Gibbons delays special session

Members of the Economic Forum told Gov. Jim Gibbons on Friday the state's shortfall is about $250 million more than expected, raising it to $1.2 billion.

The need for staff to have time to review the forum's actions prompted the governor to delay Monday's special legislative session until Friday.

Lawmakers had originally predicted the shortfall increase would be much lower " in the $95 million range.

But the members of the forum, four of five of them participating in their first meeting, agreed with the more pessimistic view presented by the Budget Division.

Cathy Santoro, a vice president with MGM-Mirage in Las Vegas, led the charge on the gaming numbers as the forum began their review with the Live Entertainment Tax. That tax adds 5-10 percent to every show and event ticket sold by the casinos and brings in more than $100 million a year.

"There is no expectation the market is going to improve at this time," she said. She said hard economic times are reducing the number of people going to shows and the amount they are willing to pay for tickets, which can range up to $200 or more for premium concerts.

Santoro made the same argument a few minutes later when discussing gaming percentage fees, which make up about 30 percent of the general fund, saying they should project it as not growing in fiscal 2009.

But, at Chairman Leo Seever's urging, the forum did support a 2 percent increase in the gaming tax for 2009. But that is far less than the 7 percent projected in May 2007. That reduces projected gaming tax revenues by $204.5 million this biennium.

But the biggest hit came when the members of the forum agreed with the budget division's gloomy sales and use tax projections. Budget division and legislative analysts were nearly $71 million apart on that projection.

The forum vote reduced projected sales tax revenues this biennium by $311,188 compared to the forecasts used to build the current budget.

Santoro was joined by John Restrepo, a business consultant named to the board by Gov. Jim Gibbons.

She said MGM-Mirage is seeing a drop in food services, a large category for sales tax revenues. And she pointed out there has been a big drop in auto sales as well. And all agreed housing sales are in the tank right now.

Mike Alastuey, named to the panel by Assembly Speaker Barbara Buckley, D-Las Vegas, questioned whether housing sales and construction might be starting to stabilize. But no one else on the panel was willing to bet on that.

In fact, the worst drop in any revenue category was to the Real Property Transfer Tax. The forum members Friday predicted that revenue source will fall 51 percent below the 2007 projections to just $119.6 million for the biennium.

When all the major revenue sources were projected, an additional $181.4 million had been cut from the budget. But Director of Administration Andrew Clinger said to that total must be added any shortfall in the Local School Support Tax, a portion of the sales tax dedicated to public schools. State law requires any shortfall there be made up by the general fund to protect school funding and that piece is about the same size as the state's share of sales taxes so the amount is at least $70 million.

Which brings the total additional shortfall projected by the forum Friday to a minimum of $250 million.

Friday's actions reduce projected general fund revenue from the state's major tax sources from $3.08 billion to $2.84 billion in FY2008 and from $3.29 billion to $2.76 billion in fiscal 2009. Together, that means just under $800 million must be cut from operating revenues for the biennium.

Most of the remainder of the $1.2 billion total reduction for this biennium is covered by the $267 million state Rainy Day Fund.

Santoro said during a break that she believes the group should be as conservative as possible given the current economic situation. But she made clear that she and her bosses don't think cutting spending is the only answer.

"I think there's a broader base of initiatives that have to be raised," she said.

She pointed out that her company's chairman has suggested the state consider a significant increase in the Modified Business Tax, which is imposed not only on major resorts but all businesses in Nevada.

"I think it's time to address a broader base," she said., adding that it's time to stop relying on one industry " gaming " to support such a huge piece of the budget " about one-third of the general fund between the percentage gaming tax and the entertainment tax " plus all the sales tax revenue gaming generates.

Asked later whether taking back employee and teacher raises is still on the table for the special session, spokesman Josh Hicks said yes. Cutting the 4 percent raises would save about $134 million of the $250 million.

But asked whether tax and fee increases were on the list, he said, "Not on the governor's table."

- Contact reporter Geoff Dornan at gdornan@nevadaappeal.com or 687-8750.