finish legislative work on the budget.

By that time, there will be three more months of tax collections to allow a clearer picture of whether the December revenues will meet predictions. If not, the forum will probably lower its estimates, and the governor and Legislature will have to trim spending plans.

Two years ago the forum raised its tax collection estimates, allowing the governor and the lawmakers to add money to the budget. One beneficiary was the state employees, who got a 2 percent cost-of-living raise effective last July.

This fiscal year, which ends June 30, is the base period that the Economic Forum uses to make its predictions for the biennium. If the tax collections are lower this year, it could affect state spending for the next two years.

Zuend said receipts from the casino entertainment tax this fiscal year are up 9.7 percent, compared with estimates by the forum of 7.1 percent.

Second quarter figures for the insurance premium tax and the business tax are not yet available, he said.

But even if they show higher revenues, it is unlikely they will be able to offset the lagging gaming tax receipts.