Last week, the Nevada Economic Forum seemingly gifted Governor Steve Sisolak (D) and the Nevada Legislature with just over $586 million in forecast tax revenue to pump into the state budget for the next two years. At first glance, it appears that everything is coming up roses in this springtime legislative ball in Carson City.
However, these roses do have some sharp and painful thorns. Today, we sift through the roses and the thorns to uncover a more accurate and complete view of Nevada’s post-pandemic economic future.
WARNING: Today’s story does eventually stumble upon a serious accusation of sexual violence. Reader discretion is advised.
“The projected increase in revenue for the state is a signal of the start of our comeback, and it’s no accident.”
– Governor Steve Sisolak, in a video response to the Nevada Economic Forum’s official budget forecast
Last week, the Nevada Economic Forum signaled some good news that state budget watchers were hotly anticipating: The official budget forecast projects $9.1 billion in (current) tax revenue for the next two years. That’s $586.2 million more than their estimate from last December, and this sudden windfall already has Governor Steve Sisolak and the Nevada Legislature breathing huge sighs of relief over their newfound ability to fully reverse last year’s special session budget cuts before the state even officially receives its American Rescue Plan fiscal relief funds.
In his special address to Nevadans last week, Sisolak declared, “In addition to the unbelievable increase in projected revenue, state economists also highlighted other signals of our economic recovery, including crediting the successful rollout of the COVID-19 vaccine as one of the driving factors to cause consumer confidence to jump to a 14-month high. The projected increase in revenue for the state is a signal of the start of our comeback, and it’s no accident.”
Indeed, the Economic Forum’s report showed a faster recovery this time than from the prior two recessions of the 21st century. And as we’ve previously explored, the biggest reason for Nevada’s faster recovery is federal government aid: chiefly the Families First Act and CARES Act in March 2020, the “mini-stimulus” and government funding deal in December 2020, and the American Rescue Plan in March 2021. Particularly programs like unemployment aid, SNAP assistance, and Medicaid deliver the most “bang for the buck” to those most in need result in fairly immediate economic stimulus, so this right here is a huge reason why we’re seeing faster growth with more consumers having more income available for more spending.
While the rest of Nevada has recovered pretty quickly and starkly, Clark County has lagged behind. Why is that?
As we dig deeper into the Economic Forum’s May report, we see that 16 out of Nevada’s 17 counties have already seen their official unemployment rates and sales tax revenue nearly or fully recover from the initial March 2020 plunge. Surprise, surprise (but not really), Nevada’s most populous and most economically active county (Clark) is the huge exception. During last Tuesday’s Economic Forum meeting, Nevada DETR Chief Economist David Schmidt admitted that if Nevada were split into two states of Clark County and “Not Clark County”, Clark County would have America’s highest unemployment rate while “Not Clark County” would have one of the nation’s lowest unemployment rates.
Even after Las Vegas Strip casino resorts began to reopen in June 2020, we saw repeated surges in new COVID-19 infections, but we haven’t seen as sharp of a rebound in gaming and tourism. As we’ve been trying our best to explain for over a year, our only shot at a sustainable economic recovery lay with a sustained effort to protect public health. And especially in a place like Clark County that’s historically depended so much on casino gaming and tourism to stay afloat, recovery was never going to be as easy as just reopening shuttered casinos.
Some 11 months after Sisolak and the Gaming Control Board first allowed casinos to reopen at limited capacity, several off-Strip “locals’ casinos” remain fully closed, while others have been slow to reopen hotel rooms, restaurants, and other amenities. As much as some far-right politicians and pundits want to blame Sisolak and “the lockdowns” for this, reality actually points to simple economics: the law of supply and demand. As long as a critical mass of otherwise prospective tourists feared the ongoing spread of COVID-19, they were not going to book flights and hotel rooms in Vegas regardless of what Sisolak announced at a press conference.
Now that new infections are well below our “winter surge” peak, and now that COVID-19 vaccines are readily available to the vast majority of American adults, the gaming and tourism sector is bouncing back. The Economic Forum projected an additional $100 million in gaming tax revenue over the next biennium, but that’s still below the $197 million in additional sales tax revenue that the Economic Forum projected for the next biennium. DETR Chief Economist David Schmidt even admitted the possibility that gaming and tourism sector employment may not fully recover to pre-pandemic levels any time soon.
