Nevada's economy has declined more than that of any other state since January 2007 and could get even worse as the national economic downturn worsens, a report indicates.
The damage is just starting for state government budgets, with further tax and payroll declines expected in coming months, according to the report by the Rockefeller Institute of Government,a policy research organization at the State University of New York in Albany.
Donald Boyd, who co-authored the report, said that states are yet to feel the full effect of the financial sector meltdown, the stock market decline and further losses in employment.
"The last fiscal crisis for the states, which occurred in the midst of a mild recession, was dubbed the perfect storm. This one could be more perfect," Boyd said in the report, referring to the aftermath of the Sept. 11, 2001, terrorist attacks.
According to the Federal Reserve Bank of Philadelphia, Nevada's economic activity index in August was 95.8, based on a January 2007 benchmark of 100, making it the worst in the nation.
Nevada's index also dropped further than any other state's between May and August, with its economic activity falling 2.1 percent.
Economic activity is a measurement that includes tax revenue changes as well as the unemployment rate, real wage and salary distributions, average weekly hours worked, labor market and payroll information.
Under that measurement, Texas is the best-off state with a 106.1 economic activity measurement, while West Virginia has performed best since May, gaining 2.2 percent.
California, which may need a $7 billion federal bailout to balance its budget, ranked 21st in economic activity with a 101.4 measurement.
Since May, 39 states have shown declines in economic activity, led by the 2.2 percent drop in Nevada.
Nevada's unemployment rate climbed to 7.1 percent in August - above the national 6.1 percent average and the state's highest rate in 23 years. Nevada economists predict unemployment will increase even more, to an 8.6 percent average rate in 2009 and 2010.
Gov. Jim Gibbons and the state Legislature have cut state spending by $1.2 billion because of declining tax revenues, and Gibbons warned legislators they might have to cut another 14 percent when they go into session in February.
The governor's communications director, Ben Kieckhefer, said Tuesday the study bears out what is becoming very apparent in Nevada.
"The inability of businesses and individuals to access capital has taken a serious toll on economic activity," he said. "People can't get loans to buy homes, and businesses cannot expand their businesses. This credit crunch is having a very serious effect on Nevada."