Economic Forum (NRS 353.226 – NRS 353.229)

STATE OF NEVADA LEGISLATIVE COUNSEL BUREAU

LEGISLATIVE COMMISSION (775) 684-6800 INTERIM FINANCE COMMITTEE (775) 684-6821 JASON FRIERSON, Assemblyman, Chairman Joyce Woodhouse, Senator, Chair Rick Combs, Director, Secretary Mark Krmpotic, Fiscal Analyst Cindy Jones, Fiscal Analyst CARSON CITY OFFICE: Legislative Building, 401 S. Carson Street Carson City, Nevada 89701-4747 LAS VEGAS OFFICE: Fax No.: (775) 684-6600 555 E. Washington Avenue, Room 4400 RICK COMBS, Director (775) 684-6800 Las Vegas, Nevada 89101-1072 BRENDA J. ERDOES, Legislative Counsel (775) 684-6830 Fax No.: (702) 486-2810 ROCKY COOPER, Legislative Auditor (775) 684-6815 MELISA R. AGUON, Legislative Services Officer (702) 486-2800 MICHAEL J. STEWART, Research Director (775) 684-6825

MEETING NOTICE AND AGENDA

Name of Organization: Economic Forum (NRS 353.226 – NRS 353.229)

Date and Time of Meeting: Friday, June 8, 2018 9:00 a.m.

Place of Meeting: Grant Sawyer State Office Building, Room 4401 555 East Washington Avenue Las Vegas, Nevada

Note: Some members of the Economic Forum may be attending the meeting and other persons may observe the meeting and provide testimony through a simultaneous videoconference conducted at the following location:

Legislative Building, Room 4100 401 South Carson Street Carson City, Nevada

If you cannot attend the meeting, you can listen or view it live over the Internet. The address for the Nevada Legislature website is http://www.leg.state.nv.us. Click on the link “Calendar of Meetings/View.”

Note: Minutes of this meeting will be produced in summary format. Please provide the secretary with electronic or written copies of testimony and visual presentations if you wish to have complete versions included as exhibits with the minutes.

Note: Items on this agenda may be taken in a different order than listed. Two or more agenda items may be combined for consideration. An item may be removed from this agenda or discussion relating to an item on this agenda may be delayed at any time.

I. ROLL CALL.

II. OPENING REMARKS.

III. PUBLIC COMMENT. (Because of time considerations, speakers are urged to avoid repetition of comments made by previous speakers. A person may also have comments added to the minutes of the meeting by submitting them in writing either in addition to testifying or in lieu of testifying. Written comments may be submitted in person or by e-mail, facsimile, or mail before, during, or after the meeting.)

1 For Possible IV. ELECTION OF CHAIRPERSON AND VICE CHAIRPERSON. Action For Possible V. APPROVAL OF MINUTES OF THE DECEMBER 8, 2017, MEETING. Action For Possible VI. OVERVIEW OF THE ECONOMIC FORUM AND THE TECHNICAL Action ADVISORY COMMITTEE ON FUTURE STATE REVENUES (NRS 353.229).

For Possible VII. PRESENTATION ON THE STATE EMPLOYMENT AND UNEMPLOYMENT Action OUTLOOK. David Schmidt, Chief Economist, Research and Analysis Bureau, Department of Employment, Training and Rehabilitation

For Possible VIII. PRESENTATION ON THE STATE POPULATION OUTLOOK. Action Jeff Hardcastle, State Demographer, Department of Taxation

For Possible IX PRESENTATION ON NEW AND EXPANDING BUSINESS Action DEVELOPMENT IN THE STATE BASED ON ECONOMIC DEVELOPMENT ACTIVITIES OF THE GOVERNOR’S OFFICE OF ECONOMIC DEVELOPMENT, LAS VEGAS GLOBAL ECONOMIC ALLIANCE, AND THE ECONOMIC DEVELOPMENT AUTHORITY OF WESTERN NEVADA. Paul Anderson, Executive Director, Governor’s Office of Economic Development Jonas Peterson, Chief Executive Officer, Las Vegas Global Economic Alliance Mike Kazmierski, President/CEO, Economic Development Authority of Western Nevada

For Possible X. REPORT AND DISCUSSION OF FY 2018 YEAR-TO-DATE ACTUAL Action COLLECTIONS COMPARED TO THE ECONOMIC FORUM MAY 1, 2017, FORECAST, ADJUSTED FOR LEGISLATIVE ACTIONS APPROVED DURING THE 2017 SESSION.

For Possible XI. REPORT ON THE COMMERCE TAX STATISTICS BY BUSINESS Act CATEGORY FOR FY 2016 AND FY 2017 AND THE TAX CREDITS TAKEN AGAINST THE MODIFIED BUSINESS TAX IN FY 2017 FOR COMMERCE TAX PAID IN FY 2016. Kile Porter, Economist, Department of Taxation

For Possible XII. PRESENTATION ON PERSONAL INCOME AND WAGES IN Action RELATION TO POPULATION, EMPLOYMENT, AND INFLATION ON A NATIONAL LEVEL AND THE STATE OF NEVADA.

For Possible XIII. PRESENTATION OF HISTORICAL TAXABLE SALES AND GAMING Action MARKET STATISTICS.

For Possible XIV. DISCUSSION OF THE REPORT BY THE ECONOMIC FORUM TO Action THE INTERIM FINANCE COMMITTEE REQUIRED PURSUANT TO NRS 353.228.

2 2 For Possible XV. INSTRUCTIONS TO THE STAFF OF THE ECONOMIC FORUM Action REGARDING THE PROCESS TO BE USED TO PREPARE AND PRESENT THE GENERAL FUND REVENUE FORECASTS TO THE TECHNICAL ADVISORY COMMITTEE AND THE ECONOMIC FORUM.

For Possible XVI. INSTRUCTIONS TO THE TECHNICAL ADVISORY COMMITTEE Action CONCERNING THE GENERAL FUND REVENUE FORECASTS.

For Possible XVII. SCHEDULING OF FUTURE ECONOMIC FORUM MEETINGS. Action XVIII. PUBLIC COMMENT. (Because of time considerations, speakers are urged to avoid repetition of comments made by previous speakers. A person may also have comments added to the minutes of the meeting by submitting them in writing either in addition to testifying or in lieu of testifying. Written comments may be submitted in person or by e-mail, facsimile, or mail before, during, or after the meeting.)

XIX. ADJOURNMENT.

Note: We are pleased to make reasonable accommodations for members of the public with a disability who wish to attend the meeting. If accommodations for the meeting are necessary, please notify the Fiscal Analysis Division of the Legislative Counsel Bureau, in writing, at the Legislative Building, 401 South Carson Street, Carson City, Nevada 89701-4747, or call the Fiscal Analysis Division at (775) 684-6821 as soon as possible.

Notice of this meeting was posted in the following Carson City locations: Blasdel Building, 209 East Musser Street; City Hall, 201 North Carson Street; and the Legislative Building, 401 South Carson Street. Notice of this meeting was posted in the following Las Vegas location: Legislative Counsel Bureau, Las Vegas Office, Grant Sawyer State Office Building, 555 East Washington Avenue. Notice of this meeting was hand delivered for posting to the following Carson City location: Capitol Press Corps, Basement, Capitol Building, 101 North Carson Street. Notice of this meeting was faxed or e-mailed for posting to the following Las Vegas locations: Clark County Government Center, Administrative Services, 500 South Grand Central Parkway; and Capitol Police, Grant Sawyer State Office Building, 555 East Washington Avenue. Notice of this meeting was posted on the Internet through the Nevada Legislature’s website at www.leg.state.nv.us.

Supporting public material provided to Economic Forum members for this meeting may be requested from Judy Lyons, Committee Secretary, Fiscal Analysis Division of the Legislative Counsel Bureau at (775) 684-6874, and is/will be available at the following locations: Meeting locations and the Nevada Legislature’s website at www.leg.state.nv.us.

3 3 4 MINUTES OF THE MEETING OF THE ECONOMIC FORUM (NRS 353.226 – NRS 353.229) December 8, 2017

The meeting of the Economic Forum (created by Senate Bill 23, 1993) was held at 9:00 a.m. on Friday, December 8, 2017, in Room 4401 of the Grant Sawyer State Office Building, 555 East Washington Avenue, Las Vegas, Nevada, with videoconference to 4100 of the Legislative Building, 401 South Carson Street, Carson City, Nevada.

ECONOMIC FORUM MEMBERS PRESENT IN LAS VEGAS: Ken Wiles, Chair Marvin Leavitt Jennifer Lewis Linda Rosenthal

ECONOMIC FORUM MEMBERS PRESENT IN CARSON CITY: None

ECONOMIC FORUM MEMBERS ABSENT: Matt Maddox, Vice Chair (Absent Excused)

STAFF: Russell Guindon, Principal Deputy Fiscal Analyst, Fiscal Analysis Division Michael Nakamoto, Deputy Fiscal Analyst, Fiscal Analysis Division Joe Reel, Deputy Fiscal Analyst, Fiscal Analysis Division Judy Lyons, Committee Secretary, Fiscal Analysis Division Susanna Powers, Economist, Governor’s Finance Office

EXHIBITS: (Exhibit A) Meeting Packet and Agenda (Exhibit B) Presentation on the State Employment Outlook, Christopher Robison, Department of Employment, Training and Rehabilitation (Exhibit C) Presentation on State Enrollment Related to the Affordable Care Act and Purchase of Insurance Plans by the Silver State Health Insurance Exchange, Division of Insurance (Exhibit D) Presentation by Heather Korbulic, Silver State Health Insurance Exchange (Exhibit E) Commerce Tax - Summary Statistics by Business Category for FY 2016 Current Information to Date

5 I. ROLL CALL. Chairman Wiles called the meeting of the Economic Forum (Forum) to order at 9:04 a.m. and the secretary called roll. The members were present at the meeting in Las Vegas.

Chairman Wiles requested the agenda be taken out of order, and directed the members to Agenda Item III, Public Comment.

III. PUBLIC COMMENT.

Chairman Wiles asked for public comment from attendees in Carson City and Las Vegas. There was no public comment at either location.

Chairman Wiles requested the agenda be taken out of order, and directed the members to Agenda Item II, Opening Remarks.

II. OPENING REMARKS.

Chairman Wiles announced that forecasting measures would not be discussed. The agenda included presentations on state outlooks, and reports and discussions relating to various tax and revenue components that the Economic Forum is responsible for forecasting.

Chairman Wiles requested the agenda be taken out of order, and directed the members to Agenda Item IV, Approval of the Minutes of the May 1, 2017, meeting.

IV. APPROVAL OF THE MINUTES OF THE MAY 1, 2017, MEETING.

MR. LEAVITT MOVED FOR APPROVAL OF THE MINUTES FROM THE MAY 1, 2017, MEETING.

MS. LEWIS SECONDED THE MOTION.

THE MOTION CARRIED UNANIMOUSLY.

V. PRESENTATION ON THE STATE EMPLOYMENT OUTLOOK.

Christopher Robison, Supervising Economist, Research and Analysis Bureau, Department of Employment, Training and Rehabilitation

Mr. Robison reported that record-high employment was reached in Nevada with 1.35 million jobs, up approximately 36,000 jobs or 2.8% since October 2016 compared to national growth of 1.4%. Nevada’s jobs grew faster than the nation’s for

6 63 consecutive months, and its unemployment rate in October 2017 measured 5.0%, down from 5.3% in October 2016 (page 1, Exhibit B).

Mr. Robison referred to the information on page 2 (Exhibit B) of his handout as “Nevada’s Recovery Scorecard,” as it compared recession lows to current statewide measures. He acknowledged a significant increase in jobs, small businesses, total employment, and wages and a sizeable decrease in unemployment, reporting a 60% drop in unemployment insurance claims.

Prior to the recession, Nevada peaked at approximately 1.3 million jobs, of which approximately 186,000 were lost during the recession. Mr. Robison conveyed that approximately 240,000 jobs were added since the 2010/2011 timeframe, which resulted in surpassing the pre-recessionary peak at approximately 1.35 million jobs.

Mr. Robison reported a declining unemployment rate since the 2010/2011 timeframe, except for the last six months when unemployment leveled off or increased slightly. He said the national unemployment rate followed a similar pattern; however, it continued to decline. He said Nevada’s unemployment rate was 4.4% higher than the nation’s during the peak of the recession, whereas now that gap measures 0.4% higher (page 4, Exhibit B).

Nevada small businesses, defined as those with less than 100 employees, showed steady growth in employment since 2010 with approximately 40,000 jobs above the previous peak. Mr. Robison said the overall growth of new business in Nevada since 2010 totaled approximately 8,000 more employers, of which many met the small business classification (page 6, Exhibit B).

Mr. Robison communicated that average weekly wages reached the highest second-quarter reading on record in 2017 at $900 per week, and that a volatile wage pattern occurred in the fourth quarter due to seasonal bonuses. He noted the overall growth trend in wages was positive, which was encouraging since Nevada’s wages, compared to the nation’s, were slow to recover after the recession.

Compared nationally, Nevada had the fastest-growing job growth prior to the recession and the slowest-growing job growth, or highest loss of jobs, during the 2009 and 2010 time frame. Mr. Robison reported that as of 2017 year-to-date (through Q1 of 2017), Nevada regained its ranking as the fastest-growing state in the nation relative to job growth. He noted updated numbers could be found on the Department of Employment, Training and Rehabilitation’s (DETR) website in their most recent monthly publication.

Mr. Robison reiterated initial unemployment claims declined approximately 60% since Nevada’s recessionary high, and were back to pre-recessionary levels. Unemployment claims are projected to show more volatility over the next couple of years as activity levels off. He said there was a seasonal rise recorded over the last month, but was minimally concerned as it happens every year at this time.

7 Mr. Robison said job level projections for the next two years, ending the fourth quarter of 2019, show levels exceeding the pre-recessionary peak by 127,000 jobs. He noted the pre-recessionary peak had already been surpassed in early January 2017.

Mr. Robison made the following general comments relative to Nevada’s job growth projections:

• Growth is expected across all major industry sectors; however, some sectors are growing at a slower pace, such as financial services, mining and agriculture.

• Construction is the fastest-growing industry, although it has not fully recovered from the recession. Construction is driven by a combination of organic growth as well as large projects, such as the Las Vegas Convention Center District, the Las Vegas Stadium (Raiders), and the Genting Group project.

• Manufacturing is growing strong, driven by Tesla, Panasonic and other manufacturing groups located in Northern Nevada.

• The Information sector is driven by Switch, Apple, Rackspace and other data centers moving to Nevada.

Mr. Robison summarized growth projections for the following job sectors:

Construction: The Construction sector was the hardest hit sector during the recession and was far from recovering. Prior to the recession, construction jobs accounted for approximately 11% of total employment statewide, which was significantly above average levels of 4% to 5%. Construction jobs have recovered to the 4% to 5% range of total employment, but are expected to reach approximately 7% to 8% of total employment over the next few years. Mr. Robison said growth was overestimated in this sector for 2017 due to project delays, such as with Genting Group’s megaresort. He noted that Genting Group has moved forward and is expected to add 1,000 jobs over 2018. The megaresort is expected to open by the beginning of 2020. He noted the Las Vegas Stadium (Raiders) and the convention center projects were approved and are incorporated in his growth projections illustrated in the chart on page 12 (Exhibit B) of his handout.

Manufacturing: Prior to 2017, manufacturing jobs were significantly below the pre-recessionary peak but have seen a steep climb in employment over the last couple of quarters due to Tesla, Panasonic and other large groups located in Northern Nevada. Strong growth is expected to continue through the end of 2019 and, at that time, is predicted to normalize. Mr. Robison noted the companies located in the Tahoe Regional Industrial Center (TRIC) are expected to add 7,000 to 9,000 total jobs or more, depending on company rollouts (page 13, Exhibit B).

Retail Trade: Approximately 2,000 additional jobs are forecast annually through 2019. Growth is not as dramatic as the manufacturing sector; however, this sector has a much larger total employment base than manufacturing.

8 Heath Care/Social Assistance: An additional 4,000 jobs per year are projected with no indication of that changing in the short term.

