In the halls of the Nevada Legislature, all eyes are on Thursday’s Economic Forum meeting.

The panel of five private-sector economists will soon release updated revenue projections for the next two budget years, providing lawmakers with a final number on how large the soon-to-be-finalized state budget can be. 

The forum’s May 1 meeting is a significant point in every legislative session. But it’s taking on new levels of importance because, according to seven longtime observers of the state budget who spoke with The Indy, there’s an unprecedented level of uncertainty about the economy’s future and signs of possible decreases in tourism to Las Vegas, ongoing budget shortfalls and lower-than-expected tax revenues. 

A decrease from the Forum’s December projection of $12.4 billion in revenue over the two years of the budget cycle could spell trouble for backers of legislation with a price tag, including a proposal to expand the state’s film tax credit program and Gov. Joe Lombardo’s priority bills, which preliminary estimates showed could cost the state upward of $500 million.

It would be the first time that the Forum decreases its revenue projections mid-session since 2009 in the middle of the Great Recession.

In anticipation of the budget forecast, the Legislature’s budget committees have been declining certain requests in Lombardo’s recommended budget for new positions and programs, but so far have opted not to cut existing positions or initiatives.

But there is also widespread uncertainty about what might happen in the next two years.

Will travel to Las Vegas, particularly from Canada and Asia, continue to plummet? What will the effects of the Trump administration's tariffs be? How at risk is the state’s federal funding, particularly for Medicaid?

It’s likely those questions won’t be answered by the time lawmakers need to gavel out in June, making the two-year budget projection next week even harder to determine.

The state has confronted economic disasters in the past, but the high number of variables this cycle could increase the variability in revenue projections and the chances that the Legislature will have to convene for a special session to make adjustments (cuts) to the budget.

“It’s a hard thing to forecast what’s going to happen in the next six weeks, much less the next two years,” said Jeremy Aguero, a principal analyst at economics research firm Applied Analysis. “The universe of things that we don't know is greater than the universe of things that we do as we sit here today.”

Red flags

Last week, the state’s Technical Advisory Committee on Future State Revenues — which serves as technical support to the forum — was pessimistic about future non-major state revenues, which include sources such as fines and fees and insurance taxes. The panel expected these revenues — which make up about 12 percent of the state budget — to come in about 2.3 percent lower in each of the next two fiscal years than it previously predicted in November.

Additionally, the state’s latest reports on revenue show underperformance. Through the first nine months of the current fiscal year, the state has brought in $102 million (or about 3.2 percent) less than the year prior, driven in large part by decreases in revenue from the sales and use tax.

During the Economic Forum’s most recent meeting in December, it expected revenues in the current fiscal year to remain relatively constant, indicating its initial estimates of revenue growth in the next two budget years might have been overly optimistic.

The Thursday meeting will see the panel adopt two-year revenue projections for the state’s seven major tax revenue sources: sales and use tax, percentage fees tax on gaming revenues, insurance premium tax, modified business tax, commerce tax, live entertainment tax and real property transfer tax. Under state law, the budget must be based on the May projection.

There are also warning signs at the local level. An analysis from lobbyist Greg Bailor found that budget deficits for the ongoing fiscal year across local governments could exceed $200 million.

Budget observers are also particularly worried about the long-term impacts of the Trump administration’s economic policies on the state’s tourism-driven economy.

Harry Reid Airport in Las Vegas reported a 7.5 percent decrease in passenger volume in February, the largest single-month decrease since the pandemic, and there is pessimism about Canadians visiting Sin City as America’s northern neighbors show newfound reluctance to travel south, driven by President Donald Trump’s rhetoric around Canadian sovereignty and trade antagonism.

“I'd be very concerned,” said Andrew Martin, a former Economic Forum member and Democratic assemblymember.  “I would think that the trend line of people visiting is going to go down because of the economy and the situation with our foreign relations.”

On top of the current uncertainty, economists also noted to The Indy that warning signs have been building since before Trump was elected.

For example, consumers decreased spending during the pandemic, which resulted in a subsequent spending surge that some economists said was unsustainable.

The Economic Forum outlined in its December forecast that a slowdown in purchasing goods has also led to a corresponding slowdown in sales tax collections. It noted that Nevada’s sales tax collections grew by about 21 percent in fiscal year 2022, but just 4 percent in fiscal year 2024. 

The Forum also observed that households now have less savings and more debt than they did immediately post-pandemic, meaning continued strength in consumer spending would likely depend on income growth. The Forum appeared bullish on wage growth in December because of easing inflation, but economists have said that Trump’s policies might lead to increased inflation.

Setting expectations 

Lawmakers have been blunt with their low expectations for Thursday’s meeting.

During a press conference with the state employees union last week, Sen. Rochelle Nguyen (D-Las Vegas) said she expected the forum to “project a significant decline in revenue,” while Assembly Speaker Steve Yeager (D-Las Vegas) emphasized the “dramatic impact on tourism that [the Trump administration’s] economic turmoil is causing.”

However, given that the effects of the Trump administration’s policies have not been fully realized yet, how can economic forecasters predict what is going to happen?

Aguero noted that forecasters have decades worth of data on the sales and live entertainment taxes — two of the largest drivers of state revenue — giving them a “real advantage” in forecasting.

But he also acknowledged the estimates are no easy feat.

“The question is going to be whether analysts will even take those things into consideration, or will they say, ‘These are the facts as we know them today. And if these facts change, then the projections need to change, but this is what we know now,’” Aguero said. “I think that has to be at least the starting point.”