State budget: Poor showing in 2002 means giant deficit in 2010

If revenues are flat in 2002 and nothing is done to change or raise Nevada's taxes, state government will run up an $885 million deficit by 2010.

And that, according to experts, is if nothing is done to improve services or increase budgets for public schools, seniors or the poor and disabled.

This was the picture presented to the Governor's Tax Policy Task Force Wednesday as it began looking at how to ensure state government has enough money to provide services for the next decade.

Chairman Guy Hobbs, former Clark County chief financial administrator and now a private consultant, said the figures were designed to begin defining the extent of the problem.

The figures show that, with normal growth each year, the state would reach 2010 with $59 million in the bank. But if just 2002 is bad, the deficit would skyrocket. In 2010 alone, the state's budget would be nearly $198 million in the red.

Those figures assume a steady 3 percent inflation each year for public salaries. An amount much less than some, such as the teachers and state workers' associations, have said is needed.

Hobbs and former Las Vegas finance director Marvin Leavitt, said they don't think the problem is so large it can't be handled by adjusting the existing tax system.

"The differences we're talking about here, even though they seem large, seem to me to be the kind you can cure," Leavitt said.

Among the ideas on the table, they said, are eliminating or reducing the property tax depreciation and eliminating exemptions to sales tax.

"I don't think anyone on the task force would disagree with the fact that there's going to be a deficit," said Las Vegas newspaper publisher and businessman Brian Greenspun.

But, he said, a couple of bad years could increase the deficit substantially.

"I don't think tweaking is going to solve a $3 billion or $4 billion deficit," he said.

Mandalay Bay casino executive and former state legislator Mike Sloan agreed. And he said it's clear revenues are going to be well below

average in 2002 because of the slumping economy and the effect of Sept. 11 terrorist attacks on tourist business in Las Vegas.

"If one year in 10 can take us from plus $59 million to $885 million in the red, tweaking won't do it," he said.

Greenspun and Sloan said they believe the task force's charge is to look beyond the existing tax system to find more revenues for the state.

"I don't see our mandate as do it with the existing tax structure," Sloan said. "I think our mandate is to broaden our tax base."

Sloan urged the task force to look beyond the traditional sources of tax revenue, such as the gaming industry he represents.

"There's a whole bunch of people who have made a whole bunch of money in this state who have not participated in generating revenue," he said referring to businessmen who pay no income or gross revenue tax in Nevada.

Greenspun agreed: "We have to expand the tax base and I have no problem with that, even though I'm going to get hit pretty hard."

Hobbs said diversification of the tax system as well as stabilization are twin goals of the task force, which will present its recommendations to the 2003 Legislature. He said the policy questions are properly dealt with by those elected to do that job -- the governor and members of the Legislature.

He said the task force has to identify needs in different areas, "then identify a continuum of solutions that get us to that need."

He said the next step for staff would be to evaluate a variety of options from changes in existing revenue sources like the property tax to creating new sources such as a business profits tax. He said it doesn't mean recommending any of those options but, instead, laying out what kind of tax or increase it would take to raise the needed money so the committee and elected officials can weigh the impact against the benefits.