Accommodation/Food Services: Leisure and Hospitality jobs have exceeded their pre-recessionary peak and are expected to grow by approximately 15,000 jobs by the end of 2019. DETR has detected some softening in the last couple of months, and will keep an eye on this sector to make sure they did not miss any turns in the economy.

Mr. Robison reported that Nevada’s economy has expanded in each of the past 15 quarters and its GDP growth has exceeded the national growth rate in the past eight quarters.

In closing, Mr. Robison stated that personal income increased in 28 of the past 29 quarters, which was the strongest gain in the nation as of the second quarter of 2017. Personal income growth is currently growing at 9.0%.

Mr. Leavitt requested an overview of personal income by county or region versus by statewide statistics, comparing Northern Nevada, Southern Nevada, the rural areas, and the mining counties.

Mr. Robison said DETR has seen fairly strong growth across the state. The statewide numbers are strongly influenced by Clark County, which accounts for approximately 80% of the population and employment; however, Washoe, Storey and Lyon counties were growing faster than Southern Nevada. He said the large rural areas (Elko) had steady growth and the smaller counties had volatile growth, which was to be expected due to smaller sampling sizes. He said unemployment rates decreased in every county, all below 6.0%, and employment growth showed improvement across the state on a year-over-year basis.

Ms. Lewis asked if DETR based their unemployment rate off the U-3 or U-6 unemployment rate.

Mr. Robison replied that DETR reported the official unemployment rate, which is most similar to the U-3 category, as defined by the Bureau of Labor Statistics (BLS). He explained that the U-3 category follows the same definition as the official unemployment rate, with the difference being it is based solely off the Current Population Survey (CPS). DETR incorporates a more robust set of inputs that include the CPS results, the Current Employment Statistics Survey, unemployment insurance claims data, as well as a time series modeling component that produces more accurate and stable results than the CPS. Mr. Robison elaborated on four of the six technical measures that make up the unemployment rate: 1) U-3 includes those who are actively seeking work and are either employed or unemployed; 2) U-4 adds discouraged workers, people who stopped looking for work because they do not feel there is work available for them; 3) U-5 adds marginally attached workers, which are discouraged workers who stopped looking for work for other reasons; and 4) U-6 includes everyone in the U-5 rate plus part-time workers who have been unable to find a full-time job. He noted the U-3 rate measured 5.2% compared to a recession high of 15%, and the U-6 rate measured 11.4% compared to a recession high of 25%. 5

9 Chairman Wiles said it was helpful to compare the U-3 and the U-6 measures. He acknowledged the significant progress in the U-6 numbers, and found that measure particularly interesting because of the discouraged worker component and the inclusion of part-time workers. He said that category has a broader impact on disposable income, which aids the Forum’s ability to forecast consumer spending. Chairman Wiles requested that DETR include that U-6 category in their presentations going forward.

Mr. Robison acknowledged Chairman Wiles request to include the U-6 category, and affirmed he would also break out full-time and part-time employment in the state.

VI. PRESENTATION ON THE STATE POPULATION OUTLOOK.

Jeff Hardcastle, State Demographer, Department of Taxation

Mr. Hardcastle compared his 2016 and 2017 projections, and stated both projections had a similar baseline forecast that derived from the Regional Economic Models, Inc. (REMI) model, with the difference relating to the lack of housing in Storey County. Storey County 2016 projections estimated 3,500 new housing units would be built in the TRIC area, which never moved forward. The lack of housing in that area influenced commuting patterns across the region in 2017 as well as the housing prices in Washoe and Lyon counties. Additionally, there was no activity from Southern Nevada’s Faraday Future project that was projected for 2017. Mr. Hardcastle reported the relative housing price in Washoe County compared to the U.S. is 1.35 and just under the U.S. median housing price in Clark County at .99. Mr. Hardcastle noted Washoe County continues to see rapid housing price increases that have not yet peaked or leveled off.

Mr. Hardcastle referred the committee members to the chart on page 46 (Exhibit A) that compares both manufacturing payrolls (since May 2012) and manufacturing employment (since January 2000) in the Reno Metropolitan Statistical Area (MSA) to the U.S. He reported the Reno MSA exceeded historic job levels prior to the recession and increased growth in manufacturing employment. Specifically, in 2001, 1.0% of manufacturing jobs within the Reno MSA were located in Storey County, which grew to 5.3% in 2014 due to the Tesla announcement and 18.0% in 2017. He said manufacturing wages have fluctuated in both Washoe and Storey counties since 2014, with Storey County measuring slightly higher than the national wage rate on a weekly level at 101.7% and 95% of the national average in Washoe County.

Mr. Hardcastle said the statewide population is projected to grow approximately 325,000 over the next 20 years. He pointed out the major differences between the 2016 and 2017 projections included the exclusion of Faraday Futures in Southern Nevada and the housing situation in Northwestern Nevada. He said other states are also projecting slower growth in population over the long term through the next 20 years.

Mr. Hardcastle said his office has been projecting 20-year population and annual growth rate forecasts since 2002 (page 48, Exhibit A). He attributed the population spike in 2006 to hotel and construction growth in Clark County. Subsequently, the growth rates in population and annual growth decreased. 6

10 Mr. Hardcastle said he was told that in the 1990’s one could multiply the number of hotel rooms in Clark County by ten to estimate its population, but as the local Southern Nevada economy diversified, in combination with the effects of other economic activity, that correlation became disconnected. He referred the members to the chart on page 50 (Exhibit A), and stated there continues to be differences between the growth in population, school enrollment, labor force, and job growth. He clarified that the chart contained data from two different sources, including “covered” employment produced by DETR and “total” employment released by the Bureau of Economic Analysis, which comprises sole proprietors, government employment, military employment and other forms of employment. Mr. Hardcastle noted population, school enrollment and labor force are growing slower on a county level, and do not grow at the same rate as jobs.

Mr. Hardcastle said immigration in the U.S. has declined and become more Asian oriented as opposed to migration from South and Central America (page 51, Exhibit A). Overall, the national population growth rate has weakened, and people moving from house to house or relocating across state lines has declined (page 52, Exhibit A).

Mr. Hardcastle talked about Nevada employment in relation to other regions of the country. The chart on page 53 (Exhibit A) illustrated employment growth from 1980 to 2015, indexed to peak employment in 2007, for Nevada and surrounding regions as well as the balance of the U.S. He pointed out that Nevada encountered consistent growth in employment prior to the 2006/2007 peak, at which time other regions of the country had already experienced rolling recessions due to various events, such as spot recessions with the defense sector, the savings and loan debacle, the agricultural recession, the predominance of the Rust Belt, and energy booms and busts in the plains and Rocky Mountain states. He said these recessions caused pools of people to relocate across the country for job opportunities, otherwise known as the “push and pull” affect. He noted that Nevada’s employment was growing evenly with other regions nationally.

Mr. Hardcastle stated the REMI econometric model used in his projections analyzed three factors to determine the driving influences of migration: 1) relative wage rate; 2) job opportunities; and 3) housing prices. In terms of wages across the surrounding states, Nevada pays higher in job sectors related to health care, arts and entertainment, accommodations and food services, and agriculture, and pays lower for jobs related to construction and manufacturing. Nevada’s average weekly wage, compared to the U.S., peaked in 2006 at about 94% of the national average, and currently competes at an annual average rate of 88%. Mr. Hardcastle theorized that the difference in the average weekly wage could be an indicator that hours worked were under part-time conditions.

Mr. Hardcastle disclosed that American Community Survey (ACS) census data, versus BLS data, was used to determine Nevada’s employment population by cohort (page 55, Exhibit A). He indicated that Nevada has been experiencing an aging labor force, trending from 2007 through 2016 (page 56, Exhibit A). The difference in expected employment less actual employment by age cohort, based on 2007 employment rates, 7

11 showed underemployment in 2016 of about 45,000 people. This data mirrored national data produced by the Hamilton Project and Northwestern University.

Historical data from 2000 to 2006 indicated that rural counties aged quicker than the rest of the state and the nation. Mr. Hardcastle informed the members that five counties in Nevada were showing a natural decrease in population as opposed to a natural increase, with two of them being Carson City and Douglas County. He reiterated that an aging population was occurring across the U.S. and worldwide.

Mr. Hardcastle expressed uncertainty about the range in the estimates for the number of occupied units for 2016 He said the State of Nevada projected an increase of 33,709 units, the ACS projected an increase of 13,093 units, and the Census Bureau estimate derived from population estimates projected an increase of 23,111 units. He could not identify the disconnect.

Mr. Hardcastle testified that estimates showed roughly 6% of housing units in Nevada were under water, and that the number of homes with a zero-balance mortgage increased. He reported that in the 2009/2010 timeframe, the status of people under the age of 55 changed from owner occupied to renter occupied, and in the 2011/2012 time frame, the owner-occupied population was driven by people 55 years of age and over. He justified that people in the tenure cohort of age 45 and under moved forward into the age cohort of people age 55 and over, which implied those people were aging in place and owning their home versus renting.

Mr. Hardcastle identified international migration as a potential risk to the forecast. He said roughly 25% of Nevada’s population was foreign born and 7% was unauthorized. He said influences that could decrease long-term trends in migration and the state’s total population include enforcement of immigration and deportation laws combined with the Reforming American Immigration for Strong Employment (RAISE) Act. Automation also presents a risk to the forecast, as studies showed that 65% of jobs in Clark County were subject to automation. He noted that better efforts exist that help codify the impacts of climate change related to mortality and worker productivity by region.

VII. PRESENTATION ON STATE ENROLLMENT RELATED TO THE FEDERAL AFFORDABLE CARE ACT AND THE PURCHASE OF HEALTH INSURANCE PLANS THROUGH THE SILVER STATE HEALTH INSURANCE EXCHANGE.

Heather Korbulic, Executive Director, Silver State Health Insurance Exchange Nicholas Stosic, Insurance Regulation Liaison, Department of Business and Industry, Insurance Division Glenn Shippey, Actuarial Analyst, Department of Business and Industry, Insurance Division

12 The Division of Insurance (DOI) and the Silver State Health Insurance Exchange (Exchange) submitted presentations that were included in the meeting packet. The presentations were revised and resubmitted as handouts outside the meeting packet. Please refer to the revised handouts for the DOI (Exhibit C) and the Exchange (Exhibit D) throughout the presentations listed under Agenda Item VII.

Nicholas Stosic, Insurance Regulation Liaison, Department of Business and Industry, Insurance Division

Mr. Nicholas Stosic identified the Nevada Division of Insurance (DOI) as the agency responsible for regulating the state’s insurance industry, which is the fourth-largest revenue source for the State General Fund. This industry grew from $10.9 billion of written premiums in 2010 to over $15.3 billion in 2016. He said the two largest insurance markets that made up the state’s total written premium in 2016 were health insurance at 47% and property and casualty insurance at 31%.

Mr. Stosic recognized Senate Bill (S.B.) 308 (2017), which increases the minimum automobile liability limits of $15,000 per person, $30,000 per accident bodily injury liability, and $10,000 for property damage liability (15/30/10) to $25,000 per person, $50,000 per accident bodily injury liability, and $20,000 for property damage liability (25/50/20), effective July 1, 2018. Optional coverage of uninsured and underinsured motorists coverage will also increase to those same limits. He said automobile written premiums in Nevada were approximately $2.4 billion in 2016, which represented roughly half of the total property and casualty market. The combined coverages of liability and uninsured/underinsured motorists made up roughly 58% of the total automobile written premiums.

Mr. Stosic said the DOI estimated that 32% of Nevada automobile insurance policies carried the current minimum coverage required by the state of 15/30/10. Recent carrier filings with the DOI indicated that some insurers would begin the new limits of 25/50/20 on both new business and renewals as soon as January of 2018. He explained that the DOI does not have the ability to access written premiums by policy limits, so although the DOI was aware that 32% of the policies carry the minimum limits, the value of those premiums are unknown; therefore, the DOI was unable to accurately estimate what the percentage of increase will be to the state’s written premiums. Additionally, the estimated increases in premiums vary widely and will depend on the carrier and the insured driver.

Mr. Stosic recognized the state’s loss ratio as a potential risk that could impact Nevada’s automobile insurance premiums. He reported that in 2015, Nevada experienced the nation’s second highest increase in claims frequency at 10.6%, and a rapid increase in the average cost of automobile claims as well. Total loss costs rose nationally by 13% in the two-year period ending in March 2016, which was more than ten times the nation’s rate of inflation. He confirmed the average approved automobile rate increases for 2014 and 2015 were approximately 5%, but saw rates as high as 8.0% for 2016 and just under 12.0% for 2017.

13 Mr. Stosic emphasized that 2017 could go down in U.S. history as having the costliest, catastrophic losses due to hurricanes Harvey, Irma and Maria, along with the California wildfires. The losses were estimated at $110 billion, which could ultimately impact Nevada’s reinsurance and commercial insurance rates.

Glenn Shippey, Actuarial Analyst, Department of Business and Industry, Insurance Division

Mr. Shippey confirmed that total written premium for 2016, including all lines of health insurance, was just over $7.0 billion. Approximately 37%, or just over $2.6 billion, came from major medical plans. He said the majority of medical premiums are written by Nevadans who are covered under employer-based plans (large group market), which are fully insured and regulated by the DOI. (Many more Nevadans are covered under self-funded plans that are not regulated by the DOI). In 2016, there were just under 636,000 Nevadans covered under fully-insured major medical plans. He said DETR estimated 5% growth in premiums for 2017 despite a contraction in the individual market in terms of covered lives; however, the total number of covered lives was expected to drop approximately 3%.

Mr. Shippey referred the members to page 10, (Exhibit C), Individual Market Premium. He said the individual market grew since 2014, the year the Affordable Care Act (ACA) was fully implemented and subsidies were accessible on the Silver State Health Insurance Exchange (Exchange). Of nearly 118,000 Nevadans covered under individual plans at the end of 2014, about 70% purchased plans off the Exchange, which were mostly offered by preferred provider organization (PPO) carriers that sold plans statewide. Mr. Shippey stated that in 2014, the primary form of subsidies under the ACA were tied to the cost of the second-lowest Silver plans in Las Vegas, Reno, Carson City and Elko (page 11, Exhibit C).

Moving ahead to 2015, covered lives in the individual health market increased about 18% due to growth in purchases on the Exchange. Mr. Shippey reported nearly half of Nevadans with coverage purchased plans on the Exchange, and there were at least ten off-Exchange carriers to choose from in the Las Vegas, Reno, Carson and Elko regions. For Plan Year 2015, the DOI approved just under a 5% average statewide rate increase, effective January 1 of 2015.

Additional growth was observed on the Exchange in 2016, exceeding off-Exchange enrollment for the first time, while off-Exchange membership remained stable. The on-Exchange growth in 2016 represented the peak of the individual market in terms of covered lives. Mr. Shippey confirmed a rate increase of 8.9% was approved by the DOI and became effective January 1, 2016. He noted that premium rate increases generally do not impact individuals who are eligible for subsidies.

Mr. Shippey said the Exchange experienced a shift in 2017. The DOI approved a 10.75% average rate increase, effective January 1, 2017; however, the Exchange grew to represent two-thirds of Nevada covered lives in the individual market. Off-Exchange lives decreased by nearly 13% in 2017. 10

14 Looking ahead into 2018, Mr. Shippey touched on the following factors that are expected to influence further contraction in the number of Nevadans covered in the individual market:

• Uncertainty over the future of ACA will affect consumers, carriers, and other stakeholders as it puts upward pressure on premium rates. • Affordability is a significant concern for individuals who are not eligible for subsidies. Rates have increased nearly 46%, on average, since the end of 2016. • Plan availability, particularly off the Exchange. More than 45,000 Nevadans who are currently insured in the individual market will lose coverage through their current carrier by the end of December 2017. • The open enrollment period for 2018 was shortened to half the time allotted for 2017, which resulted in less time to purchase plans for 2018.

