MINUTES OF THE MEETING OF

THE STATE OF NEVADA ECONOMIC FORUM

November 30, 2000 – 9:30 A.M.

Legislative Building

401 South Carson Street, Room 4100

Carson City, Nevada

 

A meeting of the State of Nevada Economic Forum (created as a result of Senate Bill 23, 1993) was held at 9:30 a.m., Thursday, November 30, 2000, in Carson City, at the Legislative Building, Room 4100, with videoconference to the Grant Sawyer State Office Building, 555 East Washington Street, Room 4412, Las Vegas, Nevada.

 

ECONOMIC FORUM MEMBERS PRESENT:

 

Cary Fisher, Vice-Chairman                    

Steve Greathouse

David J. Morgan                                    

Ronald Zideck

 

ECONOMIC FORUM MEMBERS ABSENT:

 

            Leo V. Seevers, Chairman - Excused

 

ATTENDING IN CARSON CITY:

 

            Steve Hixon, Gaming Control Board

            Dennis Neilander, Gaming Control Board

            Frank Streshley, Gaming Control Board

Bill Anderson, Economist, State Budget Division

            Bob Murdock, Department of Employment, Training and Rehabilitation

            John P. Comeaux, Director, Department of Administration

            Bill Reinhardt, Office of the Secretary of State

            Lynne Knack, Department of Taxation

            Bob Gagnier, State of Nevada Employees Association

            Al Bellister, Nevada State Education Association

            Dino Dicianno, Department of Taxation

            Steve George, Attorney General’s Office

            Paul Hewen, Attorney General’s Office

            Dave Morgan, News Media

            Cy Ryan, Las Vegas Sun

            Geoff Dornan, Nevada Appeal

Ted A. Zuend, Deputy Fiscal Analyst, Fiscal Analysis Division.

            Mark Stevens, Fiscal Analyst, Fiscal Analysis Division

            Gary Ghiggeri, Fiscal Analyst, Fiscal Analysis Division

            Russell Guindon, Deputy Fiscal Analyst, Fiscal Analysis Division

            Joi Davis, Secretary, Fiscal Analysis Division


ATTENDING IN LAS VEGAS:

 

Pat Zamora, Clark County School District

Karen Baggett, Nevada Commission on Economic Development

Walt Rulffes, Clark County School District

 

EXHIBITS:

 

Exhibit A  -                   Meeting Notice and Agenda

Exhibit B  -                  Attendance Roster

Exhibit C  -                  November 30, 2000, Meeting Packet

Exhibit D  -       Table 3 – General Fund Revenue Forecasts, by the Fiscal Analysis Division.

Exhibit E  -       Comparison of November 30, 2000 Forecast vs. October 31, 2000 Forecast:  Major Revenues by Forecaster.

Exhibit F - Letter dated November 28, 2000, to Chairman Leo Seevers, from Carole Vilardo, Nevada Taxpayers Association.

Exhibit G -        Two Percent Sales and Gaming Percentage Fees Chart, prepared by the Fiscal Analysis Division.

Exhibit H -        Forecast Information on the Major General Fund Revenues, by the Fiscal Analysis Division, Legislative Counsel Bureau – November 30, 2000.

Exhibit I -         State of Nevada Department of Administration Budget Division General Fund Revenue Forecast November 2000, by the Budget Division.

Exhibit J -         Report of the Economic Forum dated December 1, 2000.

 

DUE TO SIZE, THE EXHIBITS ARE NOT ATTACHED TO THESE MINUTES, HOWEVER EXHIBITS MAY BE REVIEWED AT THE FISCAL ANALYSIS DIVISION OR RESEARCH DIVISION LIBRARY OF THE LEGISLATIVE COUNSEL BUREAU, CARSON CITY, NEVADA, UPON REQUEST.

 

 

         I.         ROLL CALL

 

Vice-Chairman Cary Fisher called the meeting of the State of Nevada Economic Forum to order at 9:30 a.m., noting that Chairman Seevers was absent, excused.

 

II.      APPROVAL OF THE MINUTES FROM THE OCTOBER 31, 2000, MEETING OF THE ECONOMIC FORUM.

 

          The Chairman asked if the members of the Forum had reviewed the minutes from the October 31, 2000, meeting, which were printed in the Meeting Packet (Exhibit C) behind Tab II.

 

         MR. GREATHOUSE MOVED TO APPROVE THE OCTOBER 31, 2000, MEETING MINUTES. 

 

         MR. ZIDECK SECONDED THE MOTION, WHICH WAS UNANIMOUSLY APPROVED BY THOSE PRESENT.

 

         Russell Guindon, Deputy Fiscal Analyst, Legislative Counsel Bureau, Fiscal Analysis Division, identified two corrections that were made to the minutes that have been presented to the Chairman for approval:

 

         On page 13, second paragraph under Section VI, the sentence should read “. . . Mr. Streshley stated that Percentage Fee Tax was based upon each non-restricted licensee’s monthly taxable revenue and the tax rates are 3% of the first $50,000 of taxable revenue, 4% of the next $84,000 and 6.25% of all revenue exceeding $134,000.

 

         On page 25, first paragraph the sentence should read “However, it was his opinion that it would be beneficial to make that revision to FY 2001 since the estimate by the Forum was $525 million . . .”

 

         MR. GREATHOUSE AMENDED HIS MOTION TO INCLUDE THE ABOVE CORRECTIONS.  MR. ZIDECK CONCURRED AND THE MOTION CARRIED UNANIMOUSLY BY THOSE PRESENT.

 

*  *  *  *  *

 

     III. APPROVAL OF DECEMBER 1, 2000, FORECASTS OF MAJOR GENERAL FUND REVENUES FOR FY 2001, FY 2002 AND FY 2003.

 

         Mr. Guindon provided the Forum with the following supplemental information for the meeting: 

 

·        Revised Table 3 replaces the information under Tab 4 of the meeting packet (yellow sheets Exhibit D).

·        Comparison of November 30, 2000 Forecast versus October 31, 2000 Forecast (green sheets Exhibit E).

·        Letter from Carole Vilardo, Nevada Taxpayers Association, dated November 28, 2000 (Exhibit F).

·        Month-to-Month collections of the 2% Sales Tax and Gaming Percentage Fees (blue sheets Exhibit G).

 

 

 

Gaming Percentage Fees

 

               Frank Streshley – Gaming Control Board

 

         Mr. Streshley pointed out that the Comparsion document (Exhibit E) showed that the Gaming Control Board’s (Board) forecast for Percentage Fees has been slightly revised from the October 31, 2000, meeting.  For FY 2001 the growth rate has been adjusted down from 6.17% to 5.89% with total collections at $593.3 million.  For FY 2002, the growth rate was adjusted from 5.20% to 5.10% with $623.5 million in collections.  For FY 2003, the growth rate was not adjusted and remains at 3.83%; however, because the collections during the base years went down, it was now at $647.4 million. 

