Lawmakers consider tax options

Members of the legislative tax committees were told Tuesday they can escape having to raise taxes this fiscal year.

But Director of Administration Perry Comeaux said that would be betting sales and gaming revenues won't dip before July 1 and that the state won't get hit with any unexpected costs.

An analysis presented by legislative staff indicated a best case scenario --with no new taxes between now and July -- would leave the state a $106 million fund balance.

But it would drain the state's $136 million "rainy day" fund, leaving $1.3 million in reserve to handle an emergency.

The discussion came during the initial hearing on Gov. Kenny Guinn's proposed tax hikes to cover this fiscal year's revenue shortfall. Identical bills -- SB219 and AB204 -- propose tripling cigarette taxes and the per-employee business activity tax, nearly doubling the liquor tax and bumping up slot route fees to generate a total of $80 million this fiscal year. It also would take $100 million from the rainy day fund.

Some lawmakers have balked, saying they aren't convinced the state needs the extra cash between now and the end of June. Those lawmakers, including Sens. Sandra Tiffany and Ann O'Connell, both Southern Nevada Republicans, pointed to scenarios showing a fund balance of about $107 million.

"If revenues come in as projected, we don't have a hole in the budget," Comeaux said.

But if war with Iraq or another terrorist attack causes gaming and sales tax revenues to dive, he made it clear all bets are off. With no reserves and no added revenue, there's no way to react fast if something does happen, he added.

He told them that while that ending fund balance "sounds like a lot of money," it won't pay the state's bills for long. He said $107 million would last about 19 days.

"If we end up going into a war or having another kind of terrorist event or anything that effects our tourist traffic, this $107 million can disappear very quickly," he said.

Comeaux said the tax proposals the governor wants approved before April 1 are designed to make sure the state doesn't have to empty the rainy day fund. If there is no major problem, the plan is to put $45 million of it back into the rainy day fund, raising it back to more than $80 million.

"Right after April 1 there's a point of no return," Comeaux said. "There are very few cuts you can make fast enough to cover the revenue downfall. And they would not necessarily be the cuts that would do the least damage."

As for more cuts in spending to avoid tax hikes, Deputy Chief of Staff Mike Hillerby told lawmakers Guinn has already made all the cuts he is comfortable making.

"The governor feels very strongly that the set of benefits we have now work," he said.

Despite resistance from lawmakers, Guinn got some support from the Nevada Bankers Association. Spokesman John Guedry said Nevada's bankers "support the proposal to increase the business license tax" this year.

He said the banking industry is "willing to pay our fair share" and described the per-employee tax on businesses as "a fair and sensible way to obtain additional revenue from business and from banking."

The committee took no action on the two bills. The Senate and Assembly taxation committees will meet separately Thursday to discuss the proposals.