Nevada tax revenue exceeds general fund budget by more than $1 billion – The Nevada Independent

Nevada’s faster-than-expected economic recovery from the COVID-19 pandemic and a period of high inflation triggered record amounts of sales and gaming tax revenue, leading the state to collect more than $1 billion. more than the tax revenue forecast for the last fiscal year.

The $5.5 billion raised in the fiscal year that ended in June was a significant increase from projections set more than a year ago in May 2021 by the state’s Economic Forum. . Revenue forecasts from that time were used to establish the two-year general fund budget approved last year by the legislature and the governor.

Amid a period of soaring wages and commodity prices – the national inflation rate has reached a 40 years tall in June – sales tax collections in fiscal year 2022 exceeded forecasts by more than $311 million, according to data from the Office of Legislative Counsel’s Tax Analysis Division.

The state’s gaming industry, meanwhile, has recorded a historic streak of over $1 billion in gaming revenue per month, including every month in fiscal 2022. July 2021 marked the month state’s highest revenue earner of all time, with $1.359 billion in recorded revenue. Gaming tax recoveries exceeded projections by approximately $255 million.

State tax analysts shared the data Thursday at a meeting of the Economic Forum, a state-appointed group of private sector experts that provides forecasts of tax revenue streams used to determine the state’s budget. the state.

Russell Guindon and Michael Nakamoto, analysts at the Legislative Counsel Bureau, pointed out how unexpected these collections were at the time the projections were made in May 2021, when Nevada’s unemployment rate was still nearly 8% and that the national inflation rate had just passed 4 percent.

“If any of us had come to the last meetings in December 2020 or May 2021, and said we would have consecutive months of gambling winnings over $1 billion per month, or taxable sales would increase double digits, or that inflation would be where it was, I don’t know if any of those forecasts would necessarily have been taken seriously,” Nakamoto said.

Guindon pointed to factors unknown at the time that ultimately helped boost spending and tax revenue, including the expansion of the Child Tax Credit, which made payments available to families on a monthly basis from July 2021. Guindon said these credits have helped “increase people’s disposable income.”

Excess general fund revenue also triggered a large deposit in the state account. “Rainy Days Fund”, which can be used in an emergency, such as a global pandemic or economic recession, to help fund state government operations.

Guindon said about $400 million will go to the state’s Rainy Day Fund, bringing the fund balance to an all-time high. In January, the Treasurer’s Office announced that the fund had reached a balance of $340 million, or about 85% of the fund’s pre-pandemic high of $401 million.

The transfer of these funds is required annually by state law, which provides for the transfer of 40% of the unrestricted general fund balance to the Rainy Day Fund, after subtracting 7% of all credits drawn. from the general fund in the previous year.

Having a well-stocked Rainy Day Fund puts the state government in a safer position at a time when the national economy is in a precarious position, experts say. As Guindon noted, the Economic Forum will have to make a forecast with the Federal Reserve trying to orchestrate a “soft landing,” referring to the delicate balance of raising interest rates in an attempt to bring down inflation, without triggering a recession.

The Economic Forum will meet again in early December to forecast general fund revenues for the current fiscal year and the next two fiscal years. These estimates (with a final update in May) will be used to establish the general fund budget used by the Governor and Legislature in the 2023 legislative session.

Thursday’s meeting was an opportunity for members of the Economic Forum to learn more about the outlook for the state’s economy as they prepare to make their forecasts in December.

David Schmidt, chief economist at the Department for Jobs, Training and Rehabilitation, pointed to the rapid recovery in jobs since the early months of the pandemic, as well as the nearly 8% growth in hourly wages over the of the past year.

He also expressed a positive outlook for the state’s economy amid nationwide talk of a possible recession. Schmidt said he expects to see some “loosening” in the labor market over the next two years, including slowing job and wage growth, rather than a dip in conditions of recession.

Steve Hill, president of the Las Vegas Visitors and Convention Authority, said visitor volume hasn’t fully recovered since the pandemic as convention and trade show attendance and international customers still lag behind. their previous levels. He also highlighted the conditions that contributed to the record total gaming revenue.

“Our visitors have a larger gaming budget than they’ve ever had in the past, up to 50% more,” he said.

Hill also pointed to major upcoming sporting events, including a Formula 1 race in November 2023 and the Super Bowl in February 2024, which are expected to bring Nevada millions of dollars in ticket sales and entertainment tax revenue. live, a factor in economic forecasts. The forum will take place in December.

Live entertainment tax revenue also significantly exceeded projections in the past fiscal year, with actual revenues recorded ($139 million) more than double the amount projected ($61 million), live events having largely returned, as more and more people felt comfortable attending these great events. gatherings.

Despite concerns about a possible recession affecting tax collections, Nevada is poised to have a larger general fund budget in the near term with major revenue streams, including sales and gambling taxes, which are continuing at a rapid pace.

“Current forecasts for [fiscal year] 23 is $4.7 billion, so I think we know what’s likely to happen to the [fiscal year] 23 predictions,” Guindon said, followed by laughter from the committee. “Now 24 and 25, I don’t know.”

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