 

         Mr. Streshley informed the Forum that since the October 2000 meeting, the Board made minor adjustments by incorporating the September 2000 gaming win numbers into their model.  September 2000 gaming win came in at 3.8% or $31 million more than last year.  The Board had forecast that the gaming win for September would come in flat and the Board knew September would be a difficult comparison month to last year’s numbers.  In September 1999, gaming win had increased 23.2% making that month one of the best on record for the State in gaming win and Percentage Fees collections.  The September 1999 numbers included four new properties:  The Bellagio, Mandalay Bay, The Venetian and The Paris in Las Vegas.  The De La Hoya-Trinidad fight occurred that month and that added to the increased high-end play on games. 

 

         Continuing, Mr. Streshley stated that Baccarat in September 2000 was down 53% or $29 million less than last year.  The hold percentage had dropped from 19.71% in 1999 to 13.14% in 2000.  Excluding Baccarat from the total gaming win in September 2000, the statewide win would have only decreased 39% or $2 million.  Therefore, the majority of September’s decline was from Baccarat alone. 

 

         Mr. Streshley indicated that last year’s numbers included the Desert Inn, which closed August 28, 2000.  Since the October 2000 meeting, the Board has made some minor adjustments to the number of slot machines at properties.  For example, the Aladdin has removed approximately 250 machines from their floor yet Sam’s Town added approximately 500 machines to the floor, which had not been considered in the Board’s October 2000 forecast.  Adjustments were also made for the Comstock closure in Reno, which removed 530 machines out of the model used for forecasting Percentage Tax Fees.  Mr. Streshley pointed out that there was one new property that was included in FY 2001 numbers but the January 2001 opening has been pushed back to a July 2001 opening, so those numbers were adjusted out of this year’s forecast.

 

         Overall, year-to-date gaming win through September 2000 is up about 5.6% with taxable win up 6.3% and percentage Fees collections are up about 5.3%.  To reach the growth rate for this year, the base year, of 5.8%, collections for the remainder of the year will have to grow at approximately 6.8% per month.  Mr. Streshley stated that the Board’s forecast for the Estimated Fee Adjustment (EFA) remains the same as the October forecast.

 

         Russell Guindon – Fiscal Analysis Division

 

         Mr. Guindon directed the Forum to the Comparison Document (Exhibit E) and commented that the current month had a total win that was down 3.8% which was not a surprise based on the activity in that category a year ago.  However, even though activity was down, collections were up 4% which does not happen often but occurs when the net position of credit extended and credit collected within the month compared to the same period one year ago causes the distortion between win and collections.  For fiscal year-to-date, total win was up 5.6% and slot win was up 6.1% and game & table win was up 4.8% as compared to the first four months of FY 2000 when total win was up 12.5%, slot win was up 11% and game & table win was up 15.4%.

 

         Commenting on market statistics for the Las Vegas market, Mr. Guindon pointed out that Las Vegas visitor volume for the month of September was up only 0.7% which was not surprising given visitor volume was up 16.3% one year ago due to the new mega-resorts that came on-line and the major fight that occurred in September 1999.  Also, calendar year-to-date, visitor volume through September 2000 is up 7%.  Looking at June through September 2000, visitor volume was up 5.4% compared to a 13.2% increase through the first four months of FY 2000.  The average growth in visitor volume for August/September 2000 compared to August/September 1999 was 3.2%.

 

         Turning to the capacity side of the market, Mr. Guindon stated that the room inventory in September 2000 was only 2.3% greater than the capacity available one year ago.  A review of the information provided by the Las Vegas Convention & Visitor’s Authority in their hotel/motel construction bulletin, an indicator of what will occur regarding room expansion over the next couple years reveals that at the end of FY 2001, rooms will be 3.1% higher than at the end of FY 2000.  It is also expected that the room inventory will be 2.1% higher at the end of FY 2002 and only 1.4% higher at the end of FY 2003.  Mr. Guindon said its not that visitor volume isn’t expected to increase; rather, the increase would be at a more modest rate.  He went on to state that a recent article by David Anders, Gaming Analyst, Merrill Lynch, indicated that the outlook for the market was good in terms of earnings and extra shares.  However, visitor volume is expected to grow 6% in calendar year 2000, 3% in calendar year 2001, and 2% in calendar year 2002.  To achieve the forecast of 6% in visitor volume in calendar year 2000, a 3.1% growth rate would be needed over the next three months. 

 

         Mr. Guindon directed the Forum to the green handout (Exhibit E) and stated that the forecast by the Fiscal Division’s for Percentage Fees Collections in FY 2001 was 3.9% growth which was about a half of a percent lower than what was forecast in October 2000.  For FY 2002, the Fiscal Division expects a 4.4% growth coming in at approximately $6.6 million.  In FY 2003, the forecast was 3.7% which is 0.2% less than the October forecast and results in $628.9 million.  He concluded that over the three year forecast period, the November forecast was approximately $8.1 million less than the October forecast by the Fiscal Analysis Division.

 

         In explaining why the November forecast differed from the October forecast, Mr. Guindon reminded the Forum that the Fiscal Division forecasts Percentage Fee Collections by forecasting the growth expected from collections from taxable gaming revenue generated by the expected growth in win and an estimate for the Estimated Fee Adjustment (EFA).  In addition, win is forecast by its two major components, the slot side of the market and the game side of the market.  The forecasts for slot and game win are generated by using regression equations based on a number of devices and the average slot win or game win percent using information provided by the Gaming Control Board. 

 

         Turning to Table One on page five of the Fiscal Division’s handout (Exhibit H), Mr. Guindon pointed out that for FY 2001, Percentage Fees Collections were expected to grow 5.4% compared to 6% growth expected in October 2000.  The EFA for FY 2001 was expected to be $3.7 million, approximately $500,000 greater than the October forecast.  He explained that the main reason for the adjustment to the EFA was due to a reconciliation of the difference between Fiscal Division and Gaming Control Board forecasts for Advance License Fee collections.  Mr. Guindon pointed out that the Fiscal Analysis Division expects growth in Percentage Fee collections to be approximately the same in FY 2002 and FY 2003.

 

         Mr. Guindon informed the Forum that the November forecast for collections expected off of the taxable win was revised due to revisions in the slot win and game win forecasts.  The same adjustments to devices was made by the Fiscal Division as was made by the Gaming Control Board (Board) after the Board provided the Fiscal Division with information regarding property openings and closings.

 

         Mr. Guindon directed the Forum to Table 2, page six of his handout (Exhibit H) which provided detail for the slot forecast.  Slot win was now expected to grow 5.7% in FY 2001, compared to 6.3% expected growth in the October forecast.  Approximately 0.2% of the downward adjustment is due to the changes in the assumptions regarding the number of devices that was discussed earlier by Frank Streshley of the Gaming Control Board.  The remainder of the forecast revision is due to an adjustment to the current quarter based on September 2000 actual results.  On an activity basis, June, July and August are the first quarter of FY 2001 and September, October and November are the three months of the second quarter. 

 

         Mr. Guindon stated that there was no change in assumptions for the average slot win percent during the forecast period.  In FY 1999-2000 there was a .1% increase over those two years.  However, for the first four months of this fiscal year, the average slot win percent statewide was at 5.27% compared to 5.28% for the first four months of FY 2000.  That is why there was no adjustment made to the assumptions regarding average hold on slot win.  Continuing, Mr. Guindon stated that slot win is expected to grow at 4.5% in FY 2002, compared to 4.7% forecast in October.  In FY 2003, slot win growth was expected to be 3.6%; the same as the forecast from October.