Mr. Shippey stated that all six carriers currently selling off-Exchange health plans in rural Nevada have chosen not to return to that market in 2018, leaving one option to purchase from one carrier on the Exchange. He said the DOI approved a 31.6% average rate increase, effective January 1, 2018, which will absorb the impact of cost-share reduction payment defunding that was implemented by the Trump Administration, effective October 2017. Mr. Shippey identified two forms of financial assistance under the ACA, the first being an Advanced Premium Tax Credit, commonly referred to as a subsidy, that is available to individuals with household incomes between 138% and 400% of the federal poverty level (FPL). He said the amount an eligible consumer pays for the second-lowest Silver plan on the Exchange is capped at a fixed percent of his/her household income. The consumer pays the capped amount and the federal government pays the remainder of the premium directly to the carriers in the form of a subsidy. Annual rate increases to the second-lowest Silver plan corresponds to a percentage increase in the subsidy received for those eligible purchases on the Exchange. The second form of financial assistance is a Cost Sharing Reduction (CSR) plan for consumers who make below 250% of the FPL in household income.

Mr. Shippey explained that CSR plans are only available on the Exchange, and only at the Silver level. He gave the following examples of how a CSR plan can impact a 40-year-old consumer’s wallet in 2018 (page 17, Exhibit C):

• $16,700 Household Income (138% of FPL): The consumer in this income level for 2018 is eligible for a 94% CSR plan with a $600 deductible (actual deductible is $7,050) for no additional cost. He said carriers had been compensated for issuing these enhanced benefits directly by the federal government; however, the Centers for Medicare and Medicaid Services (CMS) stopped compensating carriers in October 2017; therefore, the DOI required Exchange carriers to increase the 2018 Silver plan rates to reflect the impact of the defunding. The additional load on Silver Exchange plans increased the subsidy amounts available to eligible consumers as well. Mr. Shippey said, because consumers can apply this subsidy to any Exchange level plan, there are more affordable options available to low-income Nevadans in 2018. For example, at this income level, a Las Vegas resident can

15 purchase a Bronze plan with a $6,600 deductible at no cost or can purchase a Silver plan with a CSR deductible of $600 for $27.43 per month.

• $18,500 Household Income (150% of FPL): This consumer is eligible for an 87% CSR plan if they purchase the lowest Silver plan, which would cost $45.40 per month with a deductible of $1,850 in Las Vegas. This person could get a free Bronze plan with a $6,600 deductible. The premium for the second-lowest Silver plan would be capped at 4.19% of household income or about $65 per month.

• $24,500 in Household Income (200% of FPL): In 2017, a Carson City consumer with this income paid $93.92 per month with a $6,600 deductible for the lowest Bronze plan; however, in 2018, this same plan will cost that consumers five cents per month.

• $30,500 in Household Income (250% of FPL): A consumer who falls in this category is no longer eligible for a CSR plan. However, the cost for the lowest Bronze plan with a $6,600 deductible is much lower in 2018 than it had been historically.

• $48,500 in Household Income (400% of FPL): Individuals in this category are no longer eligible for subsidies or any form of cost-share assistance. The cost for the lowest Bronze plan in Elko increased 85% for people who are not subsidized with a rate of $293.71 per month in 2017 and $544.58 in 2018. The reason being that the carrier currently selling the lowest Bronze plan off the Exchange in Elko and other rural counties is no longer selling plans in 2018. A 60-year-old in this category would be responsible to pay $1,156.49 per month (Elko) for a minimized Bronze plan with a $6,600 deductible.

Mr. Shippey clearly identified that health plan affordability is a significant concern for consumers with incomes above 400% of the FPL.

Heather Korbulic, Executive Director, Silver State Health Insurance Exchange

Ms. Korbulic described the Silver State Health Insurance Exchange as the state agency that operates the online individual marketplace known as Nevada Health Link. The Exchange connects Nevadans who are not insured by their employer, Medicaid or Medicare to ACA-certified, qualified health plans, including CSR plans that require certain qualifications. She said Nevada Health Link operates a state-based marketplace that uses healthcare.gov to determine eligibility and enrollment. The Exchange is a self-funded agency with no State General Funds or federal funds that support its operations.

Ms. Korbulic clarified that plan year 2017 extended from January 1, 2017, through December 31, 2017. She explained there were 89,061 enrollees in 2017, and as of September 2017, 74,804 of those enrollees continued to effectuate their enrollment. Of the consumers enrolled on the Exchange, 65,555, or 87%, received Advanced Premium Tax Credits (APTCs). She noted that 43,685 consumers, or 58%, were enrolled in CSR plans.

16 Ms. Korbulic reported an increase in plan selections and retention since 2014 (page 5, Exhibit D), and a decline in enrollment erosion, which dropped from 24% of consumers leaving the Exchange in 2015 to 18% in 2016 and 16% in 2017. The decline was attributed to unpaid premiums, a change in benefits, and insurance eligibility through employers.

Open enrollment in 2018 offers 14 qualified health plans from two carriers, Health Plan of Nevada and Silver Summit. Ms. Korbulic indicated that the two carriers combined offer one catastrophic plan, four Bronze plans, seven Silver plans, and 2 Gold plans. Clark, Nye and Washoe counties have the choice of all 14 plans offered, whereas the other 14 counties throughout the state only have four plans to choose from through Silver Summit. She said the Exchange allows access to 21 standalone dental plans from six different carriers. She noted the average approved rate increase for Health Plan of Nevada plans was 36.8%. Silver Summit was a new carrier to the Exchange in 2018; therefore, a comparison rate was unavailable.

Ms. Korbulic highlighted the following challenges for the 2018 enrollment period:

• The federal government discontinued paying CSR subsidies, effective October 2017, therefore, rate adjustments were incorporated to mitigate lawsuits for consumers and carriers. There was significant ambiguity related to the enforcement of the individual mandate, which triggered many questions and lack of clarity. Additionally, in October of 2017, the Internal Revenue Service (IRS) released a statement communicating that electronically filed tax returns related to 2018’s filing season will not be accepted if the taxpayer does not address health coverage.

Ms. Korbulic stated most experts agreed that in order to have a health care system where a person can purchase health insurance regardless of their health status or their pre-existing condition, incentives must be available for people to enroll and maintain coverage. She said having a diverse and sustained mix of covered lives helps to contain costs for everybody on the Exchange. She indicated the individual mandate is currently the only existing incentive to drive people into the market, and eliminating it without enacting a reform to form the risk pool would likely result in significant premium increases for consumers on the Exchange. Consumers will be priced out of the market, resulting in an increase in the number of uninsured Nevadans. Ms. Korbulic voiced the following concerns about a repeal of the individual mandate as it relates to ongoing carrier participation:

• The Exchange’s 2018 ad campaign focused more on the costs associated with medical care, or the lack of medical insurance, rather than targeting the tax penalty that exists for people who do not have health insurance.

• A truncated open enrollment period, from 90 days to 45 days, created a significant strategy and messaging and marketing challenge.

• Federal-level cuts were made to healthcare.gov funding, including 90% to marketing and advertising and 40% to outreach.

17 Ms. Korbulic expressed that the Exchange is not directly affected by the federal-level budget cuts; however, healthcare.gov advertisements and direct consumer communications had historically helped fortify Nevada Health Link’s ad campaign and generated additional awareness regarding open enrollment. She noted that healthcare.gov had maintenance outages every Sunday evening from 9:00 p.m. to 9:00 a.m., which resulted in 2.5 fewer days of enrollment availability.

• Communicating rate changes to consumers was challenging due to negative media publicity that led consumers to believe coverage was no longer affordable. Over 87% of Exchange consumers receive subsidies, and when their rate increases, so does their subsidy.

Ms. Korbulic noted that most consumers on the Exchange will not be impacted by their rate in 2018, but individuals who are not eligible for subsidies face a significant increase in premium.

• Carrier participation dropped from four carriers in 2017 to two carriers in 2018. In August of 2017, the DOI announced that 14 of Nevada’s 17 counties did not have carriers to represent them; however, Silver Summit stepped in to secure coverage for families in these areas through the Exchange. Ms. Korbulic indicated that approximately 22,000 Nevadan Exchange consumers had to select new plans in 2018 due to their carriers dropping out of the Exchange.

Ms. Korbulic directed the members to page 10 (Exhibit D) of her presentation, 2018 Enrollment To Date. She stated the chart did not represent an apples-to-apples comparison, because of the truncated enrollment period for 2018. In comparison, 75% of enrollees for 2018 were enrolled by Week 5 of the open enrollment period versus 36% by Week 5 for 2017. Healthcare.gov and CMS did not grant flexibility to allow the State of Nevada to extend their open enrollment period. Ms. Korbulic indicated that the Exchange received many calls from individuals who expressed concern and confusion regarding their rates, and from consumers who were ineligible for subsidies and were facing 36% and 46% increases to their premiums. She emphasized that some individuals opted to go without health insurance because they could not afford it.

Based on internal analysis performed by the Exchange, Ms. Korbulic noted that Nevada’s state-based marketplace was outperforming the federally-facilitated marketplace that had their outreach and marketing funds reduced by approximately 13.4%.

In closing, Ms. Korbulic directed the members to additional information regarding the price disparities between subsidy-eligible consumers versus those who are not subsidy eligible (page 11, Exhibit D).

Mr. Leavitt identified events that directly impacted premiums, such as the increase in automobile minimum liability limits, the elevated number of accidents in Nevada, huge catastrophic losses by insurance companies across the country, a 36% increase in the

18 rates of health insurance, and the volatility in the number of health plan enrollees. Taking these significant changes into consideration, he asked if any of the presenters estimated the impact to the Insurance Premium Tax (IPT) revenue projections for the upcoming periods.

Mr. Stosic replied the ultimate impact would be hard to gauge. He said, although the automobile liability limit increase of 25/50/20 would not be effective until July 1, 2018; some carriers already implemented the new rates as of January 2018. He said, typically, when dealing with insurance rate changes for an annual policy, it takes a full 12-month cycle for any rate changes to ultimately affect all consumers; thus, the ultimate impact of the rate change does not fully reveal itself until the following year when all consumers are at the new higher rates. For semi-annual policies, all policy holders must have the increased liability limits implemented by July 1, 2018, and the impact of those rate changes will occur in the second half of 2018. He said the biggest challenge with anticipating the impact is that the base rates vary greatly by carrier, and the DOI does not have access to breakdowns by carrier, premiums and limits to try and estimate the financial impact. Mr. Stosic said the Property Casualty Insurer’s Association of America testified before the 2017 Legislature, and stated the anticipated rate increase for 32% of the policies in Nevada would range between 9% and 32%. He said the overall automobile average rate increase that was approved by the DOI went from 8% in 2016 to just under 12% in 2017, so that particular 12% will take some time to filter through in 2018. Mr. Stosic touched on catastrophic losses in Nevada, stating the combined ratio (the sum of losses and expenses divided by earned premiums) was 92% in 2016 and 115% in 2017, meaning for every dollar collected in premium in 2017, $1.15 was spent in losses and expenses. Nationally, the property and casualty industry has seen their combined ratio go from 101% to 109%, an 8% increase. Relative to Nevada, the property and casualty premiums are expected to see a higher rate of increase over the next two years compared to previous increases.

Mr. Leavitt asked if the Forum would have definitive data relative to the entire insurance market, including health, casualty, automobile, etc., in order to make valid IPT revenue estimates to the Governor and the Legislature in December of 2018.

Mr. Stosic stated there is a time lag in the insurance industry. He said it takes one year for the DOI to get written premium results; therefore, results from 2017 will be accessible in December of 2018. He said the DOI has the ability to call various carriers within the state to gather information, and would consider contacting those carriers to discuss the impact after one year of implementing the new insurance policies.

Chairman Wiles stated the presentations under this agenda further emphasized the importance of clarity at the federal level relative to health care reform. He said the combination of changes in premiums, the reduction in the number of insurers in the market, the increase in copayments, and the increase in deductibles makes it difficult to find health care providers to provide services to Nevadans. He commented on Nevada’s aging population, and stated it was not just an economic issue, but a fundamental issue about people’s health and welfare in the State of Nevada.

19 Chairman Wiles requested a recess at 10:30 a.m. The meeting reconvened at 10:41 a.m.

VIII. PRESENTATION OF THE TAX CHANGES APPROVED BY THE LEGISLATURE DURING THE 2017 SESSION AND THE ECONOMIC FORUM MAY 1, 2017, FORECAST FOR FY 2018 AND FY 2019, ADJUSTED FOR LEGISLATIVE ACTIONS APPROVED DURING THE 2017 SESSION.

Mr. Russell Guindon, Principal Deputy Fiscal Analyst, Fiscal Analysis Division, Legislative Counsel Bureau and staff to the Economic Forum.

Mr. Guindon directed the members to the table on page 99 (Exhibit A) of the meeting packet that represented the Economic Forum’s May 1, 2017, General Fund revenue forecast, including adjustments for measures approved by the 2017 Legislature for all unrestricted General Fund revenue sources for FY 2017 through FY 2019. He stated all legislative actions that are approved by the Legislature and the Governor, affecting any of the General Fund revenue sources, are directed to the Forum’s staff to estimate the impacts. Mr. Guindon explained that the grey-shaded rows on the table represented tax credits that were approved by the Legislature and by the Governor. He conveyed that the majority of the tax credit programs are transferrable and can be taken against the Gaming Percentage Fees tax, the Insurance Premium Tax or the Modified Business Tax (MBT). He clarified that, because tax credit allocations are unknown at the time of forecasting revenues, the Forum made the decision at a prior meeting to forecast the gross revenue for those revenue items that could be affected by tax credits without getting involved with forecasting tax credits for each revenue source affected by credits. Mr. Guindon identified the various tax credit programs that could be taken against the Gaming Percentage Fees tax, and pointed out the zero forecast for each of those programs for FY 2017, FY 2018, and FY 2019. The actual credit amounts listed for FY 2015 and FY 2016 were reported by the Department of Taxation and the Gaming Control Board.

Mr. Guindon highlighted the tax credit programs associated with the MBT, shown on page 100, and then dropped to the bottom of the table on page 101 to bring attention to the forecast that was approved by the Forum at their May 1, 2017, meeting for FY 2017 through FY 2019, adjusted for legislative actions, as well as the total amount of actual tax credits that were taken against each revenue source in FY 2015 and FY 2016. Mr. Guindon noted that the Film Transferrable Tax Credits, as shown on page 100, represented a credit of $82,621 that was taken by an employer against their MBT versus being sold in the secondary market and transferred to another entity.

For the benefit of the Economic Forum members and the general public, Mr. Guindon explained how general fund revenue sources impacted by tax credits are forecast and then tracked against the reported actual collections. The Forum forecasts the amount of gross revenue for each revenue source, which is the amount before the application of any tax credits. The Forum also forecasts the aggregate amount of tax credits projected to be taken for a specific tax credit program. The amount of tax credits taken against a specific revenue source is not forecast because it is unknown which revenue 16

20 source the tax credits will actually be used against. The amount of actual collections for each revenue source reported by the Department of Taxation and the Gaming Control Board is the net amount after any tax credits are taken. Based on information provided on the amount of actual tax credits taken, the actual gross collections are computed by adding the actual tax credits taken to the actual amount of net collections reported. This amount of actual gross collections can then be compared to the gross forecast amount to determine how the actual collections are tracking against the Forum’s forecast accounting for the impact of actual tax credits used. Mr. Guindon explained that the tax credits for the various tax credit programs impacting General Fund revenue are treated as a negative revenue source. The Forum actually approves a forecast for each tax credit program and the actual credits taken are tracked against the forecast.

Mr. Guindon elaborated on TABLES 1, 2 and 3, beginning on page 107 (Exhibit A).

TABLE 1: A summary of the Economic Forum’s forecast for FY 2017, FY 2018, and FY 2019, before and after tax credits, approved at the May 1, 2017, meeting, without adjustment for legislative actions. Mr. Guindon stated that staff to the Forum look at Commerce Tax credits differently than the other tax credit programs, hence the reason the Commerce Tax credits were not identified in the grey shaded area of the previous table, beginning on page 99 (Exhibit A). He reasoned that the Commerce Tax credits are part of the tax law in a sense that any entity that pays the Commerce Tax, and has a Commerce Tax liability, is entitled to take up to 50% of that liability as a credit back against their MBT if they have a MBT liability. Mr. Guindon said staff has made a distinction between something that is internalized into the structure of the taxes, such as between the Commerce Tax credits and the MBT, and something that is a separate statutory program that requires an application or the ability to meet other criteria in order to get the benefit of the tax credit.

