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July 29, 2014

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Forecast: Economy will begin to rebound in mid-2011

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Gov. Jim Gibbons' administration doesn't expect the economy to rebound until at least mid-2011.

The state Budget and Planning Division, in a report to the Economic Forum, said it "continues to anticipate an initially weak Nevada recovery, beginning in fiscal year 2011." Tourism will remain "under strain" until consumers are again willing to open their pocket books. The state will then see a "gradual stabilization" in gaming tax revenue but no significant growth until fiscal 2012, which begins July 1, 2011.

The Economic Forum began its deliberation today on how much the state will collect in taxes in the final months of this fiscal year and next fiscal year. Their forecast will allow the governor and Legislature to determine what actions that must be taken -- either more cuts to state government or increases in taxes.

Gibbons, who is seeking re-election, has proposed cutting education spending. His GOP primary opponent, Brian Sandoval, has also put forth a plan to reduce government spending.

The Budget and Planning Division said in its report that if the gaming tax rate continues at a 6.3 percent, the division expects the state will collect $634.9 million this fiscal year, down 2.4 percent from fiscal 2009. And in 2011, the prediction is the gaming tax collections will be $635.6 million, or a 0.6 percent drop from the present fiscal year.

The live entertainment tax that is tied to the casinos will also decline, according to the division. "'The Great Recession' has devastated household wealth, which in turn has impacted live entertainment tax revenues," the report said.

It doesn't see any significant growth of tax revenue from entertainment until fiscal 2012. The prediction is for collections of $104.7 million this year, down 9.4 percent from last fiscal year. And next fiscal year starting in July the collections will be $104.2 million, down 0.5 percent.

The sales and use tax, another major source of revenue for the state, is expected to decline during the next two fiscal years -- 12.1 percent this year and 4.7 percent in 2011.

"Inflation-adjusted per capita sales and use tax receipts are lower than at any time since 1982," the division said. It is basing its prediction on the average U.S. retail sales per national jobs, the Las Vegas visitor volume and inflation-adjusted gas prices.

In good news for health advocates, the division predicts a major decrease in taxes collected from cigarette sales. The forecast is for a decline of 27.9 percent this year for $47.5 million in taxes and for an 11.7 percent drop in fiscal 2011 to $42 million.

The collections from the modified business tax are expected to drop 3.9 percent next fiscal year to $337.5 million.

The division also is expecting declines in tax revenue from insurance, real property and commercial recording fees.

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