 

         Mr. Guindon directed the Forum to Table 3, page seven of Exhibit H, where it shows that expected growth in game win decreased to 5% compared to the 5.5% forecast in October.   He explained that game win was revised down from last month’s forecast for the same reason as slot win in accordance with the information provided by the Gaming Control Board as well as adjustments based on information received for September activity.  Game win is expected to grow 4.6% in FY 2002, compared to 4.1% in October.  In FY 2003, growth in game win is expected to be 3.7%, which was the same forecast as presented in October.

 

         Mr. Guindon discussed the implications and interpretation of the Fiscal Division’s forecast for win and percentage fees.  He stressed that in terms of capacity, in FY 1999 the Bellagio was on-line for approximately eight months of that fiscal year, the Mandalay Bay was on line for approximately three months and the Venitian opened at the end of that fiscal year so that property did not provide any capacity or new payments.  Therefore, these properties basically provided approximately 11 new payments to the Percentage Fee Collections in FY 1999, compared to FY 1998.  Then, in FY 2000, the above three properties provided payments as well as the Paris.  With all four of these properties providing payments compared to the year before, cumulatively these properties provided 34 monthly payments in FY 2000.  Coming into FY 2001, the Paris has been providing payments for three months, and the Aladdin will provide approximately ten months of new property activity for FY 2001.  Thus, there will be 13 payments provided by new properties compared to the 34 payments that were provided by new properties in FY 2000.  This was the information used to forecast win and percentage fees by the Fiscal Division.

 

         Mr. Guindon asked the Forum to turn to page eight, Chart 1 (Exhibit H) and explained that the chart displayed the growth in Percentage Fees Collections for the last three fiscal years compared to the same months one year ago.  Given the forecast for Percentage Fee Collections, the Fiscal Division expects growth at 3.9% in FY 2001.  To achieve that target, an average of 3.3% growth needs to occur for each month of the remaining eight months of this fiscal year.  Over the final eight months of FY 2000, Mr. Guindon pointed out that growth in total Percentage Fee Collections averaged 11.7%. 

 

Mr. Guindon stated that the information in Chart 1 shows that on average over the remaining portion of FY 2000-01, growth will have to occur against the strong base posted a year ago.  To emphasize the importance of this issue, Mr. Guindon provided the following example:

 

            Assume collections in the month of November come in on target, growing the required 3.3%, compared to 13.9% growth a year ago, and assume December comes in flat at zero growth, compared to 23.1% a year ago.  Given these assumptions of growth for November and December, instead of having to average 3.3% per month, growth would have to average 3.9% over the remaining six months of the fiscal year to achieve the Fiscal Division’s forecast for FY 2000-01 of 3.9%.

 

         Chart 2, page nine of the handout (Exhibit H) displayed the same information but only references the Percentage Fees due from taxable gaming revenue.  To achieve the forecasted growth rate of 5.4% for FY 2001, an average of 4.2% growth would be needed for the remaining eight months of this fiscal year.  Mr. Guindon reminded the Forum that the taxable gaming revenue needed to grow stronger than the Percentage Fee Collections total because the EFA net at the end of the fiscal year is expected to pull 1.5% off of the total growth amount.

 

         So, again if we make the assumption that November comes in on target at 4.2% and December comes in flat, this would imply that instead of having to average 4.2% we would actually have to average 4.8% over the remaining six months.

 

         Chart 4, page 11 of the handout (Exhibit H) displayed the growth on the slot side of the market because it is the activity that drives the taxable collections.   Mr. Guindon stated that slot win is currently up 6.1% for the first four months of FY 2001 so slot win will have to average 5.5% for each of the remaining eight months of this fiscal year to reach the target growth rate. 

 

         Mr. Guindon directed the Forum to Chart 5 on page 12 of his handout (Exhibit H) and indicated that the chart displayed the same information for game win, which is up 4.8% for the first four months of FY 2000. Therefore, 5% growth must be averaged over each of the remaining eight months of the fiscal year to reach the target forecast.  This is compared to average growth over the final eight months of FY 2001 of 12.8%.  Mr. Guindon reminded the Forum that game win activity in the market tends to be more volatile because Baccarat can move things around and credit play and high-end play, special events and big fights can dramatically change this activity. 

 

         In discussing Chart 6 (page 13 Exhibit H), Mr. Guindon explained that the chart shows the relationship between the Percentage Fee Collections from taxable gaming revenue and the total Percentage Fees that include the effect of the EFA. 

 

            Mr. Guindon pointed out that when one looks at the Fiscal Division’s forecast, one might be led to believe that the forecast of 3.9% for FY 2000-01 may be low, especially given the average growth of 3.3% required over the remaining eight months to reach the target, especially when compared to the other forecasts as well as the historical behavior observed in recent years.  However, Mr. Guindon stated that it is important to remember that it is the activity (gaming win) that generates taxable gaming revenue, which generates the percentage fee collections and also drives the estimated fee adjustment mechanism.

           

         He explained that Chart 6 was created to sort out the relationships of that activity.  Chart 6 shows the actual for the first four months.    During September and October 2000, the collections from taxable gaming revenue grew much stronger than win; mainly attributable to the interaction of credit play from this year to last year.  For the first four months of this fiscal year, win is up 5.6% cumulatively, but collections from taxable gaming revenue are actually up 8.1% resulting in a 2.5% gap in the growth in activity and the growth in collections from that activity.  Historically, win and taxable grow at different rates during a 12-month fiscal year period but the gap usually closes by the end of the fiscal year.  Taking into consideration the collections from the EFA and total percentage fee collections are at 5.3%, there is a 2.8% gap between the growth of those two activities which should result in a 1.5% gap by the end of the fiscal year. 

 

            In summary, Mr. Guindon stated that from the collections side, it doesn’t seem like the projected growth and the average growth needed to reach this projection is that strong.  However, because of some of the distortions that currently exists between taxable gaming revenue and the actual collections from taxable gaming revenue and the EFA, Chart 6 indicates that the Fiscal Division is expecting gaming activity (win) to have grow at what it believes are reasonable rates on average per month.  This point is especially true when one considers the levels that were posted a year ago that we will have to go up against over the remainder of the fiscal year.

 

            Mr. Guindon pointed out that any of the future months where average growth needed for the month is not achieved, will have to be made up somewhere else in the remaining months to reach the Fiscal Division’s forecast for FY 2001.  Thus, given that only one new property is on‑line down south on the Strip and the expectations for the room capacity and occupancy rates if the current levels are maintained and the implications for visitor volume growth, the Fiscal Division does not believe its forecasts for percentage fee collections is unreasonable.

 

 

         Bill Anderson – Budget Division

 

         Mr. Anderson pointed out that by contract, WEFA was not required to be present at the November meeting of the Economic Forum. However, he has spoken with WEFA representatives and was informed that WEFA’s October forecast is unchanged.