TABLE 2: A table that itemizes the legislative adjustments that were approved by the Legislature during the 2017 Session and signed by the Governor. Mr. Guindon reported the Governor recommended and the Legislature approved allocating 25% of the Governmental Services Tax (GST) to the General Fund versus going to the Highway Fund in FY 2018 and FY 2019, and revert 100% of the GST back to the Highway Fund beginning in FY 2020.

He said the other adjustments were less of a decision regarding revenue or tax policy and more about budget decisions recommended in the Governor’s budget that needed legislative approval. The adjustments involved agencies that were funded by General Fund appropriations, and were required by law to collect fees and deposit the fee revenue in the General Fund. All of the adjustments pose a net impact to General Fund revenue totaling approximately $24.5 million in both FY 2018 and FY 2019, principally due to the GST decision (page 111, Exhibit A).

TABLE 2 references two adjustments, along with their estimated revenue impact to the General Fund, to the following tax credit programs: 1) award an additional $10.0 million in FY 2018 and FY 2019 to the Film Tax Credit Program, and 2) authorize a one-time addition of $20.0 million in FY 2018 to the Educational Choice Scholarship tax credit program. Mr. Guindon indicated that unused credits pertaining to the Film Tax Credit 17

21 and the Educational Choice Scholarship tax credit programs can be carried forward in future years. He clarified that the net impact of the adjustments to the tax credit programs totals $30.0 million for FY 2018 and $10.0 million for FY 2019. TABLE 2 also identifies the maximum potential liability in tax credits that can be taken against the state’s revenue sources for each fiscal year in the 2017-2019 biennium (page 112, Exhibit A).

The net impact to the General Fund due to legislative actions of the 2017 Legislative Session totaled approximately -$5.5 million ($24.5 million in revenue and -$30.0 million in tax credits) for FY 2018 and approximately $14.5 million ($24.5 million in revenue and -$10.0 million in tax credits) for FY 2019 (page 13, Exhibit A).

TABLE 3 is similar to TABLE 1, but shows the Economic Forum’s forecast after the legislative adjustments from TABLE 2 are incorporated.

Chairman Wiles relayed his appreciation for, and his approval of, the table’s presented by staff. He stated it was a challenge to estimate the tax credits when their allocations were unknown.

IX. REPORT AND DISCUSSION OF FY 2017 ACTUAL COLLECTIONS COMPARED TO THE ECONOMIC FORUM DECEMBER 3, 2014; MAY 1, 2015; DECEMBER 6, 2016; AND MAY 1, 2017, FORECASTS, ADJUSTED FOR LEGISLATIVE ACTIONS APPROVED DURING THE 2017 SESSION.

Michael Nakamoto, Deputy Fiscal Analyst, Fiscal Analysis Division, Legislative Counsel Bureau

Mr. Nakamoto directed the Forum to page 119 (Exhibit A), and stated TABLE 1 was a representation of actual collections versus the forecast for FY 2017 for the major General Fund revenue sources as well as select non-major General Fund revenues. He explained that for any odd number fiscal year, and for FY 2017 specifically, the Economic Forum had four different forecasts prepared, including 2-year ahead forecasts dated December 3, 2014 and May 1, 2015, and current year forecasts dated December 6, 2016, and May 1, 2017.

Mr. Nakamoto turned to page 120 and pointed out that the 2-year ahead forecast (December 3, 2014) for the Commerce Tax was a result of legislative adjustments made to the Commerce Tax after the 2015 Legislative Session totaling $119,826,000. He explained there was no such thing as a Commerce Tax when the Forum met on December 3, 2014, and May 1, 2015, and because staff is responsible for adjusting the Economic Forum’s forecast once revenue sources are approved or legislative adjustments are made, staff justified making the same adjustments for each forecaster, including Agency, Fiscal and Budget.

Mr. Nakamoto moved on to the Modified Business Tax and explained its various components. He directed the members to the row at the bottom of page 120 labeled “MBT: Commerce Tax Credit-Actual,” which identified the credit that was added in the 18

22 2015 Session. He said the point was to get down to the absolute subtotal which included the Commerce Tax, the total MBT, and the credit. Mr. Nakamoto mentioned the “buy down” provision contained within the Commerce Tax law from the 2015 Session, and testified that the number in the row labeled “Subtotal: Commerce Tax, MBT and Credit” came very close to approximating that buy-down calculation, if the buy down would have been required in FY 2017. However, the buy down is not required until FY 2018, as it is an even-year calculation. He explained that the rule states if the actual collections for the Commerce Tax, the MBT (includes the Commerce Tax credit) and the Branch Bank Excise Tax are more than 4.0% above the forecast for the even-numbered fiscal year, then there has to be a buy down of the rates for the MBT components equal to the rate that would have generated 4.0% above the forecast. He clarified that the calculation in the table is not precise, because the Branch Bank Excise Tax is not included; however, under the May 1, 2015, Forecast column, the (see Economic Forum forecast line), the actual collections of $777.757 million were $41.2 million or 5.3% above the forecast. He noted, had there been a calculation for the buy down in FY 2017, it was likely there would have been one given this result (page 120, Exhibit A).

Mr. Nakamoto reported that actual collections for the total General Fund Revenues compared to the Economic Forum’s May 1, 2017, forecast, was $68.1 million or 1.72% above the forecast. He noted that, while that number did include the Commerce Tax credit, because the Economic Forum forecast gross revenues, that number did not include any tax credits used against those revenue sources from any tax credit programs.

Mr. Nakamoto moved to TABLE 2 (page 124, Exhibit A), a look at the State General Fund revenues that are unrestricted, which compares actual collections to the forecast. He explained the difference between TABLE 2 and TABLE 1 was that TABLE 2 compared only the current year forecasts that were done on December 1, 2016, and May 1, 2017. Mr. Nakamoto scrolled down to the bottom of page 128 and drew attention to the row labeled “Total General Fund Revenue: After Commerce Tax Credits” and the orange column under the Economic Forum’s May 1, 2017, Forecast that displayed the difference between actual collections and the forecast totaling $68.1 million or 1.7% above the forecast. He explained that the row labeled “Total General Fund Revenue: Before Tax Credits,” under the same column, totaled approximately $35.6 million or 0.9% above the forecast. The Commerce Tax credits added another $32.5 million to that number, and was a significant driver for being $68.1 million above the forecast for FY 2017. He noted the Forum missed the total tax credits programs forecast by approximately $1.0 million. He attributed the Film Tax Credits and the New Market Jobs Acts Tax Credits, which came in below the forecast, as primary contributors to that above-forecast result. Relative to the Total General fund Revenue: After Tax Credits, the Forum’s forecast compared to actual collections was $67.1 million or 1.7% above the forecast for FY 2017.

23 Mr. Russell Guindon, Principal Deputy Fiscal Analyst, Fiscal Analysis Division, Legislative Counsel Bureau

Mr. Guindon moved to TABLE 1 on page 132 (Exhibit A), which represented the Commerce Tax revenues as they were collected and posted in the state’s fiscal year accounting period. He clarified the tax period for the Commerce Tax is July 1 through June 30, a fiscal year period, and is due 45 days after the end of that fiscal year. Mr. Guindon communicated there is a point in time when two fiscal years are open simultaneously for agencies that are collecting and posting revenue; the prior fiscal year is open until the third Friday in September or whenever the Controller’s Office declares its posting deadline. Although the Commerce Tax is due two months after the end of the fiscal year, those collections are accrued and returned to the previous fiscal year as long as that fiscal year is still open for posting.

Mr. Guindon explained that the red highlighted number, shown on TABLE 1 (page 132), represented actual Commerce Tax collections for the FY 2016 reporting period that were posted in FY 2016 per the State Controller’s fiscal year accounting. He said when the Fiscal Analysis Division forecast Commerce Tax collections of $119,826,000 in May of 2015, which the Forum was not involved in, 100% of that forecast was allocated to FY 2016. He said, at that time, staff anticipated that FY 2016 collections could spill over into FY 2017, and assumed that 100% of the FY 2017 collections would be posted in FY 2017, hence the forecast error of 16.5%. He further explained that actual collections posted in FY 2017 that legally belonged to the FY 2016 tax period were shaded in dark blue ($28,76,624), and actual collections for FY 2017 that were deposited in FY 2017 were highlighted in yellow (approximately $169.1 million). TABLE 1 identified the Forum’s forecast or estimates that were prepared by the Budget and Fiscal Divisions, and approved by the Forum, which totaled approximately $203.4 million and missed actual collections by approximately $5.6 million in FY 2017.

Mr. Guindon moved to TABLE 2 and explained that actual collections reported for FY 2016, but collected in FY 2016 and FY 2017, totaled approximately $172.3 million. At the Economic Forum’s May 1, 2017, meeting, staff was aware of the approximately $143.5 million that was deposited in FY 2016 for the FY 2016 reporting period, but forecast an additional $25.8 million to be collected in FY 2016 for the FY 2016 reporting period. Mr. Guindon reported that actual collections of approximately $28.8 million was deposited in FY 2017 for the FY 2016 reporting period, thus exceeding the forecast of $169.4 million by approximately $2.8 million.

The lower block in TABLE 2 shows information for FY 2017. Mr. Guindon explained that $169.1 million was the actual amount collected in FY 2017 for the FY 2017 reporting period, and an additional $7.5 million was collected for the FY 2017 reporting period, but deposited in FY 2018, for total collections of approximately $176.6 million to date. Mr. Guindon indicated that more tax collections could still come in, but this was a year-to-date reporting. He said it matters how the forecast for total Commerce Tax collections gets posted, independent of each fiscal year, because those numbers are what the budgets are built from. The lower section of each table is important because it measures how accurately the forecasters and the Forum forecast the amount of

24 revenue available for each fiscal year based on their assumptions of the economic activity and the tax base.

TABLE 3 illustrates the Commerce Tax credit against the MBT forecast. The top block, highlighted in orange (approximately $169.4 million), identified the Commerce Tax estimate for FY 2016. At the May 1, 2017, meeting, the Economic Forum voted to approve using 45% credit of the Commerce Tax revenue against the MBT for FY 2017 and 50% for both FY 2018 and FY 2019, based on the preceding year’s estimate, to generate the credit amount resulting in $76.2 million in FY 2017 and $88.8 million in FY 2018.

TABLE 4 illustrates actual collections versus forecast collections for FY 2016 and FY 2017; first-quarter actual collections for FY 2018; and actual versus forecast Commerce Tax credit against the MBT for FY 2017 based on FY 2016 Commerce Tax paid. Mr. Guindon explained that the MBT in FY 2016 was not affected by Commerce Tax credits, because they did not exist at that time. Relative to tax credit programs and the total amounts applied, for FY 2016, the difference between the Economic Forum’s forecast and actual collections was 0.1% with actual collections being higher. The total MBT actual collections for FY 2017, before tax credits, totaled $623.6 million compared to the Forum’s forecast at $609.4 million, reflecting a $14.3 million difference.

TABLE 5 illustrates the Commerce Tax credits taken against the MBT. Mr. Guindon explained that actual Commerce Tax credits taken against the FY 2017 MBT are based on actual Commerce Tax collections for FY 2016. He pointed out that actual tax credits recorded in FY 2017 that were taken against the MBT for the Commerce Tax in FY 2017 totaled approximately $32.0 million less than what was forecast. He pointed out in TABLE 4 that, the MBT, after all other tax credit programs were taken, the net difference between actual collections and the forecast for FY 2017 was approximately $48.3 million, of which $32.0 million was the Commerce Tax Credit back against the MBT.

In closing, Mr. Guindon affirmed that one complete observation existed for the FY 2016 Commerce Tax; however, it was still possible that people could file or amend their returns in terms of taking the credit against the MBT for FY 2016 and/or FY 2017.

Mr. Guindon referred back to TABLE 4 and pointed out in the far right column the FY 2018 actual collections for the first quarter, reported by the Department of Taxation. He noted that under the Commerce Tax sections for FY 2018, $10.4 million credits were taken against the MBT for FY 2016 Commerce Tax due to amended returns or because the Department of Taxation alerted entities to the fact that they paid Commerce Tax and MBT, but did not take the available credit. Mr. Guindon indicated that entities have three years to file amended Commerce Tax returns and claim their available credits against their MBT liability; therefore, it would not be unlikely to see FY 2016 Commerce Tax credits taken in FY 2019 and FY 2020. He said of the $39.9 million in Commerce Tax credits that were taken in the first quarter of FY 2018, one-fourth of it was based off the prior reporting period.

25 Mr. Guindon reiterated the complexity of the tax credits relating to the forecast process, and affirmed that the Economic Forum’s decision to forecast gross revenue was the right decision. He explained that the Economic Forum bases its forecasts on the economy, and the Fiscal and Budget Divisions generate consensus estimates for the tax credits, then present them to the Economic Forum for approval of a gross credit amount that eventually gets allocated toward a revenue source. He anticipated that the Forum might direct Fiscal and Budget staff to forecast tax credits by revenue source in the future.

Mr. Guindon referred back to TABLE 5 and stated the MBT Tax credit forecast of $76.2 million was based on the forecast for FY 2016 Commerce Tax credit of 45%. He explained that approximately $43.7 million credits were taken for FY 2016 in FY 2017, and $10.4 million credits were taken for FY 2016 in FY 2018, which totaled $54.1 million credits taken against the MBT for FY 2017 compared to the forecast of $76.0 million, a difference of $22.0 million. Mr. Guindon stated that the $54.1 million in actual Commerce Tax credits taken against the MBT represented only 31% of the actual Commerce Tax collection for FY 2017 of $176.0 million. This compares to the 45% that was projected by the Forum to derive the $76.2 million tax credit forecast amount for FY 2017. Clearly, the actual percentage of Commerce Tax credits against the MBT for FY 2017 was much lower than anticipated. He expressed concern that, unless a learning curve still exists among the taxpayers relative to Commerce Tax credits and the MBT, the 50% estimate for FY 2018 and FY 2019 will be too high.

X. REPORT ON THE COMMERCE TAX STATISTICS BY BUSINESS CATEGORY FOR FY 2016 AND FY 2017 AND THE TAX CREDITS TAKEN AGAINST THE MODIFIED BUSINESS TAX IN FY 2017 FOR COMMERCE TAX PAID IN FY 2016.

Kile Porter, Economist, Department of Taxation

Mr. Porter referred to his handout (Exhibit E) and provided a summary of the following tables:

TABLE 1 showed a breakdown of the Commerce Tax due, relative to taxpayers that met the $4.0 million total gross revenue threshold, broken down by the North American Industry Classification System (NAICS) business category number for FY 2016. Column M showed the total Commerce Tax due based on economic activity in FY 2016, which was approximately $171.9 million. He noted the numbers would vary slightly from Mr. Guindon’s tables because of the date the numbers were run.

TABLE 2 showed the same breakdown information but for FY 2017. Column M showed the total Commerce Tax due was approximately $175.0 million.

TABLE 3 showed the difference between TABLES 1 and 2. Column M represented the difference between the total Commerce Tax due (comparing FY 2016 and FY 2017), which was approximately $3.1 million.

26 TABLE 4 showed the Commerce Tax credits based on the economic activity in the fiscal year. The table broke down the information for Commerce Tax credits that were claimed. Mr. Porter said the most useful information included in TABLE 4 was the total Commerce Tax credits claimed per quarter for FY 2017 (second to last row on TABLE 4) for Commerce Tax that was due in FY 2016. He explained that Column C represented the Commerce Tax Due for FY 2016, which matched the Commerce Tax due from TABLE 1 (Column M), and Column D represented the theoretical Commerce Tax credits that were estimated based on 50% of the Commerce Tax due for FY 2016. He affirmed the approximate amount of credits taken in FY 2017 were as follows: $34.1 million in the first quarter; $10.3 million in the second quarter; $6.3 million in the third quarter; and $3.4 million in the fourth quarter. The total amount of credits claimed for FY 2017 was approximately $54.0 million, of which approximately $43.0 million was claimed during FY 2017 and approximately $10.4 million was claimed after FY 2017 closed. Mr. Porter indicated that a number of taxpayers will file amended returns, which can be filed within three years of the original tax return; therefore, changes will likely occur to the $54.0 million of total credits claimed.

