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December 1, 2012 / jimnv

Economic News is Troubling

The state’s Economic Forum met last Thursday. They establish the revenue baseline the governor must use when developing a budget. Their next meeting will be May 1st next year. Their summary of our budget situation is this: Unless the Legislature extends the 2009 tax increases beyond July 1st next year, the state will have $343 million less than what it is currently spending in this fiscal cycle.

The economic forum is a committee of financial and tax experts from the private sector which meets before the legislative session. It predicts revenues for the next biennium and the Governor and legislature must use those number to create a budget.

The total revenues are expected to be about $5.8 billion down from $6.1.  Though sales and gaming revenues have increased, they will not be enough to balance the budget. The construction sector is continuing to be a big drag on Nevada’s economy so an economic recovery is not expected for several years. This is not good news for state employees and their incomes. At the very least they should not expect merit, salary or any other increase in the next biennium starting July 1st next year.

Fortunately, Governor Sandoval supports the extension of the taxes and this will help.

The unknowns in this equation are the Health Care Act (aka Obamacare) and the “fiscal cliff” drama in Washington, DC.  Both will impact Nevada and increase costs to the state but no one how much right now. Perhaps we will have a clearer idea regarding the budget by the end of January, hopefully in time before the legislature first meets on February 4th. It’s not that the Legislature gets its butt in gear the first day or even after 60 days, it just would be nice to find out where things stand as soon as possible.

The Forum’s projections are not good and I expect no change in state employee wages unless all the bad scenarios come to pass. Then expect additional cuts in pay and benefits or what I call the “State Employee Tax”. An example of this tax:

 Our health plan increased premiums and reduced benefits after the last session. Why? Because the plan needs to be solvent. What made this situation worse was that the legislature appropriated (stole) about $20 million from plan reserves during the last session to help with the budget shortfall. Reserves are needed to insure the plan has the money to pay health care providers and do so in a timely manner.

So, in 2011 state employees were expected to make up this amount and they did so with their income. In fact, they paid more than needed and were given some of the money back in the form of a higher balance on their health reimbursement cards.

This budget tactic specifically targeted state employees and no one else.

State employees will pay what they must but don’t expect them to pay more. This would be unreasonable. Let’s end the state employee tax during the next legislative session.

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NOTE : I read several articles about this topic before weighing in on this and the best article I found was by Ed Vogel, the Las Vegas Review Journal’s Capital Bureau. He writes very well and his work is fact filled and balanced. I would dare say anything he writes would be worth reading. I am not kidding about this. For his article about this topic, click here.

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