State tax collections expected to take 9.1 percent hit

By Cy Ryan (contact)

Published Monday, Dec. 1, 2008 | 6:14 p.m.

Updated Monday, Dec. 1, 2008 | 7:05 p.m.

CARSON CITY – Nevada’s economy will continue to sink this fiscal year, requiring the state government to slice more budgets, according to official projections.

The Economic Forum, which provides official projections for tax collections, estimated that receipts this fiscal year would total $2.7 billion, or 9.1 percent less than last fiscal year.

Daniel Burns, press secretary to Gov. Jim Gibbons, said the governor still intends to call the Legislature into special session next Monday to deal with a $331.5 million deficit for this fiscal year.

Andrew Clinger, the director of the state Budget Office, said the $331.5 million was about what was expected. And the administration plan now is to borrow $150 million from a local government account, sweep about $50 million from unused state accounts and slice another $131 million from budgets, laying off up to 100 workers.

Burns said Gibbons flew to Philadelphia today to meet with other governors. They will meet Tuesday with President-elect Barack Obama to talk about the economic troubles facing the state.

Gibbons has already asked for federal help.

The governor, in a news release, noted the state has already sliced $1.2 billion from the state spending plan.

After the Forum made its predictions, key legislators held a telephone conference call to hear the results. Sen. Randolph Townsend, R-Reno, said there were no suggestions where the cuts in state government could come from.

“There was a lot of dead silence on the phone,” he said referring to suggestions where there was more money. “We’ve been cutting and cutting and cutting,” he said.

“We’ve looked at every reserve account and swept every dime,” he said.

Assembly Speaker Barbara Buckley, D-Las Vegas, says the legislative staff believes the deficit for this fiscal year to be about $340 million.

Asked where the cuts would be made, Buckley said, "we're still playing that close to the vest." She said once they are revealed, those affects would start trying to "pick us off."

The final figures on the deficit for the coming two years won't be ready until Tuesday, she said.

Assemblywoman Sheila Leslie, D-Reno, said the leadership is getting close to deciding on where the cuts should be made. "It's a package nobody likes and some people are going to lose their jobs."

She said there may be some reductions in mental health staffing and medications for patients.

But Leslie, vice chairwoman of the Assembly Ways and Means Committee, said Nevada was 51st in the nation in the per capita of state workers compared to the population. The Legislature, she said "Just can't keep slashing the budget" in the upcoming regular session starting in February.

The preliminary agreement to reductions in the special session, she said does not abolish whole agencies but may take some programs administered by a department or division.

The Economic Forum, a group of five financial experts in various fields, doesn’t see a bright year for the gaming industry or business in general.

Taxes from the gambling casinos are down 11 percent for the first three months of this fiscal year compared to the prior year. Forum Chairwoman Cathy Santoro said, “The leisure industry is down 10 percent and nobody expects that to alleviate in 2010.”

Santoro, treasurer of MGM, said, “We in the gaming industry have never seen it like it is and we are not going to change soon.”

The Forum estimated that $677.3 million would be collected in taxes from the gaming industry this year, down 11 percent from 2008. And the business would grow 3.2 percent next fiscal year and then by 5 percent in fiscal 2011 when $733.9 million would be received by the state.

Santoro noted there will be new properties opening in the next two years but she cautioned that there is always “cannibalization” -- a new casino luring customers from the established casinos.

In estimating collections from the sales tax, Vice Chairman John Restrepo of Las Vegas, said, “I see a continued malaise in consumer spending.” The Forum estimated that state would collect $883.1 million from the sales and use tax this year, down 8.6 percent from last fiscal year. And then it is projected to grow one-half of a percent next fiscal year and then 3 percent in 2011.

Both Santoro and Restrepo urged the commission to err on the side of conservatism. Restrepo pointed to the problems in the housing market in Las Vegas, the downturn in visitors and the growing unemployment as reasons to keep the estimates low.

“I see a wave of commercial foreclosures” in Las Vegas, Restrepo said.

The taxes from gaming and sales make up about 75 percent of the state’s budget.

The Forum projected tax revenue at $2.7 billion this fiscal year, down 9.1 percent, growing by 0.2 percent in 2010 and by 3.3 percent to $2.8 billion in 2011.

The Legislature must use these figures to build a budget unless they raise taxes.

The Forum estimated the state would collect $19.2 million in from the real property transfer tax this year, down 22.4 percent. And it collections would grow 5 percent next year and 3 percent the following year.

Restrepo said new homes that were selling for $400,000 are now going for $200,000 and that lowers the tax receipts.

Burns, who took on his new job as press secretary Monday, said the estimates of the Economic Forum were “not earth shattering.” The figures were slightly lower than what was estimated in November by the forum.

The live entertainment tax in casinos is expected to decline 4.8 percent this fiscal year to $115.7 million. But it will rise 3.2 percent in 2010 and 6 percent in fiscal 2011.

The decline in tourists and the drop in smoking are contributing to the 8.7 percent decline in taxes from cigarettes this fiscal year.

The insurance premium tax is expected to yield $252.1 million this fiscal year, down 1.8 percent but then increase by 0.5 percent and 2.9 percent in fiscal 2011.

The forum did not see much improvement in general business. The tax from non-financial institutions is expected to increase 0.1 percent to $264.2 million, then drop 4.6 percent in 2010 and rise 3.4 percent in 2011.

With fewer tourists, the marriage business is projected to drop. It is expected to yield $468,200 this fiscal year, down 4.5 percent from fiscal 2008. And it is expected to drop 5.6 percent next fiscal year and another 6.6 percent in 2011.

Cy Ryan may be reached at (775) 687 5032 or cy@lasvegassun.com.