The Economic Forum was told Friday that even though state revenues are more than $60 million ahead of forecasts year-to-date, most of that excess will disappear by the time the new budget is built.
Legislative economist Michael Nakamoto told forum members General Fund revenues so far are at $3.02 billion for Fiscal Year 2018. That’s just shy of $61.1 million more than projected by the forum a year ago.
But, Tesla has taken more than double the Economic Development tax credits the company expected and was forecast to claim this fiscal year. The projection used to build the budget predicted the company would claim $31.1 million but Tesla has taken $73.8 million so far this fiscal year.
The difference, $42.7 million, will come off that $61.1 million.
“That’s going to end up chewing up the overage we’ve seen year-to-date,” said forum member Craig Billings.
“When all is said and done, we’re not going to be anywhere near the $61 million ahead of forecast,” Nakamoto said.
LCB Chief Economist Russell Guindon told the five forum members projecting how many credits would be taken and when is a difficult process because the state has no control over when Tesla claims those credits and when those who buy them use them. But he said thus far, those buyers, almost exclusively casinos, are collecting on the purchased credits “almost instantaneously.”
Nakamoto and Guindon made it clear the issue impacts only the upcoming budget cycle. Tesla is entitled to a total of $195 million in tax credits under the contract spelling out how much the company must invest and how many workers it must hire. Nakamoto said Tesla is rapidly approaching the $3.5 billion it agreed to invest in the Gigafactory east of Reno and, at that point, has earned the right to claim the rest of the $195 million in tax credits.
Thus far, revenue collections are strong in the state’s “major General Fund Revenues.” While sales tax collections are a percent or $8.7 million below projections, gaming tax collections are $7.9 million ahead, the Insurance Premium Tax 2.6 percent or $7.6 million ahead and the Real Property Transfer Tax 18.9 percent or $11.8 million more than projected.