Here’s yet another reminder of why President Joe Biden’s resolute advocacy for the American Rescue Plan turned out to be such a BFD for Nevada.
As we’ve been pointing out since January, the most important people in Nevada’s state budget-making process this legislative session are nowhere near Carson City. President Joe Biden refused to waver in his core demands for the American Rescue Plan, and Nevada’s Democratic Members of Congress stood firm in support of direct relief for both individuals and state and local governments. Their stalwart support for more robust stimulus is now paying off generous dividends right here in Nevada.
Though the Nevada Economic Forum’s official $9.1 billion budget forecast for the next two years is well above Sisolak’s original $8.68 billion 2021-23 budget request and the original 2019-21 $8.85 billion budget that was in place before last year’s special session budget cuts, it’s still below the $9.7 billion that state agencies had originally requested for the 2021-23 biennium. While Sisolak has already signaled a reversal of last year’s education and health care budget cuts and a boost of new dollars into DETR’s long-neglected unemployment system, it’s clearer than ever now that the American Rescue Plan’s state and local fiscal relief program is sorely needed to fill the rest of the holes in our state budget.
Even as the state still awaits the federal government’s disbursement of $2.9 billion in Rescue Plan fiscal aid, we’re already starting to feel the benefits now. As a result of the other Rescue Plan programs, such as the extension of expanded unemployment insurance through August, 100% subsidized COBRA health insurance for qualified unemployed and furloughed workers, an expansion of the Affordable Care Act’s health insurance premium tax credits through next year, expanded child tax credits, and the $1,400 “stimmies” (or one-time economic impact payments) that are still being memed from here to eternity, more consumers can afford more discretionary spending. And from what we see in the Economic Forum’s May report, this boost in consumers’ discretionary spending is already helping our state government stay afloat.
“These projects are key to diversifying the state’s economy and keeping our unemployment low when tourism alone can’t sustain our economy.”
– Rep. Dina Titus, on the American Jobs Plan and the American Families Plan, in her address to the Nevada Legislature on May 3
The American Rescue Plan stipulates that all state and local fiscal aid must be used by December 31, 2024. And while $2.9 billion might sound like a huge number, the State of Nevada nonetheless can only stretch that $2.9 billion so far with so much pent-up demand for public education funding, health care funding, and public infrastructure programs like broadband internet and water systems. What will the State of Nevada do once the American Rescue Plan’s fiscal relief is exhausted and expired?
During her presentation to the Nevada Legislature last Monday, Rep. Dina Titus (D-Las Vegas) touted Biden’s two new infrastructure proposals, the American Jobs Plan and the American Families Plan, as potentially powerful vehicles for stronger economic recovery. Or as Titus put it, “These projects are key to diversifying the state’s economy and keeping our unemployment low when tourism alone can’t sustain our economy. […] In the 21st century, we shouldn’t settle for anything less.”
Though it remains unclear what will become of Biden’s proposals in Congress, Titus’ comments nonetheless hold plenty of salience. How many times have we heard about Nevada’s need to “diversify our economy”? Yet beyond the occasional corporate tax subsidy deal that was struck in the name of “Jobs!”, what have we been doing to diversify our economy and place ourselves on a more sustainable path?
As usual, we told you so: Notes on the final “Crash and Bern of the Blockchain City Innovation Zone”
Late last month, Sisolak finally publicly admitted defeat: The “Blockchain City” bill is dead this session, and in its place State Senate Majority Leader Nicole Cannizzaro (D-Las Vegas) merely offered SCR 11 to allow for an “joint special committee to conduct a study concerning innovation zones”. In plain language, this means that the “Innovation Zone” proposal is so unpopular in the Legislature that Democratic legislative leaders decided to give Sisolak this face-saving option of placing “Innovation Zones” into a sort of extended legislative coma that may either result in a revised “Innovation Zone” bill for 2023, or a quiet death by way of an interim committee that the vast majority of Nevadans will never even notice.