 

         The Budget Division’s forecast begins on page 14 of the handout (Exhibit I).  Mr. Anderson pointed out that the Budget Division’s forecast was up slightly, insignificantly relative to the October forecast.  The annual changes for the forecast period are below the October forecast and the slight changes simply reflect a new month of activity to complete a full activity quarter.  Mr. Anderson directed the Forum to page 16 of the handout that sets forth the method used by the Budget Division—Percentage Fee Collections adjusted for inflation. 

 

         Mr. Anderson indicated that since the Forum has already heard much about market trends and industry fundamentals from both the Gaming Control Board and the Fiscal Analysis Division, he would not discuss that further.  He pointed out that since the Budget Division had the highest forecast for Percentage Fee Collections, the Forum deserved an explanation.  He directed the Forum to page 17 of Exhibit I which showed a simple view of what needed to occur for the remaining period of this fiscal year.  The graph shows that 7.8% growth is needed for the remainder of FY 2001 to achieve the target set by the Budget Division.  That growth is compared to the 11.7% growth rate that was seen during the same time frame a year ago (October 1999 through May 2000).  Mr. Anderson indicated that the Budget Division believes this is quite likely to occur.  In reviewing the growth rates for the past 12 months, a 9.5% growth rate is seen compared to the growth of a year ago of approximately 12.2%.  So, 7.8% versus 11.7% growth can be reasonably accomplished relative to the 9.5% versus 12.2% growth that unfolded over the last 12 months.

 

         Mr. Anderson agreed with the comments made by Russell Guindon that the new properties in the Las Vegas market have been on line for more than a year which has aided in forecasting collections during each of the last three months of the forecasting period.  The most recent month saw 4% growth compared to 27.5% growth one year ago.  The month before that, 9% growth was seen compared to 13% growth of one year ago.  The month before that was 6% growth compared to 8.6% growth.  Mr. Anderson reiterated that these figures included all the new properties annualized.  Whereas, the Paris and the Aladdin are properties that still need to be annualized.  Therefore, the Budget Division believes that despite the fact that the properties in the Las Vegas market are annualizing, the strength is still present and that was evidenced by the figures received for the past few months.  He opined that the Chart on page 17 (Exhibit I) reflects that fact.

 

         Stressing another point, Mr. Anderson said the Budget Division continues to see results that are slightly in excess of their expectations.  For instance, when he appeared before the Forum in October, the Budget Division was looking for collections in taxable gaming revenues of 7.5% during that quarter; actual collections were 8.5%.  So, gains in excess of what was expected continued.  The Budget Division admits their forecast is the highest of all the projections provided, but believe the fundamentals are present to achieve the scenario expected over the course of the next year. 

 

         Regarding FY 2002 and FY 2003, Mr. Anderson indicated nothing has happened in the last month that required the Budget Division to make changes to those years from the October forecast other than 0.3% percent. 

 

         Mr. Fisher stated that the forecast that was provided to the Forum by outside economist, Mark Nichols (Exhibit C, page 97-103), shows that significant drops in revenue growth occur the year after large properties open.  He asked Mr. Anderson to comment.

 

         In response, Mr. Anderson stated that the Budget Division’s forecast reflects the “drop-off” that is seen after one year of the opening of a new property.  He explained that FY 2000 ended with approximately 12.8% growth and that the Budget Division was going down to 7.1% growth in FY 2001 and then down again to the mid-4% range for FY 2002 and FY 2003.  The Budget Division does expect things will slow down, but in the near term the strength is still present to keep generating the kinds of numbers that have been seen so far.

 

         Mr. Greathouse noted that when WEFA was at the October 2000 meeting of the Economic Forum, discussion on the macro picture was held.  Mr. Greathouse opined that revenues in Nevada are tied to the nation as well as the State of California, both of which continue to have a relatively positive forecast.  Looking at the way FY 2001 will end, he was persuaded toward accepting the agency forecast, then looking at the Budget Division’s figures for FY 2002 and FY 2003 in terms of percentage increases.  He opined that there is continued strength even though there is some evidence of an impact in the outer markets that are not so positive such as in Laughlin and Reno; however, the driver is still Las Vegas, which continues to have plenty of positive things happening.

 

                              MR. GREATHOUSE MOVED TO ACCEPT

                                          THE AGENCY NOVEMBER FORECAST FOR PERCENTAGE FEES COLLECTIONS OF $593 MILLION FOR FY 2001, 4.7% GROWTH

                                          FOR FY 2002, AND 4% GROWTH FOR FY 2003.

 

         Mr. Morgan clarified that Mr. Greathouse was effectively changing the rate for FY 2001 from 5.8% to 5.9% if the agency’s projections were to be accepted.  Mr. Greathouse concurred. 

 

            MR. MORGAN SECONDED THE MOTION AND THE MOTION CARRIED UNANIMOUSLY BY

            THOSE PRESENT.

 

*  *  *  *  *

 

Casino Entertainment Tax

 

         Frank Streshley – Gaming Control Board

 

         Mr. Streshley noted that the Comparison Tables (Exhibit E) reflect slight adjustments to the October forecast by the Gaming Control Board (Board).  Minor adjustments were made to the base growth rate and adjustments were made for new property collections.  Specifically, the Board’s October forecast did not include the Sam’s Town expansion, which includes a new entertainment area with seating for 1,100. 

 

         Mr. Streshely stated that for FY 2001, the Board adjusted the growth rate in Casino Entertainment Tax up from 6.10% to 6.35% generating $62.2 million in collections.  For FY 2002, the growth rate was adjusted up from 4.81% to 5.05% with $65.4 million in total collections, and for FY 2003, the Board’s forecast was adjusted up from 3.77% to 4.01% with $68 million in total collections.

 

         The October collections for Casino Entertainment Tax came in at approximately 8.42%.  Year-to-date collections for Casino Entertainment Tax is approximately 9.45% and the Board anticipates that will decline as compared to several months last year that were in the high 20% range.  January 2000, for example, was up 29% last year with all the high-end entertainment that was brought in for the Millennium New Year’s celebrations.  So, the 6.4% anticipated growth rate for FY 2001 means that collections for the remainder of the fiscal year will need to average approximately 5.3% but the Board feels that can be achieved.

 

         Russell Guindon – Fiscal Analysis Division

 

         Mr. Guindon directed the Forum to the Fiscal Division’s forecast for Casino Entertainment Tax (page 14, Exhibit H) as well as the Comparison Sheets (Exhibit E).  He indicated that the Fiscal Division did not revise its forecast for this revenue source after obtaining the figures provided by the Gaming Control Board.  In October, the Fiscal Division was having to average 6.5% for the remaining ten months of the fiscal year to hit the forecast growth rate of 7.1% but given that the latest month came in at 8.5% which is about 2% higher than was needed to stay on target, only 6.3% was needed on average over the remaining nine months of FY 2001 to obtain the 7.1% growth rate and there was no information that required the Fiscal Division to revise their forecast for all three years.

