By Sean Golonka
Gov.-elect Joe Lombardo and Nevada lawmakers will have $11.4 billion in projected tax revenues to construct the next two-year general fund budget covering July 2023-June 2025, marking a nearly $2.3 billion increase over the current two-year budget set in 2021.
That amount comes via the state’s Economic Forum, which projected on Monday a 2.9 percent increase in state tax revenues over the next two years, beginning in July 2023. The forecast increase in tax revenues also comes despite concerns from national economists that a recession could be on the horizon in the next year.
“Today’s economic forum shows Nevada’s economy is continuing our steadfast path toward recovery,” Gov. Steve Sisolak said in a statement Monday. “We are where we are today because of the actions we’ve taken over the last two years in the State to weather and recover from the COVID-19 pandemic, diversify our economy, get people back to work, and invest in education and affordable housing.”
The major increase in the size of the budget was driven by soaring collections from sales and gaming taxes, which have boomed amid an ongoing period of high inflation and relatively strong consumer spending.
Those factors have already driven up tax revenues in the past year. Collections reported in the last fiscal year and updated projections for the current fiscal year set Monday indicate the state will bring in more than $11.1 billion in tax revenues during the 2021-2023 biennium, a significant increase from the Economic Forum’s May 2021 projection of less than $9.2 billion in general fund revenues over the biennium.
The Economic Forum is a five-member panel of private sector business experts appointed by the governor, and the group is responsible for forecasting tax revenues for the state’s two-year budget cycles in December prior to legislative sessions and in May of years when the Legislature is in session.
The governor is required to submit his recommended budget to the Legislature in January of odd-numbered years shortly following the Economic Forum’s forecast for the size of the budget. Budgets requested by state agencies in October, totaling $10.8 billion in general fund dollars, reflect the large increases in tax revenues.
On the campaign trail, Lombardo promised no new taxes, meaning he would not approve any new sources of tax revenue. His promise came as strong tax collections bolstered the general fund budget significantly ahead of a legislative session in which Lombardo will have to work across the aisle with Democrats, who control both houses, to approve his desired budget.
“These numbers demonstrate there is no need for a tax increase of any sort, and I look forward to making my administration’s budget priorities fit within these projections while still acting fiscally responsible and saving money for a rainy day,” Lombardo said in a statement Monday.
Though Lombardo will be recommending a budget to the Legislature, Sisolak said in a statement that his office “has been hard at work in developing the budget for the next biennium.” He added that that budget “reflects my administration’s priorities and continues to make investments in the health, safety and wellbeing of all our residents.”
The Economic Forum approved the new tax revenue projections after deciding between predictions submitted by individual state agencies, state fiscal analysts, the governor’s budget office and, for select taxes, Moody’s Analytics. The projections include forecasts of the state’s major tax sources — including the Sales and Use Tax, Percentage Fees Tax on gaming revenues, Insurance Premium Tax, Modified Business Tax, Live Entertainment Tax, Real Property Transfer Tax and Commerce Tax — as well as a slew of smaller sources, such as business license fees.
In May, the Economic Forum will set a final revenue projection used to determine the two-year general fund budget. Lawmakers are constitutionally required to balance the state budget — spending no more than incoming tax revenue.
The projections approved by the Economic Forum Monday reflect the strong growth and recovery of the Nevada economy since businesses and the state budget were initially decimated by the COVID-19 pandemic in spring of 2020.
Despite concerns from some national prognosticators that the U.S. economy could enter a recession in 2023, Emily Mandel, an economist at Moody’s Analytics, told members of the Economic Forum that she expects the economy to instead enter a slow growth period. That period could see layoffs and unemployment tick up, and she did not rule out the possibility of a recession.
But as Mandel and various state fiscal analysts walked through their projections for different tax revenues, they generally indicated that economic activity would remain strong enough to sustain gains made in revenue collections since the pandemic.
