Behind the scenes of Nevada’s budget projections is a group you probably don’t know of, but their forecast reshaped the 2025 legislative agenda.
The Economic Forum is comprised of five private-sector experts appointed by the governor for two-year terms. By statute, the Economic Forum is required to provide forecasts on or before December 3 of even-numbered years, to be used by the governor for budget recommendations. An additional forecast is due on or before May 1 of odd-numbered years to be used by the legislature in balancing the General Fund. These forecasts are the backbone of Nevada’s biennial budgets, legislative priorities and fiscal policy.
This May, the Forum reconvened and delivered a costly update – legislators have $191 million less to work with than originally anticipated. In December, forecasters expected general-fund revenues of $12.4 billion over the two-year budget cycle, but on May 1st the projection had decreased to $12.2 million. This decrease is largely because of small drops in expected revenues from the state’s various tax sources – sales and use tax, modified business tax and commerce tax. Sales and use tax—a major funding source—was originally expected to grow 4 percent from fiscal year (FY) 25 to FY26, but has now been revised down to just 2.1 percent growth. In fact, projections for FY25 were already showing signs of trouble: forecasters had expected 0.15 percent growth, but actual data showed a 0.77 percent decline—a full percentage point swing. In simple terms this results from fewer visitors, a stagnant labor market and slightly less consumer spending. While the downturns were largely attributed to new federal trade barriers, it is essential to understand what this forecast translates into for the local economy.
While the Economic Forum anticipates slower revenue growth, there was a projected increase in tax credit giveaways. General fund tax credits are expected to increase by 24 percent year-over-year, without taking into account any expansions. Essentially, these credits reduce the total tax revenue the state actually collects, meaning less money is available to spend on public services. So for lawmakers, this is a good point to evaluate if the existing programs are performing well and if scaling the incentives without guaranteed return on investment is a smart move.
Controversial proposals to expand Nevada’s film tax credits from $10 million annually to up to $120 million or more now have much more tangible effects on the budget, for instance. Lawmakers must evaluate the tradeoffs between giveaways to politically popular industries and items they’d like to spend money on.
Slowing revenue growth means lawmakers must exercise greater discipline throughout the budget. Two years ago, lawmakers grew Nevada’s education spending by $2 billion, but now the education fund will accrue about $160 million less revenue than originally expected. The decreased projections result from a slight reduction in local school support tax revenue, which is a 2.6 percent component of the sales tax. The decreased projections likely mean lawmakers won’t be able to continue proliferating new spending programs as they have in recent years. The promises made by politicians might be revisited with omnibus bills of both Majority Leader Cannizzaro and Governor Lombardo now at risk.
Flat or declining revenues often portend a special session because legislators don’t easily let go of their new spending ideas and have difficulty settling on a budget. However, proposals that state agencies have indicated would be expensive to implement are beginning to be weeded out as the necessity of fiscal prudence begins to reappear in Carson City. This is not a crisis by any stretch, however. The Economic Forum has forecast a slowing rate of growth and not a major correction. The balance in the state’s Rainy Day Fund is at an all-time high. Regardless of what you may hear from lawmakers or interest groups who lobby for greater spending, there is no need to panic. Nevada mostly just needs to refrain from creating brand new programs.
