State expects big hike in tax revenue

Cy Ryan and Kirsten Searer

Tuesday, May 3, 2005 | 10:51 a.m.

CARSON CITY -- The state is going to get an estimated $265.6 million in additional tax revenue during the next 2 1/2 years.

Senate Majority Leader Bill Raggio, R-Reno, said Monday he welcomed the new money but it's not the $500 million to $600 million some lawmakers had been hoping for, to finance their pet projects.

And a lot of the money will have to go to take care the gaps in the budget of Gov. Kenny Guinn.

Ken Lange, executive director of the Nevada State Education Association, said, "It appears to me it fills the hole in the Distributive School Fund" that provides aid to local school districts. He said that shortfall ranges from $160 million to $190 million.

He said he was concerned that projects such as full-day kindergarten might not make it because of a lack of money.

The Economic Forum, a group of financial experts, predicted Monday there would be $2.722 billion in taxes coming in this fiscal year, or $85.5 million more than was forecast in December. That is a 13.3 percent increase over the prediction for the fiscal 2004 budget.

In the 2006 fiscal year, the forum estimates $2.888 billion in tax revenue, or $95.1 million more than originally forecast. That is an increase of 6.1 percent over the the new estimate for this fiscal year. And $3 billion is expected to be received in 2007, or $84.9 million predicted last December.

The Legislature cannot spend more than those forecasts unless it raises taxes.

The new projections by the Economic Forum mean the state will have a surplus as of June 30 this year of $591.3 million. The law requires a minimum reserve of $126.8 million. The remaining money is mostly budgeted by Guinn for such things as construction of buildings, financing the $300 million tax rebate and paying $17 million for the cost of the Legislature.

State Budget Director Perry Comeaux said he would meet with Guinn today to talk about some projects that might be financed from the expected additional revenue in the forecast.

Guinn said, in a news release Monday, "The Legislature must pass my proposal for a $300 million rebate."

Guinn's press secretary Greg Bortolin said the rebate plus funding to continue the Millennium Scholarships must be in the budget passed by the Legislature "for him to sign it."

The $300 million is included in the governor's budget now. And Guinn and legislative leaders reached an agreement to finance the scholarship program with a mix of $32 million in general fund money and the unclaimed property program.

Besides the hole in the Distributive School Fund, Medicaid, the program that provides medical care for the poor, may need an additional $67 million.

Assemblyman Morse Arberry Jr., D-Las Vegas, the chairman of the Assembly Ways and Means Committee said, "Everybody thought we had this pot of gold at the end." He said Democrats have not ruled out approval of the governor's rebate plan.

Assembly Minority Leader Lynn Hettrick, R-Minden, said he thought the Economic Forum was "pretty conservative with their estimates."

But Sen. Bob Coffin, D-Las Vegas, said he was worried about the national economy and how that might impact Nevada. "Things are not all that rosy," he said.

Scott MacKenzie, executive director of the State of Nevada Employees Association, agreed with Hettrick that the estimates were conservative. But he said he thinks the state workers will "still come out well." Guinn included a 2 percent annual pay raise but the association is asking for a 5 percent annual raise.

Lange also said the teachers union wants a 5 percent annual increase rather than the 2 percent recommended by the governor. "We still need to do better than 2 and 2" percent, Lange said of the coming two years.

Some Democratic Assembly members said they still think they can accomplish their slate of ideas including $72 million for full-day kindergarten, $100 million to finance the Millennium Scholarships and an additional $19 million to pay for added mental health programs.

Assemblywoman Chris Giunchigliani, D-Las Vegas, said the Ways and Means Committee has been reducing spending in state agency budget and that will help to pay for some of the priorities of the Democrats.

Raggio, chairman of the Senate Finance Committee, said he was not willing to say how the extra money would be spent. But he noted there has to be agreement with the Assembly Ways and Means Committee.

He suggested the $300 million proposed by the governor in rebates to motorists was "still in play."

There is more than $4 billion in bills proposed by lawmakers for spending during the next two years above the proposed $5.9 billion budget.

Many of these requests are doomed. Hettrick said he expected an attempt by lawmakers to spend all of the $300 million.

"Let the games begin," he said.

In December, the forum predicted $865.3 million in sales tax revenue this fiscal year, a 10.5 percent increase over 2004. But the forum on Monday estimated the sales tax revenue this year would reach $896.5 million, a 13.4 percent increase. It stayed with its predictions that the revenue from the sales tax would increase 6 percent in each of the following two years.

The forum was more bullish on gaming. It initially had predicted $683.2 million in state revenue from gaming, an increase of 0.9 percent. But the updated number is $706.3 million for this fiscal year, an increase of 4.3 percent. It predicted a 6 percent increase next fiscal year, up from its original 5.4 percent. And in 2007, it stayed with a 5.1 percent increase.

But the forum expects a slowdown in real estate in the coming years. It had predicted the real property transfer tax would yield $116.7 million this year. It increased that estimated to $144.5 million or 64.2 percent higher than last year. But it estimated that the tax collections would fall by 0.9 percent in 2006 and by 3.2 percent in 2007.

Forum members said the real estate market in Southern Nevada probably will become stagnant in the coming two fiscal year. Forum Chairman Michael Small of Las Vegas said it looks "like we have hit a peak in new homes and used homes but there is a lot of building going on in the valley."

The forum stuck with its original estimates regarding the insurance premium tax. That tax should bring in $212.8 million this year, an amount that should increase 9.9 percent increase next fiscal year and a 9.8 percent the following year, the forum said.

The forum also noted a steady increase in taxes from business. The forum originally predicted $214.4 million this year, up 32.6 percent but now believes the state will see $228.6 million. And the forum estimated the revenue from this tax would increase 8 percent next fiscal year and 6.7 percent in the following year.

Raggio, however, cautioned that there were a number of bills in the Legislature to reduce this tax so this prediction is fluid.

Overall Small foresees a "good future for Nevada."

Several forum members rejected criticism they were too conservative in their estimates. Deborah Pierce of Las Vegas said, "I felt like we were reasonable."

Cary Fisher also of Las Vegas said, "We just try to get the right numbers and not worry about who we make happy or unhappy."