Mr. Porter said understanding the distinction between what was claimed during the fiscal year versus what was claimed after the closeout of the fiscal year can be challenging as Commerce Tax credits are claimed against the MBT. He explained that businesses are assigned to a business category, and the Commerce Tax is based on the business entity classification, thus the reason for the range of percentages representing the credits claimed as a percentage of total credits available, as shown on TABLE 4, Column S (Exhibit E). He said if a taxpayer fills out the appropriate paperwork with the Department of Taxation, the taxpayer can claim those credits for another Commerce Tax entity. For example, a parent company can file that paperwork and claim that credit for their subsidiary.

TABLE 5 is formatted the same as TABLE 4, but was based on the Commerce Tax due for FY 2017. He pointed out that the total Commerce Tax due in FY 2017 (Column C) totaled approximately $175.0 million, which matched the Commerce Tax due from TABLE 2 (Column M). He stated the amount of allowable Commerce Tax credits that can be claimed in FY 2018 totaled approximately $87.5 million, of which approximately $29.5 million was claimed to date in the first quarter of FY 2018.

Mr. Leavitt questioned the accuracy of collections received from the taxpayers, relative to the law, and ask if any audits had been performed.

Mr. Porter redirected Mr. Leavitt’s question to Deonne Contine, Department of Taxation.

Ms. Contine stated that desk-auditing type procedures were performed, but the department was in the process of ramping up their audit program and could start looking at individual companies within the next couple of months.

Chairman Wiles questioned why TABLE 3, Column D, showed a decline in the number of taxpayers.

27 In response, Mr. Porter stated that was something the Department of Taxation was looking into. He agreed it was strange that the number of taxpayers went down, but total gross revenue, Nevada taxable revenue, and total Commerce Tax due increased. He agreed to provide an update at the Forum’s next meeting.

Mr. Guindon hypothesized that the decline in the number of taxpayers had to do with the $4.0 million threshold, and could be a matter of entities going over the threshold in the FY 2016 reporting period and dropping below the threshold in the FY 2017 reporting period, or vice versa.

Mr. Guindon recommended the members pay attention to TABLES 4 and 5. He reported $34.1 million in tax credits were taken the first quarter of FY 2017 against the MBT, or approximately 19.9% of total credits claimed as a percentage of the tax due; and $29.5 million in tax credits were claimed in the first quarter of FY 2018, or approximately 17% of the tax due. He said he expected the learning curve relative to business owners and the Commerce Tax to shallow out. Considering the quarterly data represented on TABLES 4 and 5 were not that far apart, Mr. Guindon thought the total credits claimed in FY 2017 of 31.5% might not be an anomaly, and that the credit percentage for FY 2018 may not be close to the projected 50%.

Chairman Wiles expressed interest in the number of companies filing a Commerce Tax return. He expected the number of taxpayers claiming the Commerce Tax credit against the MBT to increase, considering the state’s positive economic growth with escalated growth in revenues and new and expanding businesses.

XI. REPORT AND DISCUSSION OF FY 2018 YEAR-TO-DATE ACTUAL COLLECTIONS COMPARED TO THE ECONOMIC FORUM MAY 1, 2017, FORECAST, ADJUSTED FOR LEGISLATIVE ACTIONS APPROVED DURING THE 2017 SESSION.

Mr. Joe Reel, Deputy Fiscal Analyst, Fiscal Analysis Division, Legislative Counsel Bureau

Mr. Reel guided the members to TABLE 1 on page 135 (Exhibit A), a comparison of actual collections in FY 2017 to the May 1, 2017, forecast for FY 2018. TABLE 1 showed actual revenue collected in FY 2017 for each of the major and non-major General Fund revenue sources and all other General Fund revenues, both before and after tax credits. TABLE 1 also displayed the FY 2018 forecast. The dollars listed were reflective of the Economic Forum’s May 1, 2017, forecast for each revenue source listed and the forecast growth rate for each of those revenue sources. The green columns represented the forecast’s growth rate based on FY 2017 actual collections for each revenue source listed. Mr. Reel said the total General Fund revenue, after tax credits, for FY 2018 was forecast at $3.9 billion, or 2.7% growth; however, based on FY 2017 actual collections, after tax credits, the growth rate for FY 2018 only needed to be 0.9% to meet the forecast

28 Moving to page 136 (Exhibit A), TABLE 2 showed the FY 2018 forecast year-to-date versus the FY 2018 year-to-date actual collections. Mr. Reel said the revenue sources listed on TABLE 2 were based on three- to five-month reporting periods for the monthly revenue sources and the first quarter of the quarterly revenue sources. Mr. Reel summarized the following revenue sources:

Sales and Use Tax: With three months reported, FY 2018 actual collections were up 4.6% compared to the Fiscal FY 2018 year-to-date forecast of 5.9% growth, running approximately $3.3 million below the forecast. Mr. Reel said there was a disconnect between taxable sales and actual taxable sales collections, which will be monitored going forward.

Percentage Fees Tax: Through the first five months of FY 2018, actual collections were up 7.9% compared to the Fiscal FY 2018 year-to-date forecast of 2.2% growth, and ran $16.9 million above the forecast. Mr. Reel noted the Fiscal Division observed volatility in the collections.

Insurance Premium Tax: After the first quarter of FY 2018, actual collections were up $5.0 million compared to the Fiscal FY 2018 year-to-date forecast.

Modified Business Tax: Total actual MBT collections through the first quarter of FY 2018 are $10.4 million below the forecast. Most of this is attributable to the non-financial institution portion which is $9.0 million below the forecast. During the first quarter of FY 2017, there were approximately $5.9 million of collections that were attributed to a one-time event. After factoring in that one-time event, FY 2018 actual collections for non-financial institutions was on a flat level compared to the first quarter of FY 2017.

Mr. Reel reported that total major General Fund revenues, which were approximately 28% of the total General Fund, were up by $20.0 million and reflected a 2.2% error rate relative to the 2018 year-to-date forecast.

Mr. Reel stated that, for FY 2018 actual collections year-to-date, the total of all select non-major General Fund revenue sources listed on TABLE 2 were approximately $1.5 million above the FY 2018 year-to-date forecast. All other General Fund revenues were showing FY 2018 actual collections were approximately $2.6 million above the FY 2018 year-to-date forecast. Total General Fund revenues, before the Commerce Tax credits were applied, were up $24.0 million, and because the Economic Forum did not forecast tax credits, leaving nothing to compare FY 2018 actual year-to-date collections to, the full impact of the gross revenue was $24.0 million above the FY 2018 year-to-date forecast.

Mr. Reel said TABLE 3 showed the percentage for each revenue source that remained to be collected for FY 2018 compared to the forecast, before tax credits (page 137, Exhibit A).

29 Mr. Reel said TABLES 4 and 5 reflected the net revenue after the tax credits were applied, and represented the actual dollars accounted for in the State Controller’s system.

Moving ahead, TABLE 6 identified the tax credits that were allocated to each revenue source. Mr. Reel directed the members to the bottom row on page 141 (Exhibit A) that displayed the forecast for all tax credits applicable to FY 2018, totaling approximately -$95.0 million, and FY 2018 year-to-date actual collections of -$38.5 million. Tax credits totaling -56.5 million remained to be used in FY 2018. He noted that all of the forecast Economic Development Transferrable Tax credits had already been claimed for FY 2018; however, there was potential for an additional $24.0 million to be added to the Economic Development Transferrable Tax credits. Mr. Reel said staff would monitor the Economic Development Transferrable Tax credits and the additional tax credits beyond what was included in the forecast.

Chairman Wiles inquired about the one-time event that was related to the Modified Business Tax – Non-Financials in the first quarter of FY 2017.

Mr. Reel replied that the Fiscal Division was able to identify a particular employer within a specific industry, and the wages associated with the one-time event, that showed up in FY 2017 but did not reoccur in that specific industry in FY 2018. The event was confirmed as a one-time event; and was attributed to net tax collections being significantly lower in the first quarter of FY 2018 year-to-date versus in that same time period in FY 2017.

XII. REPORT ON FORECAST ACCURACY BY FORECASTER FOR SELECTED REVENUES.

Michael Nakamoto, Deputy Fiscal Analyst, Fiscal Analysis Division, Legislative Counsel Bureau

Mr. Nakamoto identified a report titled Report on the Forecast Accuracy of the Economic Forum for Selected Revenues, beginning on page 153 (Exhibit A), which was last presented to the Forum in October of 2016. Advancing to page 184, he introduced the Total General Fund Revenues – Forecast Error Analysis by Forecaster report that tracked the Economic Forum’s accuracy relative to its forecasts. The table included updated statistics for all revenue sources involved, as well as for the General Fund, adding the 2-year ahead forecasts for FY 2017 that were done in December of 2014 and May of 2015; the current year forecast for FY 2017 that were done in December of 2016 and May of 2017; and the combined forecast for the 2015-17 biennium, which was the total of FY 2016 and FY 2017 for December of 2014 and May of 2015 forecasts. Mr. Nakamoto summarized the following updates that were made to the accuracy report dated December 8, 2017.

For FY 2017, total General Fund collections were $3,952,429,484, which, as Mr. Nakamoto noted was pointed out in a prior agenda item, represented a 1.7% forecast error compared to the May 2, 2017, Economic Forum forecast for the total 26

30 General Fund, and a 2.7% forecast error compared to the Economic Forum’s December 3, 2016, General Fund forecast.

Mr. Nakamoto additionally noted that, when the May 1, 2017, forecast error of 1.7% was included, the Economic Forum’s average percent forecast error for the May forecasts of the current fiscal year was 0.4%. Mr. Nakamoto indicates, on average, that the Economic Forum has, on average, under-forecasted the total General Fund, when all positives and negatives are accounted for, by only 0.4%.

As a comparison, Mr. Nakamoto referred to information contained in the October 2016 forecast error report, which indicated an average percent forecast error for the May forecasts of the current fiscal year of 0.3% at that point.

To provide additional reference, Mr. Nakamoto indicated that the absolute average percent error for the current-year May forecasts, which measures the percentage error of the forecast regardless of whether it is positive or negative, was 1.1% in the current report. On average, he noted, the current-year forecasts produced by the Economic Forum for the total General Fund at each May meeting have been 1.1% off of the actuals. He noted that this was unchanged from the October 2016 forecast error report, where the absolute average percent error for the current-year May forecasts was 1.1% as well.

Continuing to the combined biennial forecast, Mr. Nakamoto indicated that the percent forecast error for the Forum’s General Fund forecasts at the May 1, 2015, meeting, based on actual total General Fund collections for FY 2016 and FY 2017 of approximately $7.7 billion, was 2.6%. With respect to the average percent forecast errors, Mr. Nakamoto noted that, with this 2.6 percent forecast error for the last biennium taken into account, the average percent forecast error for each biennial General Fund forecast produced at the May meeting was only 0.1% – that is, the Economic Forum, on average, has a forecast error the State General Fund for each biennium of 0.1% for the forecasts produced at the May meeting. For comparison, Mr. Nakamoto noted that this was a change from the October 2016 forecast error report, which indicated that the Economic Forum’s biennial average percent forecast error was, at that time, -0.2%.

Mr. Nakamoto stated the updated accuracy report contained information for all the major revenue sources, some going back to the beginning of the Economic Forum, such as the Cigarette Tax, State 2% Sales Tax, Gaming Percentage Fees, the Live Entertainment Tax and the Insurance Premium Tax. Statistics were also included for revenue sources for the Modified Business Tax and the Real Property Transfer Tax, which became law in the 2003 Legislative Session.

Mr. Guindon voiced the following observations:

1. The Average Percent Forecast Error for the total General Fund was calculated at 0.1% over 11 cycles. Page 158 (Exhibit A) provided a summary of the average percent forecast error and the absolute average percent forecast error, which revealed relatively small average percent forecast errors for the major revenue 27

31 sources listed. The results represented the Forum’s performance since its inception in the 1994/1995 forecast cycle. Mr. Guindon noted that the absolute average percent forecast errors were much smaller prior to the great recession.

2. The information in the forecast accuracy report was presented and discussed publicly and was posted on the Nevada Legislature’s website.

Ms. Lewis acknowledged the Forum’s small average percent forecast errors relative to the major revenue sources, and accredited the groups that presented to the Economic Forum for providing solid information.

Chairman Wiles instructed staff to the Forum to continue to post the forecast accuracy report on the Nevada Legislature’s website. He thought the report was helpful from a historical perspective, and aided in understanding the importance of the Forum and the budgetary process.

Mr. Leavitt recalled a Legislative Session, prior to the Economic Forum’s existence, when the end of session was approaching and some programs still needed funding. There was not enough revenue in the budget so last-minute revisions were made to the forecast to include those additional programs. He acknowledged the 11 biennium cycles, referred to by Mr. Guindon, that were averaged to achieve the 0.1% average percent forecast error. He reminded the members of the unexpected recessions that can occur and significantly skew the forecasts, specifically the 2-year forecasts, or longer.

Ms. Rosenthal commented that the unexpected changes in the economy and the implementation of new taxes bring challenges to forecasting when there is little data and a lack of history associated with that tax.

Chairman Wiles said the Forum’s ability to perform accurately is a credit to the forecasting process, the quality of staff, and the information that is presented to the Forum by agencies or third-party consultants. He stated the Forum’s forecast success is a tribute to everyone who has been involved in the process over the last 23 years.

XIII. PRESENTATION ON PERSONAL INCOME AND WAGES IN RELATION TO POPULATION, EMPLOYMENT, AND INFLATION ON A NATIONAL LEVEL AND THE STATE OF NEVADA.

Mr. Joe Reel, Deputy Fiscal Analyst, Fiscal Analysis Division, Legislative Counsel Bureau

Mr. Reel began his presentation by referencing the charts on pages 208 and 209 (Exhibit A), which compared Nevada’s employment with the U.S. in terms of trends from the peak prior to the recession to the second quarter of 2017. U.S. total employment grew 5.7% since the first quarter of 2008 compared to Nevada’s total employment growth of 3.0% since the second quarter of 2007. However, Nevada’s total employment, excluding construction jobs, grew 7.6% since the first quarter of 2008, 28

32 which exceeded the national growth rate during that same time period. He emphasized the magnitude of impact that the construction industry contributed to the state’s economy over the years.

The slide on page 210 illustrated that the construction industry has not recovered from the recession, as it dropped -42.7% from the second quarter of 2006 to the second quarter of 2017. Mr. Reel said the construction industry made up approximately 6.0% to 7.0% of total employment now versus the 11.0% to 12.0% it represented during the peak prior to the recession. He said in the 1988 to 1999 period, a gap existed in the growth rates between employment with and without construction, which ran consistent with the first wave of megaresort construction in Southern Nevada. The next gap occurred around 1996 and 1997, also related to megaresort construction, and again just prior to the recession, related to the housing bubble. He said the chart on page 211 shows that construction was a major driver of Nevada’s employment growth, and that a gap existed over the last several quarters. The employment gap between 2012 to the current quarter represented a 0.3% difference versus the historical gaps of more than a 1.0% difference. He noted that it was good to see construction employment grow at positive measures; however, it needed to remain sustainable.

Mr. Reel reported that four additional quarters of data were added to the series of charts in his presentation since he last presented to the Forum. He said Nevada’s growth rates for personal income and wages in relation to population, employment and inflation for the past four quarters exceeded the national growth rate.

XIV. PRESENTATION OF HISTORICAL TAXABLE SALES AND GAMING MARKET STATISTICS.

Mr. Guindon stated that the gaming and taxable sales charts associated with Agenda Item XIV could be found on the Nevada Legislature’s website, and that hard copies were available through the Fiscal Analysis Division at the Legislative Counsel Bureau. He alerted the members to a chart titled Taxable Sales for Nevada and By County – FY 1996 to FY 2017, specifically page 16 that referenced Storey County. He said Storey County used to be ranked 13th or 14th of Nevada’s 17 counties for taxable sales by fiscal year, from largest to smallest. However, due to the activity produced by Tesla and other entities at TRIC, Storey County was ranked 3rd for FY 2017. He noted that Storey County was still ranked 13th or 14th for collections from taxable sales, because of the tax abatements associated with those businesses located at TRIC.

