New figures equal leaner budget

CARSON CITY -- Nevada's general fund tax revenues for the next two years will increase by $88 million less than originally projected by a panel of fiscal experts, jeopardizing a full-day kindergarten proposal and state lawmakers' pet projects.

But taxes from gaming, sales and other sources for the coming two-year budget still will increase by more than $1 billion over the budget approved by the Legislature for the current two years, according to the revised estimates released Tuesday by the Economic Forum.

Total state tax revenues for the 2007-09 budget will total $6.84 billion, down a little more than 1 percent from the $6.92 billion projected by the panel late last year. Because the 2006 estimates were used to build Gov. Jim Gibbons' upcoming budget, the lower figures will require reductions in spending on new programs.

The reduction jeopardizes Democratic plans to establish full-day kindergarten in every public school. That program would cost $73 million in additional spending. It also means less money will be available for lawmakers' pet projects.

Legislators have submitted dozens of bills seeking money for everything from $25 million to restore historic buildings around the state to $500,000 for the acquisition and maintenance of exhibits at the California Trail Interpretive Center in Elko.

The forum's final projections also mean the Legislature's two money committees can start to finalize the major budgets, including public education, the higher education system and the Department of Corrections.

The predictions are expected to have more significance to the state budget than just the $88 million, state Budget Director Andrew Clinger said.

Because sales tax growth was revised slightly downward in the new projections, the state by law must make up a reduction in local revenue going to the public schools. Local sales taxes also support the schools, and those revenues will be lower under the revised projections.

Clinger predicted the governor and Legislature will have to trim at least another $74 million out of the proposed budget.

"It probably will be a little bit bigger," he said. "Hopefully we will know in the next couple of days."

The reduced projection in sales taxes earmarked for schools was estimated at $81 million in mid-April, but that was before the final numbers were approved by the Economic Forum.

School sales tax revenues will be lower than projected partly because a bill approved during the special session in 2005 exempted building materials in some major projects, including casino construction, from school and local government sales taxes if they meet Leadership in Energy and Environmental Design standards.

The $7 billion City Center project in Las Vegas qualified for the exemption.

"It obviously affected the growth rates," said Senior Deputy Legislative Fiscal Analyst Russell Guindon during the Economic Forum meeting. "We don't have any number available yet (on the tax exemption's effect)."

Until Gibbons receives a final figure on the amount of money that must be cut from his proposed budget, he will not comment on the Economic Forum's findings, said his communications director, Brent Boynton.

But Assembly Minority Leader Garn Mabey, R-Las Vegas, said the drop in revenue projections means "we will have less to fight about."

Mabey said it also means that the Legislature cannot approve Assembly Speaker Barbara Buckley's proposal to establish full-day kindergarten in elementary schools across the state.

"I think we will try to come up with more kindergarten classes for at-risk kids that aren't now in full-day kindergarten, but not for all kids," Mabey said.

The major remaining legislative fight might be over whether Gibbons can switch $60 million that goes to a retirement incentive program for teachers into his program to establish 100 empowerment schools throughout the state, Mabey said.

"Nothing is guaranteed, but that is where the negotiations will be," Mabey said. "I sense the speaker and the governor are really trying to resolve their differences in the next week or so, so we can go home."

Buckley said she was awaiting more information before commenting on the Economic Forum's projections.

Gibbons and the Legislature must use the forum revenue estimates when approving a balanced budget for the two years that start July 1.

The revised estimates also lowers the surplus for this year by $21 million. Surplus funds are usually spent on one-time projects, such as the $170 million Gibbons' is proposing to spend on widening Interstate 15 in Las Vegas north of the U.S. Highway 95 interchange.

The Gibbons administration has proposed some spending adjustments because officials were sure that revenues were going to grow more slowly than first predicted last year.

A slowing housing market is viewed as the cause for the lower tax revenue growth, particularly in sales taxes.

But sales taxes are expected to rebound from the latest projection for this fiscal year, set by the forum at 2.5 percent instead of 3.7 percent, which it projected in November.

In the upcoming two years of the budget, the forum said, sales tax revenues are expected to rebound, growing by 5.5 percent in fiscal year 2007-08 and by 7 percent in 2008-09.

Gaming tax projections were revised downward for this year, to 3.9 percent from 5 percent.

Gaming taxes are expected to grow by 5.4 percent in the first year of the budget and by 7.2 percent in the second year. Gaming and sales taxes are the two biggest revenue sources for the state general fund.

Forum members were told by analysts that gaming revenues will rebound in the next couple of years even with the expansion of legalized gaming in Macau, in southeast China.

Guindon said Macau should be a net benefit to the Strip because of the cross-marketing by Nevada hotel-casinos that are operating in the Far East.

Economic Forum Chairwoman Deborah Pierce said worries about Atlantic City and Indian gaming having an adverse effect on gaming in Nevada, at least in Las Vegas, have not proved to be true.