 

         Bill Anderson – Budget Division

 

         Mr. Anderson stated that the Budget Division’s forecast for Casino Entertainment Tax collections was presented on page 36 of their handout (Exhibit I).  He advised the Forum that the Budget Division revised their forecast upward from the October forecast which was at 5.5-6% growth but actual collections came in at the mid-8% range for the most recent month and information reveals that the year-to-date growth was approximately 9% so the Budget Division felt comfortable with their forecast.  To achieve their forecast, a 7.5% growth on average was needed for each month of the remaining fiscal year.  In the past 12 months, from October 1999 to September 2000, growth in Casino Entertainment Tax collections was approximately 15.6% which was off from an earlier 12-month period of about 31.2% so given what has occurred over the past 12 months, the Budget Division believes their forecast is more than acceptable. 

        

         Continuing, Mr. Anderson said that considering the new properties coming on line and annualizing themselves, the first three months of the current fiscal year (after the Venetian annualized), a 9.5% growth was seen, off of 36.7% during the first three months of FY 2000.  Looking at what occurred in May 2000 when the Venetian annualized itself, the growth rate is at approximately 11.3% so the Budget Division believes that despite the comparison to strong months from a year ago, recent behavior suggests that the strength is there to provide the 7.5% gain needed for the remainder of this fiscal year to achieve the Budget Division’s forecast.  Mr. Anderson said forecasts for FY 2002 and FY 2003 for growth rates was in line with the consensus of the other forecasters.

 

         Mr. Zideck said he was comfortable with the approaches outlined by all three forecasters.

 

                        MR. ZIDECK MOVED TO ACCEPT THE AGENCY

                                    FORECAST FOR CASINO ENTERTAINMENT TAX FOR FY 2001, FY 2002 AND FY 2003.

 

         Mr. Greathouse opined that typically in the Casino Entertainment business growth was in higher price points as opposed to lower price points so he was more inclined toward the Fiscal Division’s forecast for Casino Entertainment Tax.

 

            MR. ZIDECK AMENDED HIS MOTION TO

            ACCEPT THE FISCAL DIVISION’S FORECAST

            FOR CASINO ENTERTAINMENT TAX FOR

            FY 2001, FY 2002 AND FY 2003.

 

            MR. GREATHOUSE SECONDED THE MOTION.

 

         Mr. Fisher said he would be more comfortable with that approach. 

 

            THE MOTION CARRIED UNANIMOUSLY BY

            THOSE PRESENT.

 

*  *  *  *  *

 

Sales Tax

 

                     Lynne Knack – Department of Taxation

 

         Lynne Knack, Administrative Services Officer, Department of Taxation (Department), stated that the Department did change their forecast from October for the 2% Sales Tax revenue source.  For the first three months of FY 2001, the fiscal year-to-date revenue stands at 5.8% which was slightly off from the projection of 6.2%.  With the four major casinos that opened in Las Vegas, the Department now has a 12-month comparison so the 5.8% growth that is projected should continue.  The Department of Taxation projects a 5.9% growth in Sales Tax for FY 2002 and a 5.6% increase in FY 2003

 

         Ms. Knack said the Department looked at all the areas within taxable sales to make sure those areas were still strong and that review remains consistent so that is why the projections were not changed from the October forecast.


         Ted Zuend – Fiscal Analysis Division

 

         Ted Zeund, Deputy Fiscal Analyst, Fiscal Analysis Division, Legislative Counsel Bureau, stated the Fiscal Division’s forecast has been revised downward just slightly from the October forecast due to September data received.  Turning to page 18 of the handout (Exhibit H), the Fiscal Division forecasts $636,533,000 for FY 2001 which is a growth rate of 6.4% winding down to 6.1% in FY 2002 and to 5.7% in FY 2003.  Mr. Zuend related that the construction cycle has played a role in the Fiscal Division’s forecast of sales tax.  It is evident that none of the forecasters are expecting a recession.  On average, over time taxable sales tend to grow in combination with changes in the Consumer Price Index levels and adding WEFA numbers for inflation and population growth rates or employment security numbers results in the number forecast by the Fiscal Division. 

 

         Mr. Zuend said the Fiscal Division’s forecast might appear optimistic for FY 2001 to project a 6.4% growth rate.   However, there were strong growth rates for this same period one year ago and 6% revenue grew against the 6.4% growth rate; 6.3% grew against 8.6% and the 5.2% grew against the 10.8%.  For the last nine months of the year, the average growth for those months was only 4.9%.  To achieve the revenue forecast, an average 6.7% growth must be obtained. 

 

         Mr. Zuend stressed that the lowest two-year growth rate that the State has seen over a nine-month period since the recession, was 11.7%.  In fact, in 1992, the 2% sales tax growth rate was 11.6%.  If that rate is achieved for the next nine months, the State would be at a 6.7% growth rate for FY 2001.  The Fiscal Division anticipates that the revenue collections, when compared to the weaker months, will show much more positive growth and be in the 6-7% range for the remainder of the year.

 

         Bill Anderson – Budget Division

 

         Mr. Anderson stated that the Budget Division’s forecast for Sales Tax collections was presented on page 6 of the handout (Exhibit I) and that any change from the October forecast was insignificant. 

 

         Mr. Zideck asked why the Budget Division’s forecast for FY 2001 was 1.5% lower than the other forecasts. 

 

         Mr. Anderson replied that the Budget Division’s forecast was lower because of current growth.  The Division was slightly higher in October 2000 and that figure has been revised downward based on the new month of information received which completed a quarter and that information was not quite as strong as anticipated.    Mr. Anderson reiterated that the bulk of the changes made by the Division were due to a new inflation forecast by WEFA that was factored into their model and new information to complete the quarter.

 

         Mr. Morgan said that recognizing that the Forum would get another opportunity to look at the forecasts in May, and recognizing that at the moment, the growth rate is at 5.8% for only three months and the projection was 5.9% he would be inclined to stay with the original projection of 5.9%.

 

            MR. MORGAN MOVED TO ACCEPT THE

OCTOBER 2000 FORECAST FOR SALES

TAX FOR FY 2001, FY 2002 AND FY 2003.

 

MR. ZIDECK SECONDED THE MOTION

AND THE MOTION CARRIED UNANIMOUSLY

BY THOSE PRESENT.

 

*  *  *  *  *

 

Business License Tax

 

                     Lynne Knack – Department of Taxation

 

         Ms. Knack stated that one quarter of revenue came in at 3.88%.  The Department of Taxation’s (Department) projections were primarily based on the predicted employment growth by the Division of Employment Security and that was bumped up slightly from the October forecast because the percentage of increase for the Department’s revenues has always been slightly higher than the employment growth rate.  The average growth rate for the Business License Tax has been approximately 6.24% for the ten years since that revenue source has been in affect. 

 

         Ms. Knack indicated that the Department did not change their projections from the October forecast so for FY 2001, Business License Tax is forecast at 4.8%, which is 1% lower than the one quarter than what was being forecast for the entire year; however, that one quarter is normally one of the lowest quarters of the year.  She stated that September and June are usually the highest quarters of the year and it is anticipated that 4.8% will be achieved.

 

         Ted Zuend – Fiscal Analysis Division

 

         Mr. Zuend stated that he was going to adjust the Business License Tax forecast because quarterly figures were received from employment security.  Therefore, the Fiscal Division forecasts a 4.4% rate for FY 2001, 3.5% for FY 2002 and 3.4% for FY 2003.  As Ms. Knack indicated, the revenue source tends to grow a little faster than employment growth over time, and that is either because full time jobs are increasing at a faster rate than part time jobs, or that the length of part time jobs is being extended.  However, that pattern is not anticipated throughout this biennium since a tight labor market is not expected during this time frame. 