Mr. Guindon reported the following sales tax statistics for FY 2018, fiscal year-to-date (July, August, September), compared to the same period in FY 2017: Clark County was up 2.7%, Washoe County was up 8.1% (against 9.0% in FY 2017); Storey County was up 15.8% compared to 509% in FY 2017; and statewide taxable sales were up 4.2% for the first three months compared to 6.8% in FY 2017. He said without the inclusion of Storey County, statewide taxable sales would be up 4.0%.

33 The 2% State Sales Tax collections are up 4.2% year-to-date compared to the 5.2% growth in FY 2017. Mr. Guindon emphasized that Clark County made up 75% of the tax base, but only grew 2.7% in sales tax collections. He said the Fiscal Division had not analyzed the NAICS codes to determine which ones were slowing down, or to explore the driving factors, but would monitor the activity during the interim in preparation for a relative discussion when the Forum meets in the fall of 2018.

Mr. Leavitt expressed interest in the amount of taxable sales that will be generated from the two or three large construction projects scheduled for Clark County in 2018.

XV. DISCUSSION OF THE REPORT BY THE ECONOMIC FORUM TO THE INTERIM FINANCE COMMITTEE REQUIRED PURSUANT TO NRS 353.228.

Mr. Guindon said the Interim Finance Committee (IFC) was scheduled to meet in February of 2018. He explained that members of the Economic Forum are appointed for a two-year term, and that today would be the last time the Forum would meet within the current term. The Economic Forum is statutorily required to report to the IFC; therefore, Mr. Guindon asked Chairman Wiles to clarify if he would make the presentation to the IFC at their February 2018 meeting or if he preferred staff to present on his behalf. Mr. Guindon clarified that the presentation is for informational purposes only; however, updated revenue tracking tables in terms of additional monthly collections would also be presented.

Chairman Wiles requested staff to make the presentation to the February 2018 IFC meeting.

XVI. DISCUSSION AND RECOMMENDATIONS REGARDING THE ECONOMIC FORUM’S USE OF MOODY’S ANALYTICS AS A PRIVATE FORECAST SERVICE.

Mr. Guindon identified Moody’s Analytics as a third-party consultant that is contracted with the State of Nevada to receive U.S. and state economic forecasts. Part of that contract requires Moody’s Analytics to present, at a minimum, their national outlook and sales tax and gaming forecasts to the Forum once during the October, November, December forecast cycle meetings in even-numbered years and again at the Forum’s May meeting in odd-numbered years. The intent is to have another source other than a state agency or the Fiscal Analysis Division present a forecast and economic outlook for specific major General Fund revenue sources for the Forum’s consideration.

Mr. Guindon relayed that it is at the discretion of the Economic Forum to review and decide whether to continue services provided by Moody’s Analytics, or another outside group, for the next forecast cycle; therefore, a motion and a second would be required to continue contracting with Moody’s Analytics to provide services for the Forum for the next forecast cycle. Mr. Guindon clarified that it was possible that different members could be appointed to the Economic Forum prior to the June 2018 meeting; however, the current members have the authority to vote and approve the contract with 30

34 Moody’s Analytics, which would allow staff more time to finalize the contract prior to needing their services in the fall of 2018 versus waiting for approval at the June 2018 meeting.

Mr. Leavitt stated that Moody’s Analytics provided a service that extends beyond Nevada state borders, such as with national trends and indicators of future recessions.

Ms. Rosenthal agreed, and added Moody’s Analytics provides an additional revenue forecast for sales and use tax and gaming percentage fees. She was in favor of renewing the contract with Moody’s Analytics.

Ms. Lewis stated she was in favor of continuing services with Moody’s Analytics and that the Forum needed an outside perspective, and needed to be connected with the rest of the country.

MS. LEWIS MOVED TO RENEW THE CONTRACT WITH MOODY’S ANALYTICS TO PREPARE AND PRESENT THE SALES AND GAMING FORECASTS FOR FY 2020, FY 2021 AND FY 2022, AND TO PRESENT THEIR ECONOMIC OUTLOOK FOR THE NATION, REGION AND STATE, AT A MINIMUM OF ONE MEETING IN THE FALL OF EVEN-NUMBERED YEARS AND IN THE SPRING OF ODD-NUMBERED YEARS.

MS. ROSENTHAL SECONDED THE MOTION.

THE MOTION CARRIED UNANIMOUSLY.

XVII. PUBLIC COMMENT.

Chairman Wiles offered the floor to anyone who wanted to make public comment in Carson City and Las Vegas. There was no public comment.

XVIII. ADJOURNMENT.

Chairman Wiles announced this would be his final meeting as a member of the Economic Forum for the State of Nevada. He said, as a result of changes in his personal and professional responsibilities, he withdrew his name from consideration for an additional term. Chairman Wiles presented a “farewell” speech, which expressed gratitude to the presenters, staff to the Forum, members of the Economic Forum, members of the Legislature and Governor Sandoval. He said serving on the Forum for the past six years has been one of the great honors of his life.

Chairman Wiles commended the Economic Forum for their success, and stated the course in which the budget numbers are determined is considered the best process in the country. He gave credit to everyone involved in the process for achieving that status and for better serving the people of Nevada. He emphasized the Forum 31

35 members are appointed by Government officials from both parties, and that he was particularly proud that the Forum has always approached its responsibilities in a professional and non-partisan way.

Ms. Lewis thanked Chairman Wiles for his service and for being such a good leader. She expressed her appreciation for the opportunity to serve on the Forum with him.

Ms. Rosenthal and Mr. Leavitt also expressed gratitude for Chairman Wiles’ service to the State of Nevada.

The meeting adjourned at 12:18 p.m.

Respectfully submitted,

______Judy Lyons, Committee Secretary

APPROVED:

______Chair

Date:______

Copies of exhibits mentioned in these minutes are on file in the Fiscal Analysis Division at the Legislative Counsel Bureau, Carson City, Nevada. The division may be contacted at (775) 684-6821.

37 38 Economic Forum: June 8, 2018

State Employment and Unemployment Outlook

Department of Employment, Training, & Rehabilitation

Don Soderberg, Director Dennis Perea, Deputy Director David Schmidt, Chief Economist

Prepared by the Research and Analysis Bureau 39 40

Nevada’s Labor Market Running Strong State Employment and Unemployment Summary Non-Farm Job Levels Up 45,300 Relative to a Year Ago in April o Overall employment: 1,376,000 o 3.4% gain compares to 1.6% in the nation o 69 straight months in which Nevada > U.S.

4.9% Unemployment Rate o Stable since August 2017 o Off from a recession peak of 13.7% o In absolute terms, unemployment totaled 73,100; off from a recession high of 186,500 41 42

April 2018 Employment Level

Employment at Total Nonfarm Employment 1,400,000 record-high 1,376,000 in 1,350,000 April1 1,300,000

78,700 jobs 1,250,000 above previous 1,200,000

peak employment

1,150,000 Consistent growth since 2012. 1,100,000

1,050,000

1,000,000 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18

1 seasonally adjusted Annual Job Growth Reaches Above 45,000

The State added Nevada Job Growth vs. Year Ago 45,300 jobs over 55,000 4.5% the year in April, 50,000 4.0% 1 45,000 a gain of 3.4% 3.5% 40,000 annual percent change percent annual 3.0% Annual 35,000 2.5% employment 30,000 growth has been 25,000 2.0% 20,000 1.5% regularly around growthannual job(SA) 15,000 40,000 jobs over 1.0% the past couple 10,000 0.5% years. 5,000 0 0.0% MJ JASONDJFMAMJ JASONDJFMA '16 '17 '18 jobs pct. change

1 seasonally adjusted 43 44

Nevada’s Growth Continues to Outpace Nation

Nevada’s Job Growth: NV vs. U.S. employment grew at 6%

an annual rate of 4% 3.4% in April, compared to 1.6% in 2% the nation as a 0% 1 whole -2%

Nevada’s job growth -4% has outpaced the -6%

nation for 69 straight employment; annual percent change-8% months -10%

Trend around 3.0 to -12% '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 3.5% growth Nevada U.S.

1 seasonally adjusted April 2018 Unemployment Rate: 4.9%

Down from 5.1% a Unemployment Rate: Nevada vs. U.S. 16% year ago1 14% Peaked at 13.7% 12% during the recession 10%

8% Rate stable at 4.9% since August 6% 2017 unemploymentrate (SA) 4%

National rate has 2% fallen in April and 0% May, after several '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 months of stability. Nevada U.S.

1 seasonally adjusted 45 46

Alternative Measures of Labor Underutilization

Most measures of unemployment are at or near 2003 levels.

U-1: Unemployed 15 weeks or more U-2: Job Losers U-3: Similar to official rate U-4: U-3 plus discouraged workers. U-5: U-4 plus other marginally attached to labor force. Involuntary Part-Time Employment

Levels of involuntary part- time employment remain high, but have been falling since late 2010.

People who are employed part- time, but would prefer full-time employment if it were available. 47 48

Initial Claims for Unemployment Steady in April

Initial Claims for Unemployment Insurance 9,980 initial 40,000

claims in April, 35,000 bringing the 12- month average to 30,000

10,970 25,000

Decline of 5.1% 20,000

from the previous 15,000 year 10,000

UI benefit 5,000 exhaustion and 0 duration are also '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 approaching claims 12-month moving average precession levels Total Number of Employers in Nevada, 2018:IQ

Number of 75,000 employers in the

Unemployment 70,000 Insurance system reached all-time high of 70,600 in 65,000 first quarter

Number of 60,000 employers has of emplolyers number surpassed pre- 55,000 recessionary peak by 9,900;

first time over 50,000 70,000 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 49 50

Year-to-Date Job Growth Across Nearly All Sectors

Construction Nevada Nonfarm Job Growth by Industry added 7,500 jobs Construction through April, Manufacturing from the previous year, a growth of Education & Health Services 9.4%1 Trade, Transportation, & Utilities Government Manufacturing is Leisure & Hospitality growing fastest at Professional & Business Services 14.3% or 6,500 Other Services

jobs Financial Activities

Mining & Logging

Ed/Health Information

Services added -1,000 0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 6,000 jobs or YTD job growth 4.6%

1 not seasonally adjusted Employment Changes Since Recession by Area

Las Vegas is the only area to have passed its prerecession employment peak.

The Reno and Carson City MSAs are growing at a faster pace than Las Vegas, and are both within 1% of prerecession levels. 51 52

Private Sector Job Growth Ranking

YTD through the third quarter of 2017, Nevada had the highest rate of private sector job growth in the country.

From 2014-2017, Nevada has been among the four highest-growth states by this measure. Average Weekly Wages: 2017:IIIQ

Average weekly wages were $914 in the third quarter of 2017.

This is a decline from the third quarter of 2016, but that is due to an unusual break in the seasonal pattern in the third and fourth quarters of 2016. 53 54

Projections—Some General Comments

• Growth across all sectors. • Manufacturing growth driven by Tesla. • Construction driven by commercial projects like the Las Vegas convention center, Raiders Stadium, Genting development, data centers, warehousing, large manufacturing facilities, and residential housing. • Information sector driven by growth in Data Centers like- SWITCH, Apple, etc. • Projections are unchanged since December Forum, new projections will be coming out over the next 1-2 months. Total Employment: History & Forecast

Job levels expected to exceed prerecession peak by 127,000 at the end of 2019. 55 56

Construction Employment: History & Forecast

Construction employment will have added 54,000 jobs by the end of 2019, more than half of the jobs lost in the recession. Manufacturing Employment: History & Forecast

Further growth expected in manufacturing jobs, with 14,300 new jobs through the end of 2019. 57 58

Retail Trade Employment: History & Forecast

Stable growth in retail employment expected, with about 2,000 jobs added per year. Healthcare & Social Assistance Employment: History & Forecast

A growing and aging population will continue to drive increases of 4,000 jobs per year. 59 60 Accommodation & Food Service Employment: History & Forecast

15,000 jobs total to be added through 2019. Measures of Nevada’s Economy: GDP

Nevada’s economy, measured by state GDP, has expanded in each of the past 17 quarters.

Nevada’s GDP growth rate has been higher than the nation in 6 of the past 10 quarters. 61 62

Measures of Nevada’s Economy: Personal Income

Personal Income in Nevada has risen in 30 of the past 31 quarters.

In the fourth quarter of 2017, Nevada’s growth rate of 6.4% was the strongest in the nation.

Personal income is the income received by all persons from all sources: net earnings, property income, and personal current transfer receipts. Measures of Nevada’s Economy: Personal Income

Per Capita Personal Income, calculated County 2016 Personal Income 2016 Population Per Capita Personal Income, 2016 using 2016 data, Douglas, NV$ 3,145,049.00 48,020 $ 65,494.56 White Pine, NV $ 400,216.00 6,982 $ 57,321.11 shows that there is Lander, NV $ 303,714.00 5,702 $ 53,264.47 significant variation in Washoe, NV $ 22,549,907.00 453,616 $ 49,711.45 personal income Elko, NV $ 2,392,716.00 52,168 $ 45,865.59 Humboldt, NV $ 739,086.00 16,842 $ 43,883.51 between Nevada’s Storey, NV $ 174,474.00 4,051 $ 43,069.37 counties. Carson City, NV $ 2,351,420.00 54,742 $ 42,954.59 Clark, NV $ 91,150,359.00 2,155,664 $ 42,284.12 Esmeralda, NV $ 33,296.00 790 $ 42,146.84 Douglas County, with Mineral, NV $ 180,158.00 4,449 $ 40,494.04 the highest per capita Churchill, NV $ 913,968.00 24,198 $ 37,770.39 personal income of Nye, NV $ 1,549,949.00 43,423 $ 35,694.19 Eureka, NV $ 65,482.00 1,917 $ 34,158.58 over $65,000 is more Lyon, NV $ 1,787,910.00 53,179 $ 33,620.60 than double that in Pershing, NV $ 201,808.00 6,560 $ 30,763.41 Pershing and Lincoln Lincoln, NV $ 150,121.00 5,055 $ 29,697.53 counties. 63 64

For Additional Information, Please Contact:

Nevada Department of Employment, Training and Rehabilitation Research and Analysis Bureau

David Schmidt Chief Economist [email protected]

Christopher Robison Supervising Economist [email protected]

(775) 684-0450 http://www.nevadaworkforce.com Population Update and Overview For The Economic Forum

June 8, 2018

Department of Taxation William D. Anderson, Executive Director Shellie Hughes, Chief Deputy Executive Director Sumiko Maser, Deputy Executive Director Jeff Hardcastle, State Demographer 65 66

What I will be covering • A refresher on the demographer’s role • The 20 year and five year projections • The components of change for Nevada’s growth • Migration and it’s drivers • Our aging population 67 68

Estimates and Projections Methodology Estimates • Average of two independent estimates • Housing Unit-based Method – Housing from Assessors • “Economic” Based – looking at employment, labor force, school enrollment • Subject to appeal from local governments

Projections • Regional Economic Models, Inc. (REMI Model) • Uses Census, Bureau of Economic Analysis and Bureau of Labor Statistics data most recent history for projections was 2015. • Relationships between demographic and economic make up in a given county • Relationship between the counties in the model and the nation as a whole • User can modify the forecast at the national or local level 2017 5 Year Projections are for 1.2% Annualized Growth for 2016 to 2021 69 70

This was previously presented to the Economic Forum in Fall 2017 and shows the changes in between the 2016 and 2017 20 Year Projections. March 2018 Five Year Projections Are For Slightly Higher Growth

State Total Change Total Previous Percentage Population Year Change 2,986,656 3,029,319 42,663 1.4% 3,072,207 42,887 1.4% 3,115,643 43,437 1.4% 3,159,743 44,100 1.4% 3,204,523 44,780 1.4%

Biggest Difference Is Due To Clark County’s Recent Estimated Growth Rate Out Performing The Projections 71 72

Looking at the past 10 years for population, housing, and active electric shows different growth rates – these do not change simultaneously. For Clark County the compound annual growth rates for population exceed both active electric account and housing rates. The next six slides illustrate how from 1980 to Approximately 2003 Nevada’s migration was likely driven by having job growth during a period when other parts of the country were experiencing rolling recessions.

