Even as cases of the coronavirus begin to level off here, Gov. Steve Sisolak has a sobering message for Nevadans regarding the mounting economic costs of the pandemic for business operators, laid-off workers, families and the state’s treasury.
“Every Nevadan is going to have to go without something as a result of this,” Sisolak said in an interview with the Sun, “and that’s just the way it is.”
With the state’s hospitality and tourism industry shut down, lights on the Las Vegas Strip dimmed and hundreds of thousands of workers laid off from their jobs due to the pandemic, a state revenue picture that was once rosy is now bleak.
Last month, Sisolak ordered state agencies to prepare budgets for the fiscal year that begins July 1 with cuts of 4% to pay for the loss of revenue from the pandemic-related business closings. Additionally, he asked agencies to prepare budgets with cuts of from 4% to 16% for the following year. Now, Sisolak says, deeper cuts may need to be made.
In the wide-ranging interview Friday, Sisolak said those budgetary parameters were based on what he and his financial advisers knew at the time.
“What started out when I made those requests … we weren’t in anywhere near as bad a shape as we are today,” he said. “And we’re going to be in worse shape a month from now (revenue-wise).”
Among the biggest hits to the state budget is the estimated $2 million a day that goes to Carson City from gaming-related taxes.
An analysis by Jeremy Aguero, a principal with the Las Vegas-based economic analysis firm Applied Analysis, suggests Nevada’s tourism industry could lose $39 billion over the next 12 to 18 months, affecting more than 320,000 employees. Local governments are projecting a 20% to 40% reduction in revenues needed to support municipal services, including public safety.
The state had built up a rainy day fund in excess of $400 million, which the governor said could help stem some of the upcoming budgetary pain. He is also hoping the federal government will assist states with their coronavirus-related financial losses. But he still expects big reductions in state services.
“How deep and how hard the cuts are going to have to be, I think, remains to be seen,” Sisolak said. “A lot of people that are a lot smarter than me — financial people — are running models and analyses, and we’re going to have to go through all those things and hopefully we’ll be able to do the best we can.”
The governor ruled out across-the-board cuts and acknowledged that some state agencies would be able to cut more than others. All of them, he said, are probably underfunded, but none will be spared the budget knife.
“The idea that somebody should be exempt, I think, is unfair to all the agencies that are going to have to make sacrifices and all of the citizens that are going to make sacrifices,” Sisolak said.
The governor’s office is keeping legislative leaders in the loop on the state’s financial picture and other pandemic-related issues, Sisolak said. For now, he doesn’t see the need to call a special session of the Nevada Legislature.
“If we have to call a special session, I’ll clearly do a special session,” he said. “You know, I’m here (in Carson City). That’s something we’re looking at (but) it’ll depend on what comes out obviously with the federal government, and hopefully they’ll act quickly” on a stimulus plan for the states.
While the state will continue to largely rely on the tax revenue generated by the hospitality and gaming industries in Southern Nevada as a major contributor, Sisolak isn’t blaming the state’s lack of a more diversified economy for the current situation.
“I’ve been talking to governors that have a propensity of meat plants now, and they say, ‘Jeez, we’ve got to diversify away from meat processing because we’re just getting destroyed.’ So everybody has their issue.
“We are dependent on hospitality, tourism and conventions. That is always going to be, I think, the premier industry and revenue generator of the state. We’ll try to do more as we can in terms of (attracting and growing) manufacturing and product distribution, he said.
Yet, diversifying the economy is easier said than done.
“Understand it’s not something we’ve ignored,” Sisolak said. “Every single state — when people bring this up — every single state is competing for the same thing.”
The competition, in turn, leads to companies playing states against each other for the best deal they can land in terms of tax abatements and incentives — all of which leads to additional burdens on the public treasury.
“Every dollar that you give in terms of an abatement or an incentive is a dollar that doesn’t count for state services,” he said.
Nevertheless, he said, Nevada will continue to compete.
“We need to do a better job in terms of explaining how great Nevada is and what we have to offer in terms of a low-tax economy, in terms of great weather, in terms of amenities we have here, and sell that to businesses,” Sisolak said.
Those conversations, like most everything, are taking a back seat as the pandemic continues to dominate attention.
Sisolak said the depth of the crisis was unparalleled in Nevada’s history, but he continues to maintain that the economic issues are secondary to saving lives.
“The virus caused (economic) difficulties and … stress in places that we would have never been imagined,” he said. “But during this whole thing, my main focus has been all along that first I have to protect the health and well-being of Nevadans, and then we’ve got to get this economy moving again. And we’re going to get it moving.”
He said he realized his decisions had received mixed reactions from Nevadans.
“I mean, I can’t make everybody happy, and I stopped trying,” he said.
Instead, Sisolak said he had tried to do the best he could with the cards he was dealt. Much of that involves tales of Nevadans’ hardships.
“I talk with people that have lost loved ones. I talk with people that can’t get into a nursing home to say goodbye to their grandmother or grandpa or their folks because of visitation restrictions. A wife gives birth to a child, and the spouse can’t get in to be with them,” he said.
“When you hear these stories, they are heart-breaking. As are the stories of people that have invested their life savings into a business, and they’re losing it; people that have had problems getting through to unemployment and can’t pay their rent or buy their groceries; and folks that have been in a food line for two hours.”
The stories, Sisolak said, are sobering and weigh on his actions.
“I’ve tried to listen and understand the position people are in and reassured them that I know they’re suffering,” he said. We’re doing everything we can to minimize the suffering that everyone is facing.”