 

         Bill Anderson – Budget Division

 

         Mr. Anderson said that Business License Tax was a stable revenue source.  He acknowledged Ms. Knack’s comments that a 3.9% gain was realized during the first quarter of FY 2001 but that did not give the Budget Division any reason to revise their forecast.

 

         Mr. Greathouse commented that the Budget Division’s forecast was somewhere in between the Fiscal Division and the Agency forecast.

 

            MR. GREATHOUSE MOVED TO ACCEPT THE

            BUDGET DIVISION’S NOVEMBER FORECAST

            FOR THE BUSINESS LICENSE TAX FOR

            FY 2001, FY 2002 AND FY 2003.

 

            MR. MORGAN SECONDED THE MOTION AND

            THE MOTION CARRIED UNANIMOUSLY BY

            THOSE PRESENT.

 

*  *  *  *  *

 

Insurance Premium Tax

 

                     Lynne Knack – Department of Taxation

 

         Ms. Knack reminded the Forum of discussions during the October meeting whereby she explained that the Insurance Premium Tax has been difficult to forecast due to changes made during the 1999 Legislature and past Legislatures affecting the assessment by the Division of Industrial Relations (DIR) that is credited against the Insurance Premium Tax.

 

   Ms. Knack said she was able to do a query of all of the accounts paid last fiscal year and the first quarter of this fiscal year and determine how much of the industrial insurance received was legitimate.  In many instances, there were companies that did not take the full amount of credit to which they were entitled but then there were other companies that paid the insurance premium tax, which would be a general revenue source until they acquired enough claims reimbursement to receive a DIR assessment and be eligible for a credit against their Insurance Premium Tax.  With this new information, the Department significantly changed the October forecast. 

 

   During the first quarter of FY 2001, there was a 19% increase from the same quarter of the previous fiscal year.  Ms. Knack explained that she left the 19% for the first quarter then applied the percentages of increases that were previously projected through the linear analysis, to the remaining three-quarters of FY 2001 and then added $2.5 million that the Department believes will be legitimate Insurance Premium Tax payments from industrial insurance for FY 2001.  In addition, the Department built in an amount for industrial insurance for FY 2002 and FY 2003 with the belief that over time as companies write more premiums, there will be claims reimbursements against that premium tax based on the DIR assessment credit allowed. 

 

   Therefore, the Department has increased their forecast from 2.3% in October to 7.9%, or $135.5 million for FY 2001.  For FY 2002, $147.7 million and for FY 2003, $255.9 million.

 

   Vice-Chairman Fisher acknowledged that Ms. Knack indicated earlier that the Insurance Premium Tax was a difficult tax to project and asked whether the Department had a better handle on the tax based on the change that occurred last quarter.  Ms. Knack responded that there were many things that entered into the DIR assessment credit whereby the timing is completely off from the schedule when the Department collects the tax.  For instance, during the first quarter of FY 2001, there were companies that were taking credits from the previous fiscal year or previous quarters.  Technically, those companies would have been entitled to a credit of their Insurance Premium Tax for this quarter but DIR did not have the assessment billed to them so the Department did not know the amount of the credit. 

  

   Ms. Knack advised the Forum that the Department collected almost $1.5 million in the first quarter from industrial insurance but since the DIR assessment was not due until November 15th, the Department does not know how much of that credit would be included.  However, the General Fund will realize $1.5 million and probably some additional amounts in the next quarter.  Ms. Knack concluded that it was all a timing issue and the Department was uncertain what ramifications would result.  In addition, in January and February 2001 when the DIR does the “true-up” of this assessment, many of the companies which received a credit may owe the Department of Taxation for the overage in the credit taken earlier against the tax.  She said it was difficult to determine the consequences as a result of all those issues since this is the first year this occurred and the Department does not have enough history to predict the outcome.

 

   Vice-Chairman Fisher said that timing matters usually work themselves out and it ends up in a wash.  However, the forecasting period the Economic Forum is projecting is for three years and the Department is projecting an increase from the October forecast of $7 million in each of those years, for a total of $21 million so apparently the Department has determined the state will be receiving more revenue overall.  Ms. Knack indicated that was correct.

 

 

   Mark Stevens – Fiscal Analysis Division

 

   Mr. Stevens stated that the Fiscal Analysis Division (Division) revised its October forecast substantially based on the information provided by the Department of Taxation.  The first quarter of Insurance Premium Tax collections has been received and the Division tried to project that revenue in the same manner by looking at all lines of insurance, excluding the industrial insurance component, project the revenue from those sources and individually project the amount of income that might come in from industrial insurance activity.

 

   Mr. Stevens informed the Economic Forum that the first quarter collections showed a 19% increase for FY 2001, which was much higher than anyone had predicted; however, it is not projected that such an increase will occur throughout the remainder of FY 2001.  The Fiscal Division’s forecast for Insurance Premium Tax for November includes the 19% increase, then the same percentage growth that was seen in the previous projection (7%) was used for each of the remaining quarters of FY 2001 and each year of the two years of the forecasting period.  For the industrial insurance line, the Fiscal Division included $500,000 for each year of the biennium in their October forecast, based on how much the insurance companies could use as credit in conjunction with their DIR assessments.  However, not all of the insurance companies are taking the credit to which they are entitled, which creates a liability over time when those credits are taken at a future date. 

 

   During the first quarter of FY 2001, there was approximately $1.4 million in collections from industrial insurance, but approximately $600,000 of that sum is subject to future credits so $800,000 would not be subject to future credit.  Therefore, the Fiscal Division built in $3 million for FY 2001 to be received in revenues from the industrial insurance line, realizing that amount will decrease over time as the insurance companies take their credits.  For FY 2002, $2 million was included for industrial insurance, and $1.5 million for FY 2003.  The actual collections in the first quarter of FY 2001 and the increase in the amount projected to come in from industrial insurance lines has increased the Fiscal Division’s revenue forecast to $140.1 million for FY 2001, $148.7 million for FY 2002 and $158.4 million in FY 2003.

 

 

   Bill Anderson – Budget Division

 

   Mr. Anderson said the Budget Division’s forecast for Insurance Premium Tax revenue was set forth on page 24 of the handout (Exhibit I).  He pointed out that the Budget Division’s forecast changed by approximately $2.5 million for each year of the forecasting period relative to the October forecast.  He reminded the Economic Forum that the driver for the Insurance Premium Tax used by the Budget Division was new personal income and inflation forecasts.  Their forecast would have decreased if that driver was used and information from the first quarter of FY 2001 was ignored.

 

   Mr. Anderson explained that two things have occurred which led to the change in the Budget Division’s forecast from October to November:  First, $1.5 million was received from industrial insurance payments that was not expected.  Secondly, there was a 19% increase from a year ago for the first quarterly payment.  Historically, the bulk of the Insurance Premium Tax is made up of the four quarterly payments from insurance premiums written.  On average, those quarterly payments should total approximately $31 million.  However, the 19% increase that was seen in the first quarter of FY 2001 reflects approximately $3 million more than was expected so that increase has been factored into the Budget Division’s November forecast.  The Budget Division has not assumed that the $3 million seen this quarter will remain in the future; nor have they assumed anything pertaining to industrial insurance related payments. 

