Rosy forecasts give Nevada lawmakers more money to budget
CARSON CITY, Nev. (AP) — Widespread vaccine distribution and federal coronavirus relief money have set Nevada on a path toward a quicker-than-expected economic recovery, analysts said Tuesday.
The five members of the state Economic Forum approved projections that suggest the return of tourists to the casinos and resorts that power Nevada’s economy would provide roughly $9.1 billion in general fund revenue over the next two years, which is $586 million more than originally expected. The revenue will allow lawmakers to decide whether to restore cuts made to the state budget and — along with federal relief money — expand spending to historic levels.
Moody’s Analytics economist Daniel White said the difference between forecasts made last year and those released Tuesday was “night and day.”
Among the revenue streams projected to grow are sales and use taxes and live entertainment taxes. Revenue from sales and use taxes are projected to grow by 11% over the next two years, to $1.4 billion. Economists project Nevada will collect a meager $5.2 million in live entertainment taxes from June 2020 to June 2021 but expect a full recovery will generate $119 million in live entertainment tax revenue in the 2023 budget year.
“We’re looking at opening up the full economy this summer, as opposed to the end of 2022, which is what we were hoping for when we talked in December,” White said.
Last April, business closures and few tourists traveling to Las Vegas during the pandemic plunged Nevada into a recession and caused the unemployment rate to spike to about 30%, a record high. The downturn forced Gov. Steve Sisolak and lawmakers to slash Medicaid reimbursement rates and funding for underperforming schools to cut roughly $682 million in spending.
Analysts predicted that it would take at least two years for general fund revenue to rebound, and late last year, Sisolak asked agencies to prepare 12% across-the-board cuts for the upcoming two-year budget cycle.
But in December, the Economic Forum projected Nevada would collect $8.5 billion in general fund revenue over the next two budget years. The figure was roughly $500 million less than the two-year projection issued in 2019 but greater than last June’s $7.7 billion projection.
Economists at that time stressed that the forecasts were little more than guesses amid uncertainty about vaccine supply and distribution, but the projections allowed Sisolak to avoid asking the Legislature to make deep cuts to the state budget.
Since then, Nevada’s tourism-driven economy has begun to show signs of life as more residents, workers and tourists have received vaccines. Hotel occupancy rates and casino winnings have rebounded because of pent-up demand from prospective visitors stuck at home for more than a year and additional disposable income from federal stimulus checks, analysts said.
“I’m amazed when I look at the numbers because how well the sales tax has done considering the situation we’ve been in,” said Economic Forum member Marvin Leavitt.
Economists said they expected younger tourists to return before visitors 55 and older and weekend travel to rebound more quickly than weekday business travel and conventions. The projections, which span from 2021 to 2023, do not broach long-term structural changes that federal economists anticipate.
In a February report, the U.S. Bureau of Labor Statistics, which tracks employment trends nationwide, projected that less business travel and weaker demand for tourism could upend the labor market and cause certain sectors to employ significantly fewer workers in 2029 compared with 2019, reducing the number of hospitality-related jobs, like hotel clerks, by up to 22%.
Metz is a corps member for the Associated Press/Report for America Statehouse News Initiative. Report for America is a nonprofit national service program that places journalists in local newsrooms to report on undercovered issues.