The first slide looks at Nevada’s cumulative components of change over seven years for the 1990’s, the 2000’s, and the current decade.

Nevada had an annual average wage that was competitive, if not higher than, than other regions in the country through approximately 1996. That changed especially after 2007.

In 2016, 21% of the population in Nevada is estimated to be foreign born.

Nevada is very dependent on California as the main source of our domestic migration.

California’s net out migration is distributed across the country and Nevada is not the primary destination. 73 74 75 76 77 78 79 80

The last two slides look at changes in the age structure of Nevada’s population. The consumption of goods and services varies by age. 81 82

Change In Percentage Distribution of Head of Household By Age 2016 Less 2005 US Nevada Clark Washoe Householder 15 to 54 years -5.8% -5.5% -5.3% -8.7% Householder 55 to 64 years 3.7% 3.4% 3.3% 3.7% Householder 65 years and over 2.1% 3.3% 2.1% 5.0%

2016 Percentage Distribution of Head of Household By Age US Nevada Clark Washoe Householder 15 to 54 years 72.4% 72.4% 72.3% 68.4% Householder 55 to 64 years 13.3% 14.4% 14.1% 15.6% Householder 65 years and over 14.4% 14.5% 13.5% 15.9%

2005 Percentage Distribution of Head of Household By Age US Nevada Clark Washoe Householder 15 to 54 years 78.2% 77.9% 77.7% 77.1% Householder 55 to 64 years 9.5% 10.9% 10.9% 12.0% Householder 65 years and over 12.3% 11.2% 11.5% 10.9% Questions?

Jeff Hardcastle, Nevada State Demographer Nevada Department of Taxation Reno Office: 4600 Kietzke Lane, Building L Suite 235 Reno, NV 89502 (Direct) (775) 687-9961 [email protected] 83 84 Presentation to the Economic Forum June 8, 2018 85 86 Number of Assisted Companies

150

125 106 100 94 86 Companies

74 75 71 60 Assisted 50

of 42

30 31 25 Number

0 2009 2010 2011 2012 2013 2014 2015 2016 2017 All Companies 30 31 42 71 106 94 86 60 74 Incentivized 15 10 18 19 48 29 53 33 35 Non‐incentivized 15 21 24 52 58 65 33 27 39

page 2 Jobs Announced by Assisted Companies

7,000 6,597 6,014 6,000

4,956 5,000 4,363 Jobs

4,000 3,406 3,000

Assisted 2,130 2,000 1,552 1,483 1,213 1,000

0 2009 2010 2011 2012 2013 2014 2015 2016 2017 All Companies 1,213 1,552 1,483 2,130 4,363 6,597 3,406 4,956 6,014 Incentivized 482 595 1,057 762 2,902 4,920 2,056 4,080 3,137 Non‐incentivized 731 957 426 1,368 1,461 1,677 1,350 876 2,877

page 3 87 88 Wages Paid by Assisted Companies

$35

$30

$25

$20 Wage $15

$10 Average

$0 2009 2010 2011 2012 2013 2014 2015 2016 2017 All Companies $17.32 $18.42 $18.46 $19.98 $18.50 $21.65 $22.62 $17.99 $19.48 Incentivized $16.96 $18.08 $17.45 $20.22 $18.68 $22.41 $27.15 $18.52 $23.56 Non‐incentivized $17.55 $18.63 $20.97 $19.85 $18.14 $19.43 $15.77 $15.52 $15.03

page 4 Assisted Company Investment

$7,000

$6,000 $5,675.3 $5,116.1 $5,000 Millions

$4,000

$3,000 Investment

$2,230.6 $2,000

Company $1,000 $590.7 $728.6 $400.7 $248.2 $200.8 $332.2 $0 2009 2010 2011 2012 2013 2014 2015 2016 2017 All Companies $248,174,531 $200,762,949 $332,231,390 $2,230,592,31 $590,733,144 $5,675,338,90 $5,116,142,61 $728,622,702 $400,746,189 Incentivized $234,633,437 $188,256,729 $187,928,471 $1,136,341,20 $469,574,739 $5,431,594,32 $5,061,620,60 $706,798,202 $307,922,272 Non‐incentivized $13,541,094 $12,506,220 $144,302,919 $1,094,251,11 $121,158,405 $243,744,576 $54,522,006 $21,824,500 $92,823,917

page 5 89 90 Announced and Actual Jobs by New Incentivized Companies

6,000

5,000

4,000 Jobs

of 3,000

2,000 Number

1,000

0 2009 2010 2011 2012 2013 2014 2015 2016 2017 Contract Jobs 45 198 402 288 1,467 4,970 1,226 2,973 450 Current Actual Jobs 61 269 579 2,116 2,714 5,436 2,926 2,685 111

page 6 Projected Jobs from Assisted Companies

12,000

9,681** 10,000 2017Q4 8,000 6,329* 2017Q3 Jobs

6,000 of

4,000 2017Q2 Number 2,000 2017Q1 0

* The 6,329 projected jobs in the fourth quarter of 2018 reflect the initial jobs expected to be in place by companies assisted in 2017.

**The 9,681 projected jobs in the fourth quarter of 2022 are those expected to be in place once the 2017 assisted companies are fully built‐out.

page 7 91 92

Governor's Office of Economic Development

Paul Anderson Director 702-486-2700 [email protected]

page 8 PRESENTATION TO ECONOMIC FORUM JUNE 8, 2018 93 94

Are We Creating High-Value Jobs? Are We Creating High-Value Jobs? Nevada Ranks #1 in the Job Creation Index

A SIX-YEAR CLIMB FROM LAST PLACE HAS LANDED NEVADA THE TOP SPOT IN THE NATION’S JOB GROWTH

# 1 Above Average Average Below Average

Source: Gallup Daily 95 96

The Economy is Diversifying

Sector Employment Growth – Pre-Recession Peak to Present

Education and Health Services 34,900 Professional and Business Services 25,600 Trade, Transportation, and Utilities +56,200 Jobs 12,800 Leisure and Hospitality 11,000 Other Services 7,300 Government 6,700 Financial Activities - CURRENT EMPLOYMENT LEVELS Mining and Logging (100) NOW EXCEED PEAK PRE- RECESSION LEVELS AND ARE Information (500) DOING SO WITH Manufacturing (4,400) 37,000 FEWER CONSTRUCTION Construction (37,100) JOBS

Note: Data reflect the difference in employment from May 2007 (peak pre-recession employment) to Source: U.S. Bureau of Labor Statistics November 2017. Employment is at an All-Time High and Growing EMPLOYMENT LEVELS HAVE EXCEEDED THE PRE- Top Sector Job Growth RECESSION PEAK FOR 19 CONSECUTIVE MONTHS 1,050,000 Pre-Recession Peak to Present [VALUE] 1,000,000 950,000[VALUE] +34,900 900,000 Education & Health Services 850,000 800,000 +25,600 750,000 Professional & Bus. 700,000 Services 650,000 +12,800 600,000 Trade, Trans. & Utilities '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17

Source: U.S. Bureau of Labor Statistics 97 98

LVGEA Has Supported Over 19,000 Jobs

6,000 [VALUE]

5,000

4,000 [VALUE] [VALUE] [VALUE] 3,000

2,000 [VALUE] [VALUE] 1,000

0 '12 '13 '14 '15 '16 '17 Source: LVGEA 2017 Company Wins +5,679 Jobs 99 100

Wages and Income are Rising

Average Hourly Earnings $24

$23

$22 [VALUE]

$21

$20

$19 [VALUE] $18 AVERAGE HOURLY EARNINGS HAVE INCREASED $17 BY NEARLY 20% $16 SINCE JANUARY 2007 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17

Note: Data represent private sector average hourly earnings. Source: U.S. Bureau of Labor Statistics ROIROIStrategy of of Economic Economic 1: Support Development Development Pro-Jobs Policyis is Rising Rising

$1 $99.32 INVESTED IN LVGEA 1 YEAR ECONOMIC IMPACT CREATES OR ADDS 101 102

Are We Prepared for the Are WeJobs Prepared of Tomorrow? for the Jobs of Tomorrow? Nevada Ranks #2 in Forbes American Dream Index

RANK AMERICAN DREAM INDEX (2017) INDEX SCORE 1 Wyoming 115.1 2 Nevada 110.8 3 Montana 110.0 4 Florida 107.4 5 Maine 107.3 6 New Mexico 106.9 7 Texas 106.9 8 Utah 106.4 THE AMERICAN DREAM INDEX MEASURES CHANGE IN ECONOMIC 9 North Dakota 105.0 HEALTH 10 West Virginia 104.4 Source: Forbes Source: Forbes 103 104

Nevada is #3 in Economic Growth Potential

RANK STATE 1 Colorado 2 Utah 3 NEVADA #3 4 Texas 5 North Carolina 6 Ohio 7 Oklahoma 8 New Mexico 9 Louisiana 10 Mississippi

Note: The Economic Growth Potential ranking is based on a number of factors, including but not limited to, growth strategies, targeted Source: Business Facilities 2017 incentives, workforce training initiatives, high-tech sector development, support for innovation and startups and availability of low-cost energy. LVGEALVGEA 50 50 is isAdvancing Advancing Regional Regional Growth StrategiesStrategyGrowth Strategies 1: Support Pro-Jobs Policy

WORKFORCE TARGET STRATEGIC DEVELOPMEN INDUSTRIES PLAN T 105 106

Population Growth is Strong

Clark County Population Clark County Population Growth 2.5 5.0% 2.2 M 4.5% Millions 2.0 4.0% 3.5% 1.5 3.0% 2.5% [VALUE] 1.0 2.0% 1.5% 0.5 1.0% 0.5% 0.0 0.0% '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 Source: U.S. Census Bureau Newcomers are Younger and Wealthier

Median Household Income Median Age of Adults

$51,638 40.7 40.2 39.3 $42,603 $42,894 36.3

$36,803

2000 2006 2012 2016 2000 2006 2012 2016 107 108

Housing Market is Healthy Ratio of Incomes-to-Home Prices

0.60 Incomes Outstripped 0.50 Home Prices

0.40 Home Prices Outstripped Incomes 0.30

0.20

0.10

0.00 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17e

Source: Applied Analysis/SalesTraq $13.6 Billion in New Capital Investment is Driving

Growth Tourism Non-Tourism

Note: Investment total does not include suspended projects or projects with undisc 109 110

10. Park MGM (Former Monte Carlo) - $450 M 9.9. Palms Palms Renovation- Renovation$485 $485 M Million 111 112

8.7. Extreme Extreme Sports Sports Park Park - -$700$700 M Million 7.8. Project Project Neon Neon - -$1$1 B Billion 113 114

6.6. Switch Switch - $1- $1.0 B Billion 5.5. Union Union Village Village - $1.2- $1.2 B Billion

Note: Henderson Hospital completed construction in October 2016. 115 116

4.4. Convention Convention Center Center Expansion- Expansion$1.4 - $1.4 B Billion 3.4. Wynn Wynn Paradise Paradise Park- Park$1.5 - $1.5 B Billion 117 118

2.2. Las Las Vegas Vegas Stadium Stadium - -$1.9$1.9 B Billion 1.1. Resorts Resorts World World Las Las Vegas Vegas - -$4.0$4.0 Billion Billion 119 120

PRESENTATION TO ECONOMIC FORUM JUNE 8, 2018 Economic Forum Update Mike Kazmierski, President and CEO June 8, 2018 121 122 What Does EDAWN Do? Effective Economic Development Program - Attracts - Retains / Expand -Grows Quality Jobs!

2 2018 Attraction Priorities • Higher Paying Jobs 50% More Than $30 / Hr. • Reduced Job Goal to 2,500 from 3,200 • Corporate Headquarters • Technology Companies (IoT & Blockchain) • High State Tax Locations – New Tax Plans • Joint Entrepreneurial Attraction Effort • Increase Prospect Travel To The Bay Area 123 124 Average Prospect Visits Per Month

(Goal 8-10 per month)

9 2017 10.6

6 Tesla Announcement 2011 4.2 3

Over 600 Prospects Visits In Past 5 Years 0 Jobs Announced

2008/11 Ave 2017 3200 FY 2011/12 2016 3000 FY 2015 FY 2012/13 2018 Goal 2,500 2015 2800 FY 2013/14 Goal-2,400 2600 FY 2014/15 2400 2014 FY 2015/16 2200 2013 2000 FY 2016/17 1800 FY2017-2018 1600 2012 1400 1200 1000 2008-11 800 600 400 200 0 125 Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun 126

Average Wages Of EDAWN Projects 2018 $65,000 Goal $60,000 $53,000 51% Increase $55,000 $50,000 $45,000 2017 Actual $46,158 $40,000 $35,000 2016 Actual $36,434 $30,000 Available Workforce Almost Gone

15 Significant Reduction 13 Since 2011 14.2% to 3.9% Unemployed From 30,731 11 To Now Just 9,583

5 Full Employment 4.0%

127 7 128 Tesla Update! Going Strong! • Will Employ 6,500 People (Targeted For 2018) And Eventually As Many As 10,000 Employees • Nevadans Average 96 Percent Of The Tesla Full-Time Employee Workforce Employees 250,000 • Model 3 Battery And Drive Unit, Tesla Powerwall And Powerpack, All In 200,000 Production At Gigafactory 150,000

• Current Structure Has 5.4M Sq. Ft. 100,000 Of Operational Space (29% Complete) 50,000

0 Total Secondary Tesla It’s Not Slowing Down! Industry Job Count HQ Confidence Relocation State Distribution 400 Finalist CA Manufacturing 1,000 Finalist CO Manufacturing 150 Finalist CA Manufacturing 150 X Finalist CA Manufacturing 20 X Finalist NY Distribution 800 Finalist PA Datacenter 50 Finalist CA Manufacturing 40 Finalist CA Manufacturing 81 Finalist ? Distribution 252 Finalist ? Manufacturing 50 Finalist INT Manufacturing 125 Finalist WA

129 Total 3,118 2 130 EPIC Projection 50,400 Jobs In 5 Yrs

This Is Not A Bubble !