Back in February, we examined the disturbing “company town” history behind “Blockchain City” and the “Innovation Zone” plan, a troubling history that Nevada has repeated far too often. From the earliest days of mining companies writing their own tax law into the Nevada Constitution to “the casinos take care of us” mentality that’s used to justify a “light touch” on taxing and regulating the multinational corporations that effectively run the Las Vegas Strip that’s historically served as the Main Street of Nevada’s economy, private companies have exercised an alarming amount of power over public policy.
Even as Nevada policymakers began to promote “economic diversification” in the early 2010’s, this same “company town” mentality prevailed: The “momentum” just shifted from gaming and mining conglomerates to “Big Tech innovators”. While national media pundits are chattering over Tesla founder Elon Musk’s recent stint as a Saturday Night Live guest host, it’s important for us to remember that this company has taken $1.3 billion worth of state tax subsidies and essentially leveraged it into more government deals, an eye-popping amount of cryptocurrency and stock market speculation, and a stunningly high Wall Street “valuation” that is increasingly disconnected from the amount of electric cars that Tesla actually produces.
Fast forward to 2021, and it all finally started to converge and implode with Sisolak’s advocacy for an “Innovation Zone” proposal that emanated from one former trial lawyer who made his own fortune off cryptocurrency speculation. This one former trial lawyer essentially concocted a scheme by which he would gain the ability to make his own laws for his own “Innovation Zone” that would allegedly be based on the very cryptocurrency sector that has become a hotbed of speculation that occasionally devolves further into financial wrongdoing. One would think this alone would have set off alarm bells in the Governor’s Office. Instead it took a “PR strategy” that merely led to heightened local and national media scrutiny, a very public (and very bipartisan!) backlash at the Nevada Legislature, and a sexual harassment lawsuit based on a very serious “grooming” accusation to convince Sisolak to give up on “Blockchain City” and the “Innovation Zone”.
For Nevada to develop a better economic future, we must learn from our past mistakes.
As the Nevada Current’s Hugh Jackson oh-so-deftly alluded to in his column detailing the breakdown of Blockchains’ “Innovation Zone” scheme, Nevada policymakers have essentially been pursuing macroeconomic “get rich quick schemes” for so long, and it’s taken two horrifyingly severe recessions (first the Great Recession of 2007-09, then the COVID-19 Recession of 2020) to expose the brutal reality of state policymakers’ failure to chart a more sustainable path for economic development. And despite the “visionary thinking” behind the lobbying-industrial-complex’s attempt to sell Blockchains’ “Innovation Zone” as our one true path to economic salvation, it ultimately took some good old-fashioned Keynesian economics by way of President Joe Biden, Congressional Democrats, and their American Rescue Plan to help us out of this mess.
Just like we’ve often sought to guide consumers and retail investors away from scammy “business opportunities” like multi-level marketing (MLM’s), “10X” real estate slush funds, and super sleazy “trading apps”, we must now focus our attention on our own state… And on our state’s terrible tradition of trying to “10X” economic development through overreliance on a handful of sectors, systemic underfunding of the social safety net that’s ultimately necessary for communities’ long-term survival, and the failed experiment of “economic diversification through corporate tax subsidies”.
It took Biden’s American Rescue Plan to rescue Nevada from another fiscal crisis. We can’t afford to just wish and hope and pray that Biden can come to our rescue again. Sooner or later, we will have to take our own action to “build back better” our own economic future.
Editor’s Note: Stay tuned for our next installment of “This Week in Corona Scams”, where we delve deeper into the bizarro world of Conspirituality, bad guru “life hack advice”, and the social media trends that continue to jeopardize our public health (and so much more). Also (3:20 PM UPDATE), the U.S. Treasury released new official guidance for American Rescue Plan state and local government aid along with the final official formula for determining the amount of aid for each state. While Nevada’s official allocation of $2,738,837,228.70 is a little less than the $2.9 billion we were expecting in March, this Rescue Plan assistance will nonetheless be warmly welcomed in Carson City during these final weeks of the legislative session.