Veteran journalist Ed Vogel wraps up the 2011 Nevada Legislative Session.
Vogel notes “Nevada delivered a balanced budget while taxes stayed the same” but can’t fail to note that both candidates for Nevada Governor last year promised that they would not renew taxes scheduled to automatically expire. The promise – which appears to have been what most Nevadans wanted, if the polls that drove the major candidates’ campaigns were right – was not kept.
The Tax Foundation’s new analysis of the 2010 US Census shows that little has changed – Nevada remains one of the states most successful in shifting its tax burden off of residents and onto non-residents. The new data shows us ranked 49th in the amount of personal income consumed by state and local taxation, but 37th in the amount of total state and local government spending as a percentage of personal income.
Driven by the highest local government (cities, counties) pay in the United States and moderated by less lucrative state-level worker pay, Nevada overall ranks sixth-highest government worker pay in a new study by the Las Vegas Chamber of Commerce.
An Associated Press Wire Story that ran in today’s Review Journal and Reno Gazette Journal (read it here) is an example of embarrassingly bad journalism. It states, over and over again, that Nevada has the worst budget deficit in the United States, quoting:
as saying the Nevada has the largest budget deficit of any US state.
Paragraph three does, correctly, yet briefly, note that the gap is calculated by comparing revenue forecasts with what government thinks it needs.
In Nevada’s case, the legislature is planning to increase spending to a level 20% higher than our current revenue.
Meanwhile, our revenue is going to be around 10% less than current levels. 20% more plus 10% less equals a 30% budget gap, America’s largest.
Nevada has the largest budget gap because Nevada has the most unrestrained, irresponsible legislature of any state.
Here’s a reality-based look at Nevada’s actual revenue shortfall – sixteen states have it worse than us.
Worst in the nation, Jon Ralston flashed his audience today, citing the Wall Street Journal:
If you don’t believe what I and others have been saying about Nevada having the largest proportional budget hole, The Wall Street Journal says it’s true – just click on the map
The Journal’s article and chart actually rank Nevada’s tax shortfall as relatively mild, compared to many other states… at 6.5-percent, 16 states have a worse revenue shortfall than we do.
The data does rank Nevada’s legislature as one of the most irresponsible in America. When Nevada’s revenue started tanking, our legislature increased spending by draining all our savings and giving employees an average 6% raise last July. And our legislature plans on increasing spending again in three months – alot.
As a result, Nevada leads the nation in what the Wall Street Journal calls “Projected 2010 Gap as Percentage of FY2009 General Fund” and what Ralston more cleverly calls the “largest proportional budget hole”.
If our Legislature had acted responsibly, and trimmed spending when revenue flattened out instead of increasing spending, we would have an average problem on our hands. This is especially clear in retrospect, but should give the Legislature pause before raising taxes.
Remember, a “budget” is merely a plan to spend… or in Nevada’s recent years, a plan to overspend.
We recently had occasion to check out the new Open Government website from Governor Gibbons. I could spend hours here!
Great Review Journal editorial today:
…despite the fact both population growth and school enrollments have leveled off — even the “maintain services at current levels” spending Carson City Democrats apparently consider “as low as they’ll go” represents 17 percent more spending than the budget enacted by the Legislature two years ago — 26 percent more than actual spending of about $6.3 billion.
For months, the bureaucrats and Democratic legislators have been making a show of tearing their hair, weeping and moaning about “cuts,” lambasting Gov. Gibbons for submitting a budget that will supposedly leave schools and hospitals no choice but to close their doors, leave children and old people to starve in the streets, etc.
What cuts? Where are the cuts? Most Nevada taxpayers are figuring out how to tighten their belts and live on less. But a 17 percent spending increase — a revenue increase of 37 percent over what’s now flowing in to state coffers, new or increased taxes to generate an extra $2.16 billion, to a new record income level of $7.96 billion — is the minimum lawmakers will consider?
Yes, state government’s general fund actually spent $6.3 billion from the GF over the last two years, but the revenues were only $5.8 billion. Incidentally, that is just about the same amount of revenue we received in the prior biennium. For the coming biennium, the latest estimates (which are unofficial guesstimates from the Legislature, who has a long history of manipulating guesstimates for political purposes) say we will collect $5.1 billion, plus about $250 million from the new room tax, and about $400 million from the federal stimulus money.