 

   Acting Chairman Fisher thanked the divisions for presenting information on the Insurance Premium Tax and asked if the Economic Forum members had questions. 

 

   Mr. Zideck asked whether there was an explanation for the “extra” $3 million received the first quarter of FY 2001.  Mr. Anderson replied that the extra $3 million was attributable to extraordinarily strong growth but such an increase is not expected throughout the forecasting period so it was not incorporated into the Budget Division’s forecast.  He stated that the Budget Division’s perspective was that the state received a $3 million “windfall” for the first quarter of FY 2001 but that will not be repeated.  That $3 million remains in the base and brings the other projections up by $3 million but no other extraordinary growth is expected in the future.  He reminded the Forum that the Division did not incorporate in any industrial insurance payments to their forecast.

 

   In response to Mr. Zideck’s inquiry, Mr. Stevens, Fiscal Analysis Division, directed the Economic Forum to page 23 of the handout (Exhibit H), whereby the collections from Insurance Premium Tax in FY 2000 is set forth.  The Fiscal Division left the 7% assumption for the rest of FY 2001 the same, as well as for each year of the biennium.  The Fiscal Division included the amount in the bank to date then kept their original assumption on growth rates constant for the rest of the forecasting period.

 

   Mr. Zideck related that based on the nearness of the approaches described by the forecasters, he would make the following motion:

 

MR. ZIDECK MOVED TO APPROVE THE AGENCY’S FORECAST FOR INSURANCE PREMIUM TAX FOR FY 2001, FY 2002 AND FY 2003.

 

MR. GREATHOUSE SECONDED THE MOTION AND THE MOTION CARRIED UNANIMOUSLY BY THOSE PRESENT.

 

Cigarette Tax

 

               Lynne Knack – Department of Taxation

 

   Ms. Knack stated that for the first three months of FY 2001, the total percentage of increase is 3.02%.  As a result, the Department did not make any changes to their October forecast with the expectation that there might be a “fallout” from California’s tax increase which was not realized in FY 2000. 

 

 

   Russell Guindon – Fiscal Analysis Division

 

   Mr. Guindon directed the Economic Forum to page 24 of the handout (Exhibit H), which contained the Fiscal Division’s explanation for the Cigarette Tax forecast.  He pointed out that the Fiscal Division did not change their projection from the October forecast.  Fiscal year-to-date is at approximately 3% and the Fiscal Division is forecasting 2.4% growth for FY 2001.  To achieve that growth rate, an average of 2.2% growth would be necessary over the remaining nine months of the fiscal year. 

 

   Mr. Guindon stated that one of the things that acted as a driver for the weakness in this revenue source in FY 2000 and may continue to be a driver for the current forecasting period is the conditions of the Tobacco Settlement regarding advertising and promotions.  Looking at the CPI that was designed for tobacco in FY 2000 the increase was 18.9% whereas for the first four months of FY 2001, it was up 10.4% and some of that decrease may be related to the price factor driving consumption downward.

 

   Bill Anderson – Budget Division

 

   Mr. Anderson stated that the Budget Division’s forecast for Cigarette Tax was unchanged from the October forecast.  The year-to-date growth is at approximately 3% and the Budget Division was forecasting about 3.3% so there was nothing in recent data that required a change from the October forecast.

 

   Mr. Morgan asked Ms. Knack to clarify whether or not the State of California changed their tax rates on cigarettes and, if so, whether the Department of Taxation factored that into their methodology.

 

   Ms. Knack replied that the State of California increased their rates significantly at the beginning of 1999 and that was one of the reasons the Department of Taxation projected FY 2000 revenue would be at a higher increase.  However, when the surrounding states, such as Arizona and Utah increased their tax rates significantly higher than Nevada, the Department saw a “fallout” so the Department anticipates a similar situation with California’s increase.  She concurred with Mr. Guindon, however, that the pending Tobacco Settlement lawsuits may have had an affect on the increase that was expected but was not realized.  The Department is maintaining that the State of Nevada will see something based on California’s increase—which was $0.87 compared to Nevada’s $0.35 and all of the states, with the exception of one, are significantly higher than Nevada’s tax rate.

 

   Mr. Guindon added that the increase in California took affect in January 1999 and it was a $0.50 increase that brought that state up to $0.87. 

 

      MR. GREATHOUSE MOVED TO ACCEPT THE

      FISCAL DIVISION’S FORECAST FOR CIGARETTE

      TAX FOR FY 2001, FY 2002 AND FY 2003.

 

MR. ZIDECK SECONDED THE MOTION AND THE MOTION CARRIED UNANIMOUSLY BY THOSE

PRESENT.

 

 

*  *  *  *  *

 

Minor Revenues

 

 

   Russell Guindon – Fiscal Analysis Division

 

   Mr. Guindon indicated that at the last meeting of the Economic Forum, the Technical Advisory Committee (TAC) along with staff of the Budget Office, the Fiscal Analysis Division, and the respective agencies, were asked to attempt to reach a consensus regarding the minor revenue sources.  Mr. Guindon pointed out that the list of minor revenues was contained behind Tab 4 of Exhibit C and should be read in conjunction with the revised sheets that were provided to the Forum (Exhibit D).   The table sets forth the seven minor revenues that used to be considered major revenues, and lists the previous forecasts for those revenue areas. 

 

   Mr. Guindon opined that during the meeting with TAC, the consensus was to accept the agency forecasts for the minor revenues especially regarding the gaming revenues.  As to the net proceeds of mineral tax, there was a consensus to accept the agency forecast on that revenue source as well.  However, there were revisions to the interest income forecast but the Fiscal Analysis Division and the Treasurer’s Office worked out a consensus forecast and that is why the table reflects that the Agency, Fiscal and Budget Divisions all have the same forecast.

 

   Mr. Guindon advised the Forum that he would answer additional questions regarding the minor revenue forecasts or, if necessary, a representative from the agency could come up to discuss their forecast.

 

   Mr. Morgan asked whether the Forum had made a projection on the minor revenues from the last meeting.

 

   Bill Anderson, Budget Division, reminded the Forum that at the last meeting, staff was instructed to accept the agency forecast for planning purposes.

 

   Mr. Guindon pointed out that Table 6 that was originally faxed to the Forum after the October 2000 meeting contained the Forum’s preliminary forecast for the six major revenue sources and all the minor revenue sources were the agency forecasts, with a few small revenues using the Fiscal Division’s forecast.  He went on to state that the preliminary forecast was contained in the meeting packet (Exhibit C, Tab A).

 

   Mr. Greathouse commented that after reviewing the minor revenue sources, he noted a sharp decline in the interest income and the advance license fees.  He stated that he understood the advance license fee issue with the lack of new construction, but asked why interest income was expected to decrease so much.

