Their confidence buoyed by continuing double-digit increases in sales-tax revenues, members of the Nevada Economic Forum voted Wednesday to add more than $100 million to revenue projections for the coming two years.
The governor and Legislature will now have a total of $5.75 billion to spend during the coming two-year budget cycle - some $840 million more than projected for the current biennium.
The forum is appointed by the governor and Legislature to provide revenue projections that must be used by both the executive and legislative branches in building the state budget.
The forum's letter to Gov. Kenny Guinn and lawmakers says the state economy "has bounced back from the 2001 recession." The letter points out that while visitor volume increased only 1.3 percent in 2003, it went up 5.5 percent through September and the state's unemployment rate is just 3.6 percent - just above half what it was after the 9/11 attacks.
For most of the seven major sources of general fund tax revenue, staff projections for 2006-07 remained pretty much the same as their preliminary estimates in November - 6 percent overall. The big change was in the state's estimated sales tax growth.
Sales tax revenues have now recorded nine straight months of double-digit increases. Those revenues, the forum noted, are up 13.9 percent so far this fiscal year - approaching triple the 5 percent projected growth.
Forum Chairman Michael Small said the forum had enough confidence to raise sales tax projections from 6 percent to 10.5 percent for fiscal 2005. That produced an increase of more than $40 million in sales tax revenues for the current year.
But that did even more for the coming two years. While the predicted percentage increases remained the same for fiscal 2006-07, the increase this year produced dramatic increases in revenue by increasing the base starting point in each of those years. Adding those same percentages to the higher 2005 sales tax base generates another $115 million in sales taxes over the coming biennium. By year's end, they should generate more than $833 million this year and $1.8 billion in the next two years.
Sales tax revenues provide more than a third of the general fund revenues collected by the state. But Small said the forum was confident most of the state's revenue sources would increase over the next two years.
"What we see is the economy has been picking up and revenues from major revenue sources have increased," he said. "We see a continuing strengthening."
"Many other important state revenues including the mining tax, the insurance premium tax, the liquor tax, the gaming tax and the tax on tobacco products other than cigarettes are doing better than expected," according to the report.
The new real estate property transfer tax is generating more than expected because of the booming housing market in Nevada, said the report.
The numbers will be reviewed again May 2 as the Legislature prepares to finalize the state budget.
Contact reporter Geoff Dornan at email@example.com or 687-8750.
Highlights from Nevada Economic Forum's forecast for 2006-07:
- State revenues should grow by $840 million
- Sales tax revenues will rise 10.5 percent
- Gaming tax revenue will grow 5-6 percent, to $1.5 billion
- Insurance tax revenue: $225 million
- Business tax revenue: $225 million
- Real estate transfer revenue: $115 million
- Cigarette taxes: $115 million
- General fund revenues will rise 6 percent each year