Economic Forum predicts more Nevada growth

Thursday, Dec. 2, 2004 | 11:10 a.m.

CARSON CITY -- During the next two fiscal years, the Economic Forum foresees continued growth in Nevada's economy.

The forum Wednesday predicted that tax collections from the state would grow by 5.8 percent next fiscal year and then by 6.1 percent in fiscal 2007. The biennial revenue should total $5.75 billion.

In its report to Gov. Kenny Guinn and the Nevada Legislature, the forum, composed of financial experts, said, "The Nevada economy appears to be poised for a continuation of its recent strong performance."

Guinn must submit a balanced budget based on the revenue predicted by the forum. And the Legislature cannot appropriate any money beyond the amount forecast by the forum, unless it increases taxes.

Guinn's press secretary Greg Bortolin said the governor is meeting daily with his cabinet members to go over the upcoming budget. He said the growth in tax revenue would help to protect needed programs in education, health and Medicare.

"Hopefully there will not be any cuts," Bortolin said, referring to the upcoming budgets. He noted the governor has said he has no plans to raise taxes.

Bortolin also said there "were big holes" in the present two-year budget that need to be filled. The state will be receiving about $90 million less from the federal government with the phase-out of the estate tax. And some programs funded in 2003 were financed with one-shot money that was outside the continuing revenue.

The forum predicted the state will have $5.7 billion during the next two years. Agencies have asked for more than $5.8 billion over the next two years. And that doesn't include pay raises for state and university personnel.

Perry Comeaux, state budget director, said the predictions by the forum are $100 million more than they forecast in November. He said the increase comes mostly because of recent strong sales tax. "Car sales and construction are really good," he said.

The 2003 Legislature, when it closed, had predicted the tax collections for this fiscal year would be $2.46 billion or a 9 percent increase. But the economy during this fiscal year that ends June 30 is producing major increases.

The forum now estimates the state tax revenue to be $2.63 billion or a gain of 9.7 percent for this fiscal year.

In recent months, there has been a strong surge. Collection from the sales tax increased by 17 percent in September, the highest percentage gain in at least four years in a month-to-month comparison. Unemployment fell to 3.6 percent in October.

The forum predicts the state will receive $2.79 billion next fiscal year and $2.96 billion in the following year.

Michael Small, chairman of the forum, said the gaming industry is expected to pick up in the coming two years. He said Steve Wynn's resort will open in April. The Las Vegas Sands Corp., which owns the Venetian, is building the 3,000-room Palazzo on the Las Vegas Strip. And MGM Mirage is going forward with a project called city center.

The forum predicted gaming taxes to come in at $732.3 million, a 2.5 percent increase over the 2004 fiscal year. The gaming tax collections should rise to $758.6 million, a 3.6 percent increase next fiscal year and $796.7 million, a 5 percent gain in 2007.

Deborah Pierce, vice chairman of the forum, noted that the initiatives on gaming on the California election ballot failed. "We have cause to be more optimistic on gaming tax growth," she said.

The forum said the expansion of gaming into other places remain a threat to Nevada's tourism. But the concerns have diminished in recent years because Las Vegas continues to grow despite Indian gambling in California.

"On the other hand, gaming and tourism in the Reno-Tahoe area has been affected by competition from Native American gaming in California," the forum said.

The gaming tax is expected to provide 27 percent of the total tax revenue in the coming two fiscal years, down from the present 28.7 percent.

Sales tax collections, the biggest producer of state revenue, is expected to yield $873.2 million this fiscal year, up 10.5 percent, and rise 6 percent next year to $925.2 million and 6 percent in fiscal 2007 to $981.2 million. The sales tax will provide 33.1 percent of the tax collections in the next two years compared with 33 percent for the biennium.

The forum said rural Nevada faces challenges because of the uncertainty in the mining industry. However, the recent increase in gold prices to around $440 an ounce, due in part to the uncertainty caused by war and terrorism, bodes well for the prosperity of many rural counties over the next two to three years.

Collections from the insurance premium tax, the third biggest producer of revenue, is predicted to be $213.7 million this year and grow by more than 9 percent in each of the coming two fiscal years.

Proceeds from the cigarette tax are expected to stay level during the next two years with an annual collection of $117.6 million.