Nevada revenues $56 million short for first quarter
CARSON CITY, Nev. – Nevada’s state budget has a $56.6 million hole in it after just the first three months of this fiscal year.
Revenues collected from the 10 major taxes which make up the General Fund totaled $665.8 million for July, August and September. They were budgeted at $722.4 million for that period.
The three largest revenue producers – the sales tax, gaming percentage collections and Modified Business Tax – were also the biggest problems, accounting for $41.5 million of that deficit.
Director of Administration Andrew Clinger said the first quarter of the fiscal year was expected to be the worst, but that the new numbers aren’t showing signs of turning around as quickly as his economists had projected. He said he has asked them to generate a new revenue forecast using the latest numbers.
“I anticipate it’s going to start getting better,” he said. “But our turn-around point is pushed out a little bit farther.”
If things don’t get better, that first quarter shortfall would translate to a $225 million shortfall for the year.
The numbers, however, don’t necessarily mean a special session of the legislature is imminent. Spokesman Dan Burns said Gov. Jim Gibbons has advised senior staff he will wait until they have a better handle on what agencies have spent and the state’s cash flow before making that decision some time in December or January.
Gibbons has said in the past that a special session is the last resort. And, under his orders, agency heads have been trying to reduce spending below the budgeted amounts since the Legislature adjourned.
Although Clinger said there is a chance no special session will be necessary, he said the first quarter revenue shortfall isn’t the only financial problem Nevada has developed this year. The biggest, he said, is the increased demand on Medicaid caused by people who now qualify because they are out of work. Nevada’s 13 percent unemployment rate translates to more than 120,000 jobless in the state.
“We’re $55 million in state dollars upside down in Medicaid,” Clinger said, adding that those expenditures are outside the state’s control.
He said vacancy savings from holding off filling positions will help somewhat, “but it’s not going to be enough to come close to covering the shortfall.”
According to figures released Tuesday, sales tax collections were just $187.2 million for the quarter ended September 30, $16.3 million below first quarter projections developed by the budget office. If, however, the total projected for the year is simply divided into four equal quarters, sales tax collections are only off $12.5 million. Economists, however, point out that revenue expectations differ from month to month with some months – such as Christmas – seeing much higher sales.
Gaming taxes were $15 million light at $206.9 million and the business tax $10.2 million below projections at $95.7 million.
All but one revenue source on the list was down. The exception, surprisingly, was the Real Property Transfer Tax which beat its projection by just over $200,000. However, that projection – $14 million for the quarter – was set 27 percent below the previous fiscal year because of the housing market’s collapse.
Altogether, the General Fund finished the quarter 7.8 percent below projections, which means revenues for the remaining three quarters of the fiscal year would have to beat projections by nearly 13 percent to fully fund the approved budget.
Room Tax revenues to the state were also down sharply, bringing in almost 25 percent less than expected – just $22.5 million for the quarter. The reason is that major resorts throughout southern Nevada have sharply reduced room rates to try entice gamblers back to Nevada.
The fourth largest revenue generator, the Insurance Premium Tax, did much better, missing its $60.2 million projection by just $1.1 million. In part, that tax is stable because for vehicle owners and businesses, insurance is a requirement, not an option.
September taxable sales did, however, show a couple of hopeful signs, including a 5.5 percent increase by food services and drinking places along with a doubling of taxable sales in the performing arts, spectator sports and related events category. That is a good omen for the resort industry.
Clinger said he is hoping to see more indications of a recovery in that sector when October’s gaming win numbers come out in a week or so.
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