Even before COVID-19, income inequality in Nevada was pretty stark. According to a 2019 study by the Kenny Guinn Center for Policy Priorities, economic growth after the Great Recession largely benefited top earners.
And now, as the pandemic has upended the tourism industry, resulting in record high unemployment in the state, much of the progress made has been erased.
With the state Legislature in special sessions this summer to address a $1.2 billion budget shortfall, Nevadans are facing even more uncertainty.
Here’s a look at how we got here, and what’s next for Nevada’s economy.
What does income inequality look like in Nevada?
It’s pretty extreme. The state relies really heavily on tourism — almost half of the state’s general fund comes from sales tax and taxes on casino winnings. And according to the Department of Employment, Training and Rehabilitation, or DETR, almost 90% of Nevadans work in the service industry.
Those jobs tend to be less well paid than white-collar careers, but they’re also not as well paid as many jobs in the trades, either.
A lot of casino and hotel workers are unionized, especially in Southern Nevada, which helps offset that a little bit. In fact, working at a casino resort used to be considered a good, stable job before the recession.
The Guinn report also found income inequality has been rising in Nevada. According to the analysis, the highest-paid residents in the state were earning a larger percent of overall wages. Their share of the total earnings went up from 6.9% to 8.8%.
The authors of that report found the overall economy had still not fully recovered from the Great Recession. For example, in 2007, Nevada’s median household income was just under $64,000, but in 2017, it was just over $55,000.
So that’s a big drop. But even still, the state’s economy was growing back then.
For example, just last January the Reno-Tahoe International Airport announced their passenger numbers were back to their pre-recession highs. They were even adding flights to their schedule, to serve more destinations.
But now, all that progress has been erased.
With that background in mind, how has Nevada held up to COVID-19?
Nevada has been one of the states where the pandemic has hit worst.
Since the state relies on tourism — which means it relies on people traveling to spend money — the virus has messed up the economy in terms of declining air travel and declining incomes.
Basically, people are flying a lot less and they have less money to spend.
On top of that, Gov. Steve Sisolak ordered all non-essential businesses to close in March, to keep the pandemic from overwhelming the health care system. That included casinos, which was a really big deal in Nevada.
As a result, Nevada saw record high unemployment. In April, it was more than 28%. That was the highest rate ever recorded in the country since they started tracking unemployment data in the seventies.
So what are state leaders doing to address the crisis?
They just had a special session in the state Legislature, which ended a couple of weeks ago. The Nevada state Legislature usually meets only every two years. But as a result of the pandemic — and nonessential business closures to help slow it down — the state had a $1.2 billion shortfall in the general fund. So lawmakers met to re-balance the budget.
They approved a new budget that made a lot of cuts. For example, they eliminated funding for a program called Read By Grade 3, which gives schools extra resources to help students who are behind. They also made some cuts to Medicaid.
Both of those programs — Read by 3 and Medicaid — disproportionately serve low-income families, Black Nevadans, the Latinx community and other people of color.
People are worried those cutbacks will set Nevada back even worse than the recession did. If we don’t see some relief soon, they might have to cut even more from the budget when they meet for the regular session in February.
Were there other options?
Nevada is required to have a balanced budget. Nevada’s leadership doesn’t have a lot of options to deal with economic downturn: You can cut, you can ask the federal government for relief money, or you can raise taxes somehow.
During the special session, they did the first two. In fact, lawmakers from both parties signed onto a letter asking Republican Senate Majority Leader Mitch McConnell to release the HEROES Act, which would give direct bailouts to state governments. It passed the House of Representatives, but he’s not allowing the Senate to vote on it.
Did they try raising taxes?
They did. Democrats in the Assembly tried to raise more taxes from the mining industry, which is really big in Nevada. They couldn’t have changed the overall tax rate on mineral extraction, because that’s capped at a flat 5% in the state constitution. Changing that would take years.
But they tried to limit the amount of deductions mining companies can claim on their taxes. Basically, it would’ve raised the tax rate on mining operations without changing the constitution. And they estimated it would have raised an extra $50 million for this fiscal year.
But the measure failed by one vote in the state Senate.
Meanwhile, the Nevada Current found some mining companies take so many deductions they don’t end up paying any taxes at all.
So what’s next for Nevada?
The pandemic is getting worse throughout the state. Authorities are trying to slow it down with more testing, contact tracing and a requirement that people have to wear masks in public.
But the casinos are still open, even though cases are surging. And the way things are now, Nevada doesn’t have much of a choice there — at least economically speaking.
It also remains to be seen if Congress will approve relief funding for states. States can’t use CARES Act money to make up for lost revenue.
If Congress approves another relief bill, it could include more support — but that’s not a guarantee.
