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September 1, 2015

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Economic Forum has spoken; tough choices come next

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Brian Sandoval

In the fat times, no one much cared what the Economic Forum had to say. If its predictions of anticipated tax revenue were too low, $100 million here or there could be socked away in a rainy-day fund or returned to taxpayers.

With the downward spiral of Nevada’s economy, the panel of business leaders tasked with projecting tax receipts has new prominence as arbiter of the crucial debate over government spending.

Each forum prediction, on heavy equipment sales in rural counties or Garth Brooks ticket sales on the Strip, translates into dollars available for public education and public safety. The rosier the Economic Forum’s outlook, the more money for those services.

The five business leaders met Wednesday to set spending levels and try to predict what will happen to Nevada’s economy between today and June 30, 2013. The gathering set the stage for Jan. 24, when Gov.-elect Brian Sandoval presents his budget to the Legislature and delivers his State of the State address, revealing how he plans to lead the state for the next two years.

The forum concluded that for fiscal years 2012-13, the state will have $5.3 billion in general fund revenue to spend — about $1.1 billion less than the current biennium.

Disagreements over what to cut and whether to raise taxes are expected. But everyone will have to deal with the forum’s number.

The projection assumed a few things: Taxes raised in 2009 will expire as scheduled; the federal government won’t shower Nevada with stimulus money as it did two years ago; and Sandoval and the Legislature won’t (even though they probably will) take money from local cities and counties.

To maintain current levels of services, state agencies have requested $8.3 billion, according to the state budget office.

Despite the weight given to the Economic Forum’s prediction, the number amounts to an educated guess.

“It’s up to you what you read as a signal and what you read as noise and how you interpret that,” legislative fiscal analyst Russell Guindon said while explaining his sales tax projections.

After all, who really knows how many Gucci purses will be sold to tourists or how many bets will be made on baccarat?

When asked how difficult the task is, Andrew Martin, a certified public accountant and new Economic Forum member, replied: “Is that a rhetorical question?”

Only four other states have legislatures that make budgets two years at a time. And most states update forecasts multiple times a year, some as often as monthly.

Only two other states leave their official revenue forecasts to an independent panel appointed by the governor and Legislature — Hawaii and South Carolina. In most states, the governor and Legislature come to an agreement on an official revenue forecast, according to the National Conference of State Legislatures. Seventeen states rely on the executive branch to determine forecasts and a few others leave it to legislative committees.

Nevada’s Economic Forum meets again May 2 to finalize the amount of money the Legislature can spend. For now, it assumes Nevada won’t see any rapid recovery, and certainly no return to the salad days of 2006 and 2007.

“This could be our Great Depression,” said John Restrepo, chairman of the Economic Forum and a private fiscal analyst. Changes in how consumers spend their money “could make this a game-changer for a while.”

Restrepo said he gets no pressure to put a finger on the scale.

“The only pressure we feel is to get it right, consider all economic factors and feel comfortable evaluating the data,” Restrepo said.

Regardless of whether they got the number right, the governor and Legislature face tough choices.

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