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Gaming Guru

Ed Vogel
 

Economic Forum: Surplus Estimate Grows

3 May 2005

CARSON CITY, Nevada -- According to economic projections, the state of Nevada has as much as $585 million of them in surplus for the fiscal year ending June 30, and lawmakers will have to wrestle with how much of that to spend or give back to residents.

The surplus had been estimated at $320 million when the forum last met on Dec. 1. On Monday, members of the Economic Forum -- the group of five business people who by state law determine how much money Gov. Kenny Guinn and the Legislature can spend -- increased that figure by at least $86 million because of the state's economic boom.

Bill Anderson, an economist in the state budget office, said nearly $180 million in sales taxes collected by school districts has been returned to the state general fund. That will put the surplus on June 30 at $585 million, he estimated.

If school districts receive sales tax revenue above what the Legislature has projected, the extra money must be returned to the state general fund. Sales taxes have grown by double digit rates in 15 of the past 16 months, forcing the return of the revenue.

Assembly Minority Leader Lynn Hettrick, R-Gardnerville, predicted there will be an "effort to spend every dime" of the revenue.

The Legislature should instead rebate all of the surplus back to taxpayers, he said.

"We have to rebate the money," added Hettrick, noting that tax revenues have grown by $2 billion in the past two years, if the $833 million tax increase approved by Legislature in July 2003 is added in.

Economic Forum members also projected that total tax revenue for the budget period between July 1 and June 30, 2007, to be about $5.94 billion, or $180 million more than the $5.76 billion estimate made five months ago.

"That is going to be hard to sustain," Hettrick said about growth in future years. "If we spend it all, we are setting ourselves up for some real problems."

By law, the revenue and surplus projections by the Economic Forum must be used by the Legislature in setting state spending.

"I think our proposals reflect a strong economy," said Economic Forum Chairman Michael Small, who serves as director of tax and treasury activities for the Venetian.

Small and the four other members are predicting state tax revenues will increase by 6.1 percent, to $2.889 billion, in the fiscal year that begins July 1 and then by another 5.5 percent, to $3.048 billion, in the fiscal year that begins July 1, 2006.

Much of the reason for the growth, according to Anderson, is that job growth in Nevada will top 6 percent in the current fiscal year and then climb by more than 5 percent in each of the next two years. Nevada leads the nation in job growth percentage.

Guinn said the forecast shows that funds exist to carry out his proposal to rebate $300 million in car registration fees to residents. His plan would give residents as much as a $300 per vehicle rebate, although owners of older vehicles will receive only $41 per car.

"With the good news from the Economic Forum, it is now time for our citizens to receive the benefits of their investment and get the dividend they so deserve," Guinn said in a prepared statement. "We've met the obligations and demands of our people, and the citizens of Nevada have every right to expect we give them back their money."

Greg Bortolin, Guinn's press secretary, added another top priority of the governor is ensuring that at least $200 million is banked in the state's rainy day fund for emergencies. Bortolin noted that fund was exhausted in 2003 in part because the state had to give the school districts $150 million to make up for a shortfall in sales tax revenues.

"Last time we had to pay," Bortolin said. "This time we are getting money back. The governor wants to put the vast majority (of the surplus) into savings and rebates."

But Ken Lange, executive director of the Nevada State Education Association, was not buoyed by the Economic Forum estimates. Teachers and state employees are slated to receive just 2 percent annual salary increases in Guinn's proposed budget.

Making that increase 5 percent for all school employees and state workers each of the next two years, as some legislators have proposed, would add $250 million in spending.

"We are going to have to have the Legislature make a strong effort to get beyond 2 (percent)," said Lange, noting that the actual increase for a teacher is about $20 a month. "There needs to be an examination of the priorities in the overall budget allocation."

He pointed out budget readjustments are necessary if the Legislature is going to pass a bill to bring full-day kindergarten classes throughout the state. Assembly Speaker Richard Perkins, D-Henderson, has proposed the kindergarten increases, which would cost $72 million.

Lange also noted the $180 million in additional revenue the Economic Forum projects the economy will bring in over the two years beginning July 1 only covers deficiencies in the current school budget plan.

He said the Legislature must raise education spending by about $180 million to cover a mistake in the budget request made by the Clark and Washoe county school districts, increases in health care costs, and losses the schools will suffer because of passage of property tax relief.

At the same time, legislators must find another $30 million to make up a projected spending shortfall for Medicaid over the next two years. University Chancellor Jim Rogers also has requested $100 million for additional construction in the Higher Education System of Nevada.

The Assembly Ways and Means Committee introduced a bill last week to spend $100 million to cover shortfalls in the Millennium Scholarship program.

The request, however, is at odds with an earlier agreement on the Millennium Scholarship program. In a news conference on Feb. 16, Guinn, Perkins and Senate Majority Leader Bill Raggio, R-Reno, announced an agreement to save the scholarship program through a one-time allocation of $32 million, along with spending $8 million a year in unclaimed property funds.

But state Treasurer Brian Krolicki maintains the Legislature and the governor still must cut $10 million in annual Millennium Scholarship spending to ensure the program's success beyond 2008. Krolicki reiterated Monday that steps must be taken quickly to save the program.

"They have to do something pretty dramatic to make sure the funds are available," Krolicki said. "The money is there. They have to decide what the program will look like."

Perkins could not reached late Monday to comment on the new forecast. Earlier Monday he said his priorities are saving the Millennium Scholarship program and properly funding education.