During the first quarter of 2010, state legislators left few rocks unturned in developing a stop gap solution to the state’s budget shortfall. The Nevada State Legislature met in its 26th Special Session from February 23 through March 1 for the principal reason of finding a solution for the $888 million state General Fund shortfall. Other issues on the agenda included a Supreme Court decision potentially impacting water rights, and the state’s ailing economy also found their way onto the legislative agenda.

While some cuts to the state’s elderly, children and disabled were avoided, significant reductions were made to the budget in nearly every major area. Preliminary estimates place direct programming cuts at roughly $315 million, including 10 percent reductions for state agencies and a more modest cut of 6.9 percent for K-12 and higher-education programs. How these reductions will translate into reduced services is unclear at this point, although legislators were clear that keeping as many state employees working as possible was paramount in their decision-making process.

At the local level, consumer and business spending patterns remained dim. According to the Nevada Department of Taxation, Clark County reported total taxable retail sales at $6.9 billion, or 74.2 percent of the statewide taxable sales. The largest taxable sales category, food services and drinking places comprised 17.9 percent of total Clark County sales at $1.2 billion and reported a 2.8-percent decrease when compared to the same three month period of the prior year. General merchandise stores and clothing/clothing accessories stores accounted for a combined 20.5 percent of Clark County taxable retail sales and reported increased activity of 1.7 percent and 5.8 percent, respectively, when compared to the same period prior year. Motor vehicle and part dealers sector also posted a year-over-year increase of 0.4 percent.

Softened construction activity also contributed to the year-over-year decrease as two of the largest construction-related categories, building material/garden equipment and specialty trade contractors, posted declines of 19.2 percent and 60.4 percent, respectively. Components of the consolidated tax such as cigarette and liquor taxes, real property transfer taxes, and government service taxes continued to report mixed results.

Consolidated tax distributions for Clark County totaled $177.6 million during the trailing three-months ending February 2010 (latest data available), representing a 5.4-percent decrease when compared to the same three-month period in the prior year. Government service taxes - which are derived from vehicle registration payment collections to support local government entities - were down 9.3 percent during the same time frame with $20.7 million collected. Real property transfer taxes witnessed a similar trend, posting a 10.4 percent decline, with collections off by $561,500 year-over-year.

Clark County liquor tax collected amounted to $510,200, up 17.5 percent despite a 6.7 percent decline in total gallons of liquor taxed at the state level. In Nevada, a total of 19.8 million gallons of liquor were taxed during the trailing three-months ending February 2010. Cigarette tax collected in Clark County also reported a decline of 17.4 percent during the same three-month period, as 5.6 million less cigarette packages were taxed statewide. The southern Nevada economic contraction, prevalent since December 2007, has translated into a fiscal challenge for state and local governments. The ultimate timing of the economic recovery will necessitate public sector spending level adjustments to match with new revenue streams going forward.
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