Nevada budget in $121 million hole

Wednesday, May 2, 2001 | 11:33 a.m.

CARSON CITY -- Pay raises for state workers and a bonus for schoolteachers apparently are safe from the chopping block, despite the state's expected $121.5 million shortfall in tax revenues over the next two years.

The Economic Forum said Tuesday that the tax revenue rolling into the state in the next two fiscal years will be about $3.65 billion, meaning reductions in some state programs.

Several fiscal experts had predicted that the deficit could be as high as $180 million. The state must build its budget on the numbers produced by the Economic Forum, five experts in various areas of finance said.

The reaction was varied. Kami Dempsey, spokeswoman for the Las Vegas Chamber of Commerce, said lawmakers can make the reductions without raising taxes. In the interim, she said, there would be a study on a long-term solution.

"I feel the legislators do not have the stomach to enact taxes now," said Dempsey, whose organization has fought higher taxes. And it is not time to pass taxes because of the sluggish performance of the gaming industry, she said.

Debbie Cahill, spokeswoman for the Nevada State Education Association, said the shortfall was not as high as "some of the big scary numbers." But she said she feared lawmakers will be more determined now "to do a Band-Aid fix and not look for a long-term solution."

The teachers' union has been pushing a business profits tax to provide raises in each of the next two years for schoolteachers.

Gov. Kenny Guinn, in his budget, has set aside $57.5 million for a one-time 4 percent to 5 percent bonus for teachers. And he has allocated enough money for a 4 percent cost-of-living raise in each of the two years.

Guinn had no immediate comment. But his press secretary, Jack Finn, said the governor is committed to the employee pay raises, teachers' bonuses and health programs. Everything else is on the table. And the cuts will be made on programs or projects with the lowest priorities, he said.

Senate Majority Leader Bill Raggio, R-Reno, said legislative leaders have been meeting with Guinn on what reductions might have to be made. While there will have to be cuts, Raggio said he had expected the shortfall to be about $30 million higher.

The majority leader echoed Guinn's commitments. Salary increases for state workers, Raggio said, are "pretty secure," and the teachers' bonus is "a commitment that needs to be kept." He said some health programs have high priorities and will probably escape any reductions.

In addition, Raggio talked about some type of incentive to lure teachers to come to Nevada.

The Economic Forum made its first prediction in December on tax revenues. And Guinn, as he is required to do, built his budget on that money expected to be available.

The forum, armed with the latest tax revenue collections, revised its estimates Tuesday.

It expects $34.4 million less this fiscal year. That means the governor and Legislature will have to cut one-shot items or those that do not have a recurring expense. The forum lowered its projections by $46.7 million in fiscal year 2002 and $40.4 million in fiscal 2003.

In addition to the $121.5 million hole in the state budget, there is also another $9 million to $10 million that will have to be made up. Public schools get part of their funding from the sales tax. Since those receipts won't be as high as predicted, the state will have to make up any deficit. And school experts predicted that could be as high as $10 million over the next two years that the state will have to find.

Deputy State Budget Director Don Hataway said this budget was built on the status quo, so it may be difficult to find areas to reduce spending without cutting programs.

One target could be the University and Community College System of Nevada, which takes about 19 percent of the state's general fund budget. Lobbyists for the system were nervous about the forecasts and are worried they may be one of the targets.

Raggio was asked about the state college proposed for Henderson. He noted the construction money comes from bonds that are not in the general fund. But he refused to say whether that might be one possibility.

The Economic Forum is forecasting the state will collect $1.715 billion this fiscal year in taxes; $1.785 billion next fiscal year or a 4.1 percent increase and $1.870 billion the following year for a 4.7 percent increase.

Originally the forum predicted $1.832 billion next fiscal year or a 4.7 percent increase and $1.910 billion the following year or a 4.3 percent increase.

The main reason for the shortfall is that taxes from Nevada gaming casinos failed to come in as high as predicted. Over the three-year period, there will be $103 million less than anticipated from the gaming industry.

The forum in December had predicted gaming percentage fee taxes at $593 million for this fiscal year but now they are expected to collect only $560 million. It forecast a 4.5 percent increase in the gaming tax in each of the next two fiscal years.

Steve Greathouse, a Las Vegas casino executive and member of the forum, said the industry has had a "good 10-year experience." And he said he expected the next couple of years will be better than the past 12 months.

Greathouse doesn't anticipate any new major projects but said he believes "existing operators will improve their marketing" to draw more tourists to Las Vegas.

Frank Streshley, senior research analyst for the state Gaming Control Board, said car traffic into Las Vegas in the last two months has declined by 4.3 percent and room occupancy has also decreased.

But he said airline passengers rose by 5.1 percent and convention business jumped by 16.4 percent. He said the visitor numbers were still strong but that tourists were not spending as much. And gambling by high-end players is down, he said.

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