“It just seems like everything behaved better than we thought because everything was better than we thought,” said the Legislative Counsel Bureau’s fiscal analyst. (Photo: Ronda Churchill)
The State of Nevada is collecting significantly more revenue than projected – around $1 billion this fiscal year.
Fiscal analysts on Thursday presented updated data to the Economic Forum, a five-member panel of private-sector financial experts tasked with projecting the revenue numbers used by the governor and state legislature when setting the state budget.
The current biennium revenue projections were set in May 2021 when Nevada’s unemployment rate was being reported at 8.1% and uncertainty over covid variants and stimulus packages loomed.
Forecasters then predicted Nevada would bring in $4.42 billion during Fiscal Year 2022, but $5.44 billion has been collected so far. That figure includes approximately $255 million more gaming revenue than expected, $311 million more in taxable sales than expected, and $110 million more in modified business tax revenue than expected.
Fiscal analysts are typically conservative in their estimates but the gap between FY2022 projections and actual revenue collected is extreme. For comparison, sales tax revenue projections across the past 13 biennia were on average within plus or minus 5.5% of actual collected revenue, according to an LCB report. In FY2022, the forecast error rate is 19%.
The currency fiscal year being so far off its projection is a testament to how truly unprecedented and impossible to predict the pandemic was, said fiscal analysts.
“If any of us had come into the last meeting back in December of 2020 or May of 2021 and said that we would have consecutive months of gaming win above a billion dollars per month, or taxable sales would be growing by double digits, or that inflation would be where it has been, I don’t know if any of those forecasts would have been taken seriously,” said Michael Nakamoto, a fiscal analyst with the Legislative Counsel Bureau. “I think that, given the information, we had the best estimates of what we could get our hands on.”
LCB Fiscal Analyst Russell Guindon concurred and noted that some of the data used for the FY2022 forecast was later revised upwards. Adjustments to things like unemployment data aren’t uncommon but the pandemic likely made them more substantive, he explained.
“I don’t know if I see anything anomalous,” he said. “It just seems like everything behaved better than we thought because everything was better than we thought.”
About $400 million of the surplus revenue will automatically wind up in Nevada’s Rainy Day Fund. State law requires that 40% of any ending fund balance over 7% be transferred there. But the majority of the unrestricted money should be available for one-time appropriations at the discretion of lawmakers next year.
The fiscal analysts also indicated that the higher-than-anticipated revenue in FY2022 likely means Nevada’s FY2023 revenue projections, which had tentatively been set by the Forum at $4.7 billion, are likely to be adjusted upwards.
“I think we probably all know what is going to happen to FY23,” said Guindon, garnering laughs from the panel. “But ‘24 and ‘25? I don’t know.’”
Forecasters look at myriad data points to project future revenue, including unemployment numbers and population data.
Department of Employment, Training and Rehabilitation Chief Economist David Schmidt told the panel that employment in Nevada has fully recovered, though the unemployment rate is still the eighth highest in the nation. Similarly, most industries within the state have recovered, but casino hotel industry employment remains flat and below pre-pandemic levels.
“I think there have likely been some structural changes over the last two years about the level of staff that’s needed to maintain operations,” said Schmidt. “My expectation is not that we’re going to get back up to where we were.”
The Economic Forum met Thursday – and will meet again on Nov. 14 – to receive information in preparation for their setting of the next biennium forecast, which they will do at a meeting in early December. That budget will provide the base for the governor’s recommended budget, which will be given to the 2023 Legislature to modify and ultimately pass.
Who that governor will be – and the political makeup of the Legislature he will work with – is still unknown. First-term Democratic Gov. Steve Sisolak is facing a highly competitive challenge from Republican Joe Lombardo. Similarly, the majority party within both chambers of the Legislature could also change with the upcoming elections in November.
Sisolak at a campaign event with SEIU Nevada on Thursday promised he would include in his proposed budget a long-overdue boost to the Medicaid reimbursement rate – from $17.56 to $25 an hour. The rate, according to an SEIU press release, has not been changed in two decades. Sisolak said he would also implement a $15 per hour minimum wage for home care workers.
Currently, the average hourly wage for Nevada’s 13,000 home care workers is around $11.
Our stories may be republished online or in print under Creative Commons license CC BY-NC-ND 4.0. We ask that you edit only for style or to shorten, provide proper attribution and link to our web site. Please see our republishing guidelines for use of photos and graphics.