State’s revenue shortfall grows by $300 million

Associated Press

Wednesday, April 29, 2009 | 8:33 p.m.

Analysts calculating a revenue hole in Nevada's budget have increased the figure by at least $300 million, bringing a total estimated shortfall to $3 billion or more if lawmakers wanted to maintain current government service levels over the next two fiscal years.

Key legislators confirmed late Wednesday that the figure has gone up by $300 million to $400 million as the analysts finalize reports they will submit on Friday to the state Economic Forum.

"That's what we're being told," said Senate Majority Leader Steven Horsford, D-North Las Vegas. "It's devastating."

The reports will be reviewed by the Economic Forum which will in turn decide on its own revenue estimates. Its numbers must be used by legislators as they complete work on the state budget and determine what they need in the way of new taxes to ensure the budget is balanced.

"I don't think any of us want to raise any taxes, especially in this down economy where businesses and individuals are really struggling to survive," said Horsford.

"That said, we have to raise $600 to $700 million of new revenue just to fund the governor's budget, which includes 6 percent cuts to teachers and state workers, elimination of health benefits for retirees, basically dismantling higher education because of 38 percent cuts, not to mention the impact to K-12 education."

"The governor's budget is not balanced as we speak, so there's a hole to begin with," said Assembly Majority Leader John Oceguera, D-Las Vegas. "We've cut to the bone. The only other alternative now is to try to figure out where we can get revenue."

To that end, legislators have been meeting with the business community for months to discuss new and expanded taxes. Out of those talks has emerged a consensus that a broad-based business tax would help spread the burden on more industries than gaming and tourism.

One option on the table is increasing the Modified Business Tax rate, favored by some because the tax structure is already in place and it can be done quickly.

Another option would be an increase in sales taxes, which some Republicans favor.

"I think it's the least onerous," said Assemblyman Pete Goicoechea, R-Eureka. "It's broad-based, and everyone has to pay it. That's why I support it."

"There are people who say that it taxes the poor more," Goicoechea added. "But if you don't want to pay the tax, you don't buy the product. Typically sale tax isn't on food. It's on big-ticket items like a TV, a refrigerator, a car. And so you can avoid paying that."

Democrats tend to favor increasing business taxes or taxes on services because those are less regressive.

"I personally do not like sales taxes," Horsford said. "It impacts working people the most, when people are losing their homes and struggling to make ends meet."

"I am more hopeful that we can come up with other options, such as a more broad-based tax," Horsford added. "Whether that's in the form of a net profits tax on business, or a services tax, those are discussions that we will have to have in the next week to 10 days."

Horsford also said he hopes the tax discussion will be open to the public. So far, many discussions have been held behind closed doors. Lawmakers say they intend to meet with business leaders again over the next week.

Another part of the discussion has been the possibility of eliminating some of the tax exemptions enjoyed by the mining industry.

"We can't raise enough taxes to get ourselves out of this crisis," said Assemblywoman Sheila Leslie, D-Reno. "We can't raise $2 billion in this economy. If you increase it too much, you end up with more people going on the rolls."

Leslie said she supports a net profit tax as part of a long-term solution, but added that a combination of short-term and long-term tax solutions must be found.

Any tax solution would have to be approved by both houses of the Legislature. While the Assembly has enough Democrats to pass an increase, the Senate has enough Republicans to stand in the way.

"We haven't come to any conclusion yet on the amount or the nature of any revenue enhancement, so at this point, everything is on the table," said Sen. Bill Raggio, R-Reno. "I would be opposed to any new taxes, and any taxes that are enhanced would have to be sunset."

Lawmakers continued to express frustration that Gov. Jim Gibbons has left the budget-balancing to them.

"A real governor would be huddling with us, saying 'what do you think the number is, what can we do,'" said Leslie. "If (former GOP Gov.) Kenny Guinn was still in the mansion, we'd be meeting with him every day."