So the actual revenue decline (assuming the federal stimulus and room tax) with no further tax increases is less than 1%. Those are the facts, pure and simple. Our population is barely growing now and the CPI is also very low.
To say a 37% increase in revenue is imposing harsh cuts is only possible in the delusional world of government spending. The problem centers on the fact that the government (particularly the state legislature) increases spending on autopilot by granting raises and expanding benefits every year, and any reduction in those automatic increases is falsely described as a draconian cut. The majority of the political media – Ralston and Sebelius – make no bones that they passionately desire more government, so they repeat the false descriptions from legislative leaders, and portions of their audience too lazy to check the math buy into and repeat it.
So now legislative leaders say it’s a cut if further increases are not implemented. There are a lot of private businesses that would be real happy to have only a 1% reduction in revenues and the spending adjustments needed to balance the books would be much easier than what they are facing now.
Oh, did we mention 20% of the employees at the Las Vegas Chamber of Commerce just LOST THEIR JOBS!
Nevada’s State Archivist Guy Rocha made the front page of the newspaper with news of his retirement. He offered, in addition to his usual ability to fascinate with his command of Nevada history, some political views. For example:
“I find it disturbing this state that has essentially been my life is, in my opinion, on the brink of disaster. You can’t cut 34 percent or more without devastating state government”… Rocha fears legislators in the coming session will cut state spending so severely that it might take decades for his and other agencies to recover.
This is a little melodramatic. The latest estimates of Nevada’s tax revenue for the next two years is that state tax revenues will be about this same for the two years starting July 1, 2007 as it was for the two years starting July 1, 2005, and that it will be about the same for the two years starting July 1, 2009. Our flat revenue is much higher than revenue was for the two years starting July 1, 2003, and that number was swollen with the largest tax hikes in many decades passed by the 2003 Legislature. Later, Rocha notes he was a history major.
Rocha parts with this:
Rocha also criticized the state’s tax structure, saying it relies too much on tourist-generated revenues and leads to wild swings in the state’s financial health.
“We need a 21st-century Nevada, and it can’t rely on tourism to keep driving the engine,” Rocha said. “Tourism will no longer be able to sustain state government unless people are satisfied with a government so small it can’t do very much at all.”
All the available evidence indicates that our ability to export taxes to visitors has led to greater tax structure stability for Nevada, rather than wild swings. The current economic downturn (the private sector is down and losing jobs while the public sector is flat and not losing jobs) started with the “locals” economy of residential construction, and for many months tourism continued to do well, and the 2001 downturn was much less severe in Nevada than most states due to how quickly tourism rebounded.
Prior to the 1980′s, the Nevada Legislature approached spending with a measured, responsible eye. Over a couple of years back then, it converted to push hard for more and more spending every session. This attitude was not a function of Nevada’s growth rate, which has run at a constant rate since the 1960s.
During the late 80s and early 90s, the Legislature’s zeal to spend led to an embarrassing series of “budget cuts” caused by the Legislature’s aggressive forecasts of revenue. They planned unrealistic increases in revenue, then planned to spend it, then found themselves having to “cut the budget” back down to fit the actual increases in revenue.
This led to the creation of the “Economic Forum” in 1993 – an independent group that is supposed to forecast revenue without the political addictions to spending that tormented legislative leadership.
Here is the economic forum’s website.
At the close of the 2007 Legislature, the forum was forecasting state tax revenue to be $6.8-billion for the two years starting July 1, 2007. Last week, they estimated state tax revenue will be $5.7-billion for the next biennium, a reduction of $1.1-billion or 16%.
Remember, these dollar figures and percentages are measured over two year periods.
The Economic Forum will make their final forecast for the next biennium at the beginning of May 2009; this will be the “final answer” to which legislators will adjust their spending budget for the next biennium.
The Nevada Legislature reduced their plans to increase spending by $73-million dollars, but squeezed savings accounts and borrowed money in order to increase spending by another $267-million dollars during a special session Monday.
Here’s coverage from the Review Journal.