Revenue sunsets hit June 30
January 14, 2011
No matter what the governor and lawmakers say the revenue shortfall is, it will be $1 billion bigger if a laws diverting 15 different revenue streams to the General Fund are allowed to sunset June 30.
Under existing law, those revenues – several of which were taken from local governments – will either go away or revert to their original uses at the end of the fiscal year.
But lawmakers have the legal ability to reclaim those revenues for another two years – even the 3 percent room tax those who signed an initiative petition intended go to K-12 education next year.
Lawmakers approved the room tax in Washoe and Clark counties to generate $210.6 million during the current biennium based on support from voters who signed enough petitions to send the issue to the 2009 Legislature. That petition allows the state to take the money for this biennium but, in the future, the cash is supposed to go to the Supplemental School Support Fund.
Under the law, if lawmakers reject or amend such a petition, it goes to the voters and, if approved, can’t be modified for at least three years. But lawmakers did approve it and, without amendment.
In that case, the law can be changed without waiting three years. In other words, the 2011 Legislature could continue to keep the room tax money to feed the state budget.
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The biggest single pot of money in that list is the estimated $278.9 million generated by the increased Local School Support Tax over the next two years. Lawmakers raised that piece of the sales tax from 2.25 cents to 2.6 cents but schools didn’t get the added cash. The state reduced the General Fund portion of the K-12 education budget by that amount. The sunset will drop the tax back to 2.25 cents June 30 but lawmakers can vote to continue it.
Likewise, the $263.7 million projected to come from the temporary increase in the Modified Business Tax will go away June 30. Lawmakers and Gov. Jim Gibbons changed the structure of the MBT, creating a two-tiered system to replace the 0.63 percent tax on wages. The rate for businesses with taxable wages over $62,000 a quarter increased to 1.17 percent. But the same legislation actually lowered the rate to a half-percent for businesses with wages less than that amount. Failure to remove that sunset would not only cost the state the $263.7 million, it would result in a tax increase on the majority of Nevada businesses since 70 percent of them pay out less than $62,000 a quarter.
Also scheduled to go back to the counties are the 4 cent property tax taken from Clark and Washoe operating funds and the 5 cent capital property tax rate taken from those two counties. Between the two, those taxes are expected to generate $100 million over the biennium.
The Indigent Accident Fund designed to cover catastrophic medical costs run up at Nevada hospitals by those who can’t pay was taken away in not only 2009 but 2010 and 2011. For the coming biennium, that fund – collected from county property taxes as well – is projected to generate $39.6 million.
Jeff Fontaine of the Nevada Association of Counties said for Clark and Washoe counties, the 4 cents, 5 cents and indigent fund total more than 11 cents off their property tax rate.
He pointed out that, because both residential and commercial property values have fallen so dramatically, Clark is expecting a 26 percent reduction in property tax revenues. He said the situation is about the same in Washoe.
“The situation has not gotten any better for the counties,” he said. “They cannot afford to have a continuation of property tax diversions.”
The Indigent Accident Fund, Fontaine said, impacts not only the counties but hospitals throughout the state.
Another $49 million hit will come if the Business License Fee, which the 2009 Legislature doubled to $200 a year, goes back down to $100 July 1.
Two pieces of the puzzle affect the mining industry. The first created a progressive mining claims fee based on how many claims a miner has. It would generate $25.7 million a year if reinstated. The second is revenue neutral since it involved changing the Net Proceeds of Minerals tax from a projected payment in advance to an actual payment. The problem is, changing that would effectively bill the mines in Nevada for the same year’s worth of minerals twice.
Another revenue stream swept into the General Fund by the 2009 Legislature was $7.6 million a year from the unclaimed property fund that had been going to the Millennium Scholarship program. Taking that money put the scholarship program in financial dire straits. The treasurer’s office was hoping to get the money back and revitalize the Millennium Scholarship.
There is also a small amount of money generated from professional lobbyists by doubling their registration fees – about $100,000 a year.
It won’t be known until the State of the Staet Address Jan. 24 whether Sandoval has included any of those revenue streams to pay for his budget.