No revenue windfall expected for lawmakers out of Economic Forum
Lawmakers won’t get either a last-minute windfall or face draconian cuts when revenue projections for the state’s two-year budget are finalized on Wednesday.
Early projections posted online on Tuesday show that lawmakers are likely looking at somewhere between an $4.3 million and $5.8 million bump based on three overall agency forecasts — sums that are essentially pennies in the scope of the state’s $8.8 billion budget. The Economic Forum — a five-member panel of private-sector economists — will use those projections to update its December 2018 prediction, which anticipated $591 million more in the coming biennium over current levels but also assumes an economic slowdown sometime before 2021.
“The Economic Forum [Wednesday] will make a big difference in what gets funded and what doesn’t,” said Republican Assemblywoman Robin Titus, a member of the Assembly Ways and Means Committee. “I’m hearing the needle’s not going to get pushed really far … So we’re going to have to make some serious decisions. There’s been a bunch of asks. We’re going to have to decide.”
The state also stands to gain between $25 million and $34 million in additional revenues for the 2019 fiscal year that’s almost finished. Republican state Sen. Ben Kieckhefer said those totals take into account the $20 million settlement Wynn Resorts paid after gaming regulators found the company overlooked founder Steve Wynn’s sexual misconduct.
The forum, which was established in 1993, meets on a regular basis to review the state’s seven major tax sources: sales and use tax, percentage fee tax on gaming revenues, insurance premium tax, modified business tax, cigarette tax, live entertainment tax and real property transfer tax.
Under state law, the forum’s projection of tax revenue — based on forecast data from the governor’s finance office, legislative fiscal analysts, taxation officials and a national forecasting firm — out of the May meeting in odd-numbered years is what state lawmakers must use to craft their spending plan. Lawmakers are constitutionally required to balance the state budget.
The extra $591 million in revenue projected by forecasters in December doesn’t give lawmakers a lot of wiggle room when it comes to funding pet projects as much of it will be eaten up by mandatory spending, including increases in caseload and a higher state contribution for Medicaid, as well as big-ticket discretionary proposals.
The forum’s predictions are unlikely to bail lawmakers out of an ongoing education funding predicament. Gov. Steve Sisolak has promised teachers a 3 percent cost of living adjustment and a 2 percent merit pay increase, but a recent analysis by the Guinn Center for Policy Priorities estimated that Sisolak’s budget was about $107 million short of the funds necessary to pull off both pay raises.
The Clark County School District has said it will not include the raises unless the Legislature ponies up more money. Still, lawmakers including Democratic Senate Finance Committee Chair Sen. Joyce Woodhouse said getting the teacher pay raises in place is a top priority, promising “to do everything we can to make sure that happens.”
But Woodhouse acknowledged the low odds of passage for dozens of other bills seeking state dollars for programs not already included in the state’s existing budget. Most tallies indicate that legislators still have dozens of bills authorizing hundreds of millions of dollars in spending not allocated in Gov. Steve Sisolak’s budget.
Among them are bills to increase autism services that could cost close to $80 million, a proposal to expand need-based aid to university students that could cost $126 million, and $15 million for a railroad museum in Boulder City.
“We have a big long list,” Woodhouse said. “There’s no way everything is going to be funded.”
In the 2017 legislative session, forum members revised upward all projected tax revenue, giving state lawmakers an extra $95.7 million to spend on the state’s two-year budget. They used it to fund last minute initiatives such as a $28 million in state worker pay increases and $36 million in “weights” for underperforming or special needs students in public schools.
But economists are suggesting slower growth in the upcoming biennium. Moody’s Analytics says that while sales tax collections — the single largest driver of general fund revenue — are on track to grow by 7.9 percent in the current fiscal year, they are projected to slow to 4.2 percent and then 1.5 percent in the two years of the upcoming biennium “as the U.S. economy sees less stimulus from the federal government and likely confronts a major slowdown in growth if not outright recession.”
The Democrat-led Legislature has taken no major steps to raise additional revenue, and Sisolak has said he does not want new taxes. Asked whether Democrats have a Plan B should their wishlist exceed the Economic Forum’s projections of existing revenue, Assemblywoman Maggie Carlton, who chairs the Assembly Ways and Means Committee, said “no comment.”
Carlton said she can’t be sure of claims coming from the Clark County School District that they need $120 million in additional revenue to give out raises. In the past, she said, the district has pointed to shortfalls when it was simply a matter of the district not receiving everything they wanted based on their own projections.
“I can say that this building does its homework very well, and we will always make sure that education gets funded,” Carlton said. “My job is to fund government. All the great policy stuff is wonderful, but if we don't get government funded, we find out what happens. People don't get paychecks. We will get our jobs done.”
Democratic Senate Majority Leader Nicole Cannizzaro was similarly coy when asked about potentially raising taxes to meet budgetary requests.
“I’m not going to speak to what the end of the session might bring,” she said. “Like I said, I think [Wednesday] is really going to give us some good direction.”
Projections by the forum only include existing sources of revenue, and thus do not include recommendations made in Sisolak’s budget to prevent a planned decrease in the Modified Business Tax (payroll tax) rates and to keep a quarter of vehicle registration tax revenue in the state’s general fund for another two years. If implemented, the two changes are projected to bring in about $138 million in revenue.
“There's a $100 million shortfall built in that has yet to be dealt with,” said Kieckhefer, referring to the budgetary gap lawmakers would have should they not axe the scheduled payroll tax decrease. “I think that's the big one that no one's talking about yet.”
It’s still not clear whether Democrats will need a two-thirds majority to nix the payroll tax reduction. If legislative attorneys determine they do, they’ll need the support of at least one Republican in the Senate, where Democrats are one seat short of a super-majority.
For his part, Kieckhefer said that he won’t vote for the reduction, calling it a “critical component” of the $1.1 billion tax package passed by the Legislature in 2015 and saying he had no bills introduced that he would be willing to trade in return for a vote for extending the taxes.
He also noted that the Economic Forum’s decision kicks off the “end game” in which lawmakers must resolve all lingering budget questions.
“There's a lot of moving pieces,” he said in an interview on Tuesday. “Tomorrow's the start of the legislative session.”