 

   Mark Stevens, Fiscal Analysis Division, responded that representatives from the Treasurer’s Office and the Fiscal Analysis Division met to discuss interest income, upon the direction of the Economic Forum.  The method that was used to project those revenues was to look at the WEFA forecast with the Treasurer’s Office using the federal funds rate and the Fiscal Division using the 90-day T-Bill rate and review the relationship of what is actually earned versus the T-bill or the federal funds rate.  Mr. Stevens advised that WEFA reduced its interest rate forecast in FY 2001 by a quarter of a percent so that resulted in reducing the projection in FY 2001.  The Fiscal Division increased the 90-day T-Bill rate by one-half of a percent from the projection made by WEFA for FY 2001 and throughout the entire forecast period. 

 

   Mr. Stevens said another item that drives the forecast in interest income was the amount of money that is available for investment by the Treasurer.  The Fiscal Division projected the amount of General Fund surplus that would be recommended by the Governor and appropriated by the Legislature in the 2001-03 biennium and assumptions were made as to when that money would actually leave the state treasury.  For instance, if there is an equipment purchase, the money might be moved out rather quickly.  Whereas, a capital improvement project might result in the money remaining in the state treasury for a longer period of time.   Next, the amount of money that could be invested was multiplied that by one-half of a percent above the projected T-Bill rate and that was how the projections were computed.

 

   Mr. Stevens also pointed out that the forecast for interest income is higher in FY 2001 and lower in both FY 2002 and FY 2003, which is as a result of the projection that General Fund surplus will increase this fiscal year and will build the amount of money available for appropriations and then in each year, those appropriated funds will leave the treasury and not be available for investment, assuming that the General Fund forecast was accurate. 

 

      MR. GREATHOUSE MOVED TO ACCEPT THE

      PROJECTIONS OF THE TECHNICAL ADVISORY

      COMMITTEE FOR THE SEVEN MINOR REVENUE

      SOURCES FOR THE 3-YEAR FORECAST PERIOD.

 

MR. MORGAN SECONDED THE MOTION AND THE MOTION CARRIED UNANIMOUSLY BY THOSE PRESENT.

 

* *  *  *  *

 

   Mr. Guindon interjected that the motion only included seven of the minor revenue sources; however, there were adjustments made to some of the other minor revenue sources so the motion should clarify what was being recommended for approval. 

 

   Mr. Greathouse recollected that in the past there would be a table that set forth all the minor revenue sources and asked if such a table was available among the information that had been provided to the Forum. 

 

   In response, Mr. Guindon directed the Forum to Table 3, which included all the forecasts for all the General Fund revenue sources and the projections for all three forecasters.  Then, the seven new minor resources were broken down in a separate table.  Historically, the Forum has reviewed the tables to see what the consensus was among the forecasters.

 

   Vice-Chairman Fisher suggested that another motion for the other minor revenue sources be taken at this time.

 

      MR. GREATHOUSE MOVED TO ACCEPT THE

      RECOMMENDATIONS OF THE TECHNICAL

      ADVISORY COMMITTEE ON THE REMAINING

      MINOR REVENUE SOURCES FOR THE THREE

      YEAR FORECAST PERIOD AS SET FORTH IN

      TABLE 6.

 

   Mr. Morgan asked whether the TAC had any concerns regarding the minor revenue sources.

 

   Mr. Guindon answered that the TAC meeting was short and there did not seem to be anything of concern to those present.

 

   Mr. Morgan asked whether Mr. Stevens and Mr. Anderson agreed with Mr. Guindon.  Mr. Anderson responded that the Budget Division was comfortable with the forecasts as presented.  Mr. Stevens concurred.

 

      MR. MORGAN SECONDED THE MOTION AND

      THE MOTION CARRIED UNANIMOUSLY BY

      THOSE PRESENT.

 

   Vice-Chairman Fisher noted that the Forum had reached a break in the Agenda.  Mr. Guindon stated that with the acceptance of forecasts that just took place by the Forum, the Fiscal Division would ask for a short recess so that the numbers could be tabulated and then that information could be brought back to the Forum.

 

   John P. Comeaux, Director, Department of Administration, addressed the Forum and noted that this year the Forum departed from tradition whereby at the October meeting, the Forum provided the Budget Division with tentative forecasts to assist with planning.  He stressed how helpful it was to the Budget Division to receive the Forum’s tentative numbers for planning purposes in compiling the Executive Budget for the next biennium.  He encouraged that practice in the future.

 

   Mr. Stevens suggested that the Chairman take public testimony now rather than after the recess, in order to accommodate people in the audience that may have to leave before the Forum reconvened.

 

   Vice-Chairman Fisher asked whether there was any public testimony.  Seeing none, Vice-Chairman Fisher called a 45-minute recess at 11:25 a.m.

 

V.     APPROVAL OF DECEMBER 1, 2000 REVENUE FORECAST REPORT.

 

   Vice-Chairman Fisher reconvened the meeting of the Economic Forum at 12:50 p.m.

 

   Vice-Chairman Fisher directed the Forum to the December 1, 2000 Revenue Forecast Report and asked if any changes were needed to the report (Exhibit J).

 

   Mr. Morgan commented that a couple of word changes were needed on page 2 of the report.  First, since the final forecast by the Forum will be completed in May 2001, it was his opinion that the forecast report should be referenced as “closed” or “preliminary” but not “final.”   Further, he suggested that the acronym WEFA be written out in its entirety—Wharton Economic Forecast Associates.  Mr. Guindon replied that WEFA has been bought out several times by other companies but the acronym is still used nationwide since that is what everyone is familiar with rather than the new company that has taken over.  Mr. Morgan agreed that retaining WEFA’s acronym was fine.  Lastly, in the final paragraph on page three, “percent” needed to be placed behind 4.0.

 

   The Forum agreed to use the word “closed” instead of “final” in reference to the December 1, 2000 forecast report. 


      MR. MORGAN MOVED TO ADOPT THE

      PROJECTIONS OF GENERAL FUND

      REVENUES FOR FY 2001 AT $1,750,044,432;

      FOR FY 2002 AT $1,832,474,518; AND FOR

      FY 2003 AT $1,910,865,147.

 

 

MR. GREATHOUSE SECONDED THE MOTION AND THE MOTION CARRIED UNANIMOUSLY BY THOSE PRESENT.

 

   Mr. Greathouse asked if April 30, 2001 was the date of the next meeting.  The Secretary interjected that the next meeting had been set for May 1, 2001; however, no time or location had been designated.  Mr. Stevens advised the Forum that the Fiscal Division was very busy during the morning hours during the Legislative Session.  In the past, the Economic Forum has met in the early afternoon.

 

   The Forum agreed to meet on May 1, 2001 at 1:00 p.m., in Room 4100 of the Legislative Building.

 

VI.            DIRECTIONS TO TECHNICAL ADVISORY COMMITTEE

 

   There were none.

 

VII. ADJOURNMENT

 

   Vice Chairman Fisher thanked all of the presenters for their hard work and professionalism which helps make the job of the Forum much easier.  Seeing no further public comment, Vice Chairman Fisher adjourned the meeting at 12:57 p.m.

 

 

      ______________________________

      Joi Davis, Secretary

 

APPROVED BY:

 

_______________________________

CARY FISHER, Vice-Chairman

 

_______________________________

Date