Gov. Joe Lombardo and Nevada legislators will have more than $12.4 billion to build the state’s next two-year general fund budget, a record-setting projected tax revenue forecast approved Monday by a state economic panel.

The projection by the state’s Economic Forum — a group of five private-sector economists — marks a more than 7 percent increase compared with the last two-year budget period, which ends in June. 

The forecast provides the first look at how much money Lombardo, a Republican, will be able to count on as he constructs his proposed budget, which will be submitted to the Democrat-controlled Legislature in January. The state operates on a two-year budget cycle because of the nature of the part-time Legislature, which meets every two years and is charged with reviewing and approving the governor’s proposed budget.

A governor’s office spokesperson said it would not be releasing a statement on the forecast on Monday.

It marks a slightly smaller increase in the size of the state’s budget compared with two years ago, when expected tax revenues increased by more than $2 billion amid soaring collections from sales and gaming taxes. Although the economists projected revenue from the state’s hospitality industry to largely remain steady, the forecast of future tax revenues will likely be unable to match high-profile events such as the  F1 race and Super Bowl held in Las Vegas and the opening of the Las Vegas Sphere.

The panel on Monday largely approved more conservative forecasts for the next two fiscal years, even as inflation has cooled and high interest rates have stabilized, both of which should benefit the state’s economy.

Even so, the projections come amid a cooling labor market — the state saw net job losses in the past three months compared with the prior three-month period — but layoff levels are not rising alarmingly and the state’s economic health remains far from recession levels, according to Emily Mandel, an economist at Moody’s Analytics, an economic research firm that contracts with the state to assist with the work of the forum.

The projection also comes at a time of economic uncertainty because of President-elect Donald Trump’s victory last month. Trump has pushed for large tariffs on goods coming from China, Mexico and Canada, as well as a massive deportation of undocumented immigrants — factors that have worried economists.

Mandel testified that Trump’s plan to launch a mass deportation campaign of undocumented immigrants could have major repercussions for Nevada, which has among the highest rates of foreign-born employees.

The most recent budget had a forecast of about $11.6 billion in tax revenues, but the state is likely to end up exceeding those expectations by bringing in a projected $12 billion in revenues across the current biennium.

However, the projections only encompass general fund revenues, which compose just one portion of the state budget that also relies on billions in federal dollars and from other funds.

Tax forecasts are subject to be changed when the Economic Forum next meets in May, shortly before the end of the legislative session, to provide an updated revenue projection. In 2023, for example, the size of the budget revenues increased by more than $250 million following updated tax revenue projections.

Gaming percentage fees

Revenue from the gaming percentage fees tax is expected to remain relatively steady during the next biennium, bringing in nearly $2 billion.

The forecast aligns with revenues from the gaming industry at large, which is expected to experience a downturn in money brought in since a surge in fiscal year 2024, which was thanks to the first F1 race (where revenue is expected to be higher than from following races) and the Super Bowl at Allegiant Stadium.

Mandel said the gaming industry should generally expect a downward shift, in part because of the closing of The Mirage as it is transformed into the Hard Rock and because the strength of the U.S. dollar has made international tourism more expensive.

The Economic Forum approved the revenue forecast put forward by the state’s Gaming Control Board, which was more conservative than other projections. 

Live entertainment tax

An estimated $445 million in revenue will come in through the state’s live entertainment tax in fiscal years 2026 and 2027, a sizable decrease from past years.

The total makes up a roughly 6.8 percent decrease from the amount brought in by the taxes in the 2024 fiscal year and the forum’s forecast of the 2025 fiscal year, but it still makes up significantly more revenue than during the pandemic.

The decrease in revenue is largely because of the surge in money brought in during the 2024 fiscal year’s packed entertainment calendar.

Lawton said he did not see a path for growth for the gaming aspect of the live entertainment tax in the upcoming year because of several factors, including a continued lag in international travel post-pandemic and the ending of the Adele and Garth Brooks residencies in Las Vegas.

Sales and use tax

Nevada’s 2 percent sales and use tax makes up by far the largest share of tax revenues, with an estimated $3.8 billion coming in revenue across the next biennium.

Revenue from the tax has slowly increased in recent years, and the economists expected that to remain the same during the next two years but likely at a more decelerated rate.

Consumers in Nevada have been purchasing less in recent years compared with earlier in the pandemic, leading to a slowdown in collections from the sales and use tax, Mandel said. For example, sales tax collections grew by 21 percent in fiscal year 2022, but fell to about 7 percent and 4 percent growth in the following two years, which experts said is likely because high interest rates limit purchasing.

Modified business tax

Nevada’s modified business tax — which is imposed on businesses for the wages paid to their workers — is expected to bring in about $1.9 billion during the next biennium, an increase of about $150 million compared with the ongoing budget period.

The upcoming budget will be the first one enacted since the tax rate for most general businesses dropped from 1.378 percent to 1.17 percent.

The reduction was automatically triggered under state law in 2023 after collections of the tax exceeded projections by more than 4 percent.

Insurance premium tax

About $1.4 billion in insurance premium taxes are projected in the next biennium, a roughly 13.2 percent increase compared with the revenues expected to be generated in the current biennium.

This makes up about 11 percent of the state’s budget.

Real property transfer tax 

The real property transfer tax — essentially viewed as a tax on property sales — is expected to bring in about $258 million in the next biennium.

It’s an increase from preliminary projections for the current budget period, which expected the state to only receive $241 million from the taxes because of decreased home buying, but stabilizing interest rates are likely contributing to more money expected to come in from the taxes.

Commerce tax

The state’s commerce tax is imposed on businesses with more than $4 million in gross revenue in the last year.

The Economic Forum projected that the tax would bring in about $765 million in revenue during the next biennium, the fifth-largest share of the state budget.

Starting in fiscal year 2024, the annual revenue brought in by the commerce tax is expected to increase by $20 million annually, according to the forum’s projections for the following three fiscal years.

Updated on 12/2/24 at 5:10 p.m. to include more details about the sources of the tax revenue.