10 Retention-Expansion-Workforce • Visit Primary Companies • Introduce To Resources • Remove Roadblocks • Recognize And Support Company of The Year • B2B & B2C Connections GrandRounds • Encourage Sustainability • Implement Workforce Plan

131 11 132 Workforce Development Activities Retention • Contribute Articles And Presentations • Share Monthly Retention Tips EDAWN EU • Increase Awareness Of Retention Best Practices Training • Promote Community College Programs In Support Of High Demand Jobs • Focus On High School Graduation / Equivalency • Support STEAM

12 Workforce Development Activities

Connection • Backpacks & Pantry Bag Promotions • Employer Workforce Guide • Promote Internships and Apprenticeships • RTC Bus Advertisement-New Nevada • Connect Partners, Business, Education 133 134 Where The Talent May Come From

UNR TMCC WNC SNC CCNN

Sacramento State UC Davis San Jose State Stanford

Cal State Chico Fresno State UC Berkeley UC Merced

Attract Nearby Talent 14 Entrepreneurial Successes In 2017

182 NEW Startup Jobs 49 NEW Companies $58 M In NEW Funding Reno Attracting High Tech / High Growth Startups As An Alternative To The Bay Area 15 135 136 First Few Years Focused On Building A Vibrant Ecosystem • Connections • Events • Marketing • Capital • Mentoring

An Environment Where Start-Ups Can Grow And Innovation Flourishes

16 Example Of Companies We Help Attracted Organic

137 1 7 138 Programs We Support FY '16 FY '17 FY '18 Notes Apr 18th Indicators Actual Actual Goal Oct '17 Nov'17 Dec'17 Jan '18 Feb '18 Mar '18 (Required for Red Status) Light Blue = Board Metrics Status JOB ATTRACTION Brown is Internal 1a Assisted Jobs - Outside the Region 894 934 934 1,034 1,054 1,636 1,832 Total: Goal of 2,500 3,104 3,323 2,350 1b Assisted Local Job Expansions 01515252525 Jobs 50% over $30 / Hr 1c Attracted Start-up / Tech Jobs N/A N/A 150 84 85 115 117 152 171 1st Yr Jobs for Start-ups 2a # of Jobs over $30/Hr Average Wage N/A N/A 1,250 316 319 356 463 469 540 2b Avg Salary of All Jobs Cumulative $36,434 46,158 $53,000 $47,662 $47,285 $47,289 $52,909 $51,742 $54,341 3 New Corporate/National Headquarters 4 12 10 3334 4 12 4 Assisted Companies Locate Downtowns 0 5 5 1111 1 1 5 Capital investment from Projects 643.2M $222M $200M 7.4M 7.9M $27.9M $31.9M $34.8M $318.8M 6 Prospect Closure Rate (Only Visits) 88% 90% 75% 89.00% 90.00% 90.00% 77.00% 73.00% 73.00% 7 Meet Top 150 Consultants 114 127 80 58 61 89 89 89 128 8 Prospect Visits Here Cumulative 118 110 100 50 63 74 77 85 96 9 New Prospects (Lead) Cumulative 213 217 100 92 101 137 148 162 199 JOB RETENTION / WORKFORCE EDAWN Dashboard 10 # of P.E.'s Visited By EDAWN (Cum) 181 151 140 35 41 57 64 77 92 11 P.E. Critical Issues Resolved 100% 100% 100% 100% 100% 100% 100% 100% 100% 12 Visit New Companies in First Year 100% Used100% 100% 100%To 100%Monitor 100% 100% 100% 100% 13 Local Job Expan Net (Not Assisted) 945 700 500 572 423 446 519 529 599 14 Business to Business Connections 37 34 40 11 17 18 20 34 46 ENTREPRENEURIAL GROWTH Program Success 15 New Start-up Companies Attracted N/A N/A 12 3346 7 9 16 New Companies Started (Local) 47 35 20 51314141924 17 Assist in Entrepreneurial Funding $5.806 $35M $10M $18M $18M $18M $18.5M $18.5M $19.5M 18 Assist Start-up Companies 437 397 150 50 81 114 153 186 208 WF DEVELOPMENT 19 Connections: Employer to Education 104 92 50 17 19 53 57 58 72 20 Connections: Employer to Use Interns 82 46 50 12 14 19 20 22 27 21 Attraction of Talent To Website - Hits N/A N/A 600 76 94 864 2,030 3,187 4,343 New Users to Who's Hiring 22 Workforce Recruitment Initiatives 3 9 6 779101214 FINANCIAL STATUS AND MEDIA 23 Variance from Budget/Mo -186,059 -73,345 0 24,180 -15,064 -39,184 34,575 7,436 -3,170 24 Var YTD - Cumulative 15,247 2,793 0 53,844 38,780 -404 34,171 41,607 38,437 Positive Variance The Goal 25 Expenditures Variance - Cumulative -60,851 -114,690 0 56,779 58,646 37,290 43,941 49,820 73,967 26 Add to Reserve Fund Annual (Cum) 50,000 50,000 50,000 16,400 20,500 24,600 28,700 32,800 36,900 27 Media ("Direct" / Cumulative Hits) 879 508 500 247 401 565 584 660 850 28 # of Major Investors 74 88 95 92 92 93 94 92 93

139 29 Investor Communications (Cum) 173 203 200 40 50 60 70 81 92 140 Where We Need Help

• Support For Workforce Development Funding Training Of Nevadans - Great Jobs Available • Support Reset Upon Sale Legislation To Help Fund Local Governments And Schools • Support For Entrepreneurs - Make Nevada The Most Entrepreneurial Friendly State In The U.S. • Support For Affordable Housing – #1 Issue • Maintain Funding Support For Economic Development – Continue Our Success! Questions? AGENDA ITEM XII Presentation on Personal Income and Wages in Relation to Population, Employment, and Inflation on a National Level and The State of Nevada Page Employment, Population and Inflation U.S. Total Nonfarm Employment (CES) 1 NV Total Nonfarm Employment (CES) 2 NV Construction Employment (CES) 3 NV Total Nonfarm Employment Growth Rates (With and Without Construction) (CES) 4 U.S. and NV Total Nonfarm Employment (CES) Growth Rates 5 U.S. and NV Population Growth Rates 6 U.S. Consumer Price Index (CPI) and Select CPI Components (Index 1982-84=100) 7 U.S. Consumer Price Index (CPI) and CPI Less Food and Energy (Core CPI) Growth Rates 8 U.S. Consumer Price Index (CPI) and Select CPI Components Growth Rates 9 U.S. Consumer Price Index (CPI) and Select CPI Components Growth Rates 10 Total Personal Income and Wages U.S. Total Personal Income and Total Wages and Salaries 11 NV Total Personal Income and Total Wages and Salaries 12 U.S. and NV Total Personal Income Growth Rates 13 U.S. and NV Total Wage and Salary Growth Rates 14 Per Capita Personal Income U.S. Per Capita Personal Income 15 NV Per Capita Personal Income 16 U.S. and NV Per Capita Personal Income 17 U.S. and NV Per Capita Personal Income - Inflation Adjusted 18 U.S. and NV Per Capita Personal Income Growth Rates 19 U.S. and NV Per Capita Personal Income Growth Rates - Inflation Adjusted 20

Wages and Salaries per Employee U.S. Wages and Salaries per Employee 21 NV Wages and Salaries per Employee 22 U.S. and NV Wages and Salaries per Employee 23 U.S. and NV Wages and Salaries per Employee - Inflation Adjusted 24 U.S. and NV Wages and Salaries per Employee Growth Rates 25 U.S. and NV Wages and Salaries per Employee Growth Rates - Inflation Adjusted 26

Median Household Income U.S. and NV Median Household Income 27 U.S. and NV Median Household Income - Inflation Adjusted 28 U.S. and NV Median Household Income Growth Rates 29 U.S. and NV Median Household Income Growth Rates - Inflation Adjusted 30

141 General Fund Revenue and Personal Income Nevada General Fund Revenue per $1000 of Nevada Personal Income 31 Nevada General Fund Revenue versus Nevada Personal Income Growth Rates 32 142

U.S. Total Nonfarm Employment 2000Q1 to 2017Q4 Source: BLS (Seasonally Adjusted) 148

146 Percent Change 2008Q1 to 2017Q4 144 6.6%

142

140

138

Millions of Employees Millions of 136

134

132

130

128 2000Q1 2000Q3 2001Q1 2001Q3 2002Q1 2002Q3 2003Q1 2003Q3 2004Q1 2004Q3 2005Q1 2005Q3 2006Q1 2006Q3 2007Q1 2007Q3 2008Q1 2008Q3 2009Q1 2009Q3 2010Q1 2010Q3 2011Q1 2011Q3 2012Q1 2012Q3 2013Q1 2013Q3 2014Q1 2014Q3 2015Q1 2015Q3 2016Q1 2016Q3 2017Q1 2017Q3

U.S. Total Nonfarm Employment (CES)

Page 1 of 32 Nevada Total Nonfarm Employment 2000Q1 to 2017Q4 Source: BLS (Seasonally Adjusted) 1,400 NV Total Nonfarm Employment 1,350 Percent Change 2007Q2 to 2017Q4 1,300 4.6%

1,250

1,200

1,150

Thousands of Employees 1,100

1,050 NV Total Nonfarm Employment (Without Construction Industry) 1,000 Percent Change 2008Q1 to 2017Q4 950 9.2%

900 2000Q1 2000Q3 2001Q1 2001Q3 2002Q1 2002Q3 2003Q1 2003Q3 2004Q1 2004Q3 2005Q1 2005Q3 2006Q1 2006Q3 2007Q1 2007Q3 2008Q1 2008Q3 2009Q1 2009Q3 2010Q1 2010Q3 2011Q1 2011Q3 2012Q1 2012Q3 2013Q1 2013Q3 2014Q1 2014Q3 2015Q1 2015Q3 2016Q1 2016Q3 2017Q1 2017Q3

NV Total Nonfarm Employment (CES) NV Total Nonfarm Employment (Without Construction Industry) 143

Page 2 of 32 144

Nevada Construction Employment 2000Q1 to 2017Q4 Source: BLS (Seasonally Adjusted) 160

150

140 Percent Change 2006Q2 to 2017Q24 130 -41.8%

120

110

100

90 Thousands of Employees

40 2000Q1 2000Q3 2001Q1 2001Q3 2002Q1 2002Q3 2003Q1 2003Q3 2004Q1 2004Q3 2005Q1 2005Q3 2006Q1 2006Q3 2007Q1 2007Q3 2008Q1 2008Q3 2009Q1 2009Q3 2010Q1 2010Q3 2011Q1 2011Q3 2012Q1 2012Q3 2013Q1 2013Q3 2014Q1 2014Q3 2015Q1 2015Q3 2016Q1 2016Q3 2017Q1 2017Q3

NV Construction Employment (CES)

Page 3 of 32 Nevada Total Nonfarm Employment Growth Rates (With and Without Construction Industry) 1981Q1 to 2017Q4 Source: BLS 15.0% NV Total Nonfarm Employment Average Percent Change

10.0% 2012Q3 to 2017Q4 3.1%

5.0%

0.0%

‐5.0%

NV Total Nonfarm Employment Percent Change- Quarter Same 1-Year Ago (Without Construction Industry) ‐10.0% Average Percent Change 2012Q3 to 2017Q4 2.8%

‐15.0% 1981Q1 1982Q1 1983Q1 1984Q1 1985Q1 1986Q1 1987Q1 1988Q1 1989Q1 1990Q1 1991Q1 1992Q1 1993Q1 1994Q1 1995Q1 1996Q1 1997Q1 1998Q1 1999Q1 2000Q1 2001Q1 2002Q1 2003Q1 2004Q1 2005Q1 2006Q1 2007Q1 2008Q1 2009Q1 2010Q1 2011Q1 2012Q1 2013Q1 2014Q1 2015Q1 2016Q1 2017Q1

NV Total Nonfarm Employment (CES) NV Total Nonfarm Employment (Without Construction Industry) 145

Page 4 of 32 146

U.S. vs. Nevada Employment Growth Rates 2001Q1 to 2017Q4 Source: BLS 8.0% U.S. Average Percent Change 6.0% 2011Q1 to 2017Q4 1.7% 4.0%

2.0%

0.0%

‐2.0% NV Average Percent Change 2011Q1 to 2017Q4 2.6% ‐4.0%

‐6.0% Percent Change - Same Quarter 1-Year Ago ‐8.0%

‐10.0%

‐12.0% 2001Q1 2001Q3 2002Q1 2002Q3 2003Q1 2003Q3 2004Q1 2004Q3 2005Q1 2005Q3 2006Q1 2006Q3 2007Q1 2007Q3 2008Q1 2008Q3 2009Q1 2009Q3 2010Q1 2010Q3 2011Q1 2011Q3 2012Q1 2012Q3 2013Q1 2013Q3 2014Q1 2014Q3 2015Q1 2015Q3 2016Q1 2016Q3 2017Q1 2017Q3

U.S. Total Nonfarm Employment (CES) Growth Rates NV Total Nonfarm Employment (CES) Growth Rates

Page 5 of 32 U.S. vs. Nevada Population Growth Rates 2001Q1 to 2017Q4 Source: Census Bureau, Moody's 5.0%

4.5%

4.0%

3.5%

3.0%

2.5%

2.0%

1.5%

Percent Change - Same Quarter 1-Year Ago 1.0%

0.5%

0.0% 2001Q1 2001Q3 2002Q1 2002Q3 2003Q1 2003Q3 2004Q1 2004Q3 2005Q1 2005Q3 2006Q1 2006Q3 2007Q1 2007Q3 2008Q1 2008Q3 2009Q1 2009Q3 2010Q1 2010Q3 2011Q1 2011Q3 2012Q1 2012Q3 2013Q1 2013Q3 2014Q1 2014Q3 2015Q1 2015Q3 2016Q1 2016Q3 2017Q1 2017Q3

U.S. Population NV Population 147

Page 6 of 32 148

U.S. Consumer Price Index (CPI) and Select CPI Components 2000Q1 to 2017Q4 (Index 1982-84=100) Source: BLS 280.0

260.0

240.0

220.0

200.0

180.0

160.0 Consumer Price Index 1982-84=100

140.0

120.0

100.0 2000Q1 2000Q3 2001Q1 2001Q3 2002Q1 2002Q3 2003Q1 2003Q3 2004Q1 2004Q3 2005Q1 2005Q3 2006Q1 2006Q3 2007Q1 2007Q3 2008Q1 2008Q3 2009Q1 2009Q3 2010Q1 2010Q3 2011Q1 2011Q3 2012Q1 2012Q3 2013Q1 2013Q3 2014Q1 2014Q3 2015Q1 2015Q3 2016Q1 2016Q3 2017Q1 2017Q3 CPI: Urban Consumer ‐ All Items CPI: Urban Consumer ‐ All Items less Food and Energy (Core CPI) CPI: Urban Consumer ‐ Food CPI: Urban Consumer ‐ Energy

Page 7 of 32 U.S. Consumer Price Index (CPI) and Core CPI Growth Rates 2001Q1 to 2017Q4 Source: BLS 7.0%

6.0%

5.0%

4.0%

3.0%

2.0%

1.0%

Percent Change - Same Quarter 1-Year Ago 0.0%

‐1.0%

‐2.0% 2001Q1 2001Q3 2002Q1 2002Q3 2003Q1 2003Q3 2004Q1 2004Q3 2005Q1 2005Q3 2006Q1 2006Q3 2007Q1 2007Q3 2008Q1 2008Q3 2009Q1 2009Q3 2010Q1 2010Q3 2011Q1 2011Q3 2012Q1 2012Q3 2013Q1 2013Q3 2014Q1 2014Q3 2015Q1 2015Q3 2016Q1 2016Q3 2017Q1 2017Q3 CPI: Urban Consumer ‐ All Items CPI: Urban Consumer ‐ All Items less Food and Energy (Core CPI) 149

Page 8 of 32 150

U.S. Consumer Price Index (CPI) and Select CPI Components Growth Rates 2001Q1 to 2017Q4 Source: BLS 7.0%

6.0%

5.0%

4.0%

3.0%

2.0%

1.0%

Percent Change - Same Quarter 1-Year Ago 0.0%

‐1.0%

Page 9 of 32 U.S. Consumer Price Index (CPI) and Select CPI Components Growth Rates 2001Q1 to 2017Q4 Source: BLS 30.0%

25.0%

20.0%

15.0%

10.0%

5.0%

0.0%

‐5.0%

‐10.0%

‐15.0% Percent Change - Same Quarter 1-Year Ago

‐20.0%

‐25.0%

‐30.0% 2001Q1 2001Q3 2002Q1 2002Q3 2003Q1 2003Q3 2004Q1 2004Q3 2005Q1 2005Q3 2006Q1 2006Q3 2007Q1 2007Q3 2008Q1 2008Q3 2009Q1 2009Q3 2010Q1 2010Q3 2011Q1 2011Q3 2012Q1 2012Q3 2013Q1 2013Q3 2014Q1 2014Q3 2015Q1 2015Q3 2016Q1 2016Q3 2017Q1 2017Q3 CPI: Urban Consumer ‐ All Items CPI: Urban Consumer ‐ All Items less Food and Energy (Core CPI) CPI: Urban Consumer ‐ Food CPI: Urban Consumer ‐ Energy 151

Page 10 of 32 152

U.S. Total Personal Income and Total Wages and Salaries 2000Q1 to 2017Q4 Source: BEA $18

$17 Percent Change 2008Q2 to 2017Q4 $16 30.9%

$15

$14

$13

$12 Dollars

of $11

$10 Trillions Percent Change $9 2008Q3 to 2017Q4 29.7% $8

$4 2000Q1 2000Q3 2001Q1 2001Q3 2002Q1 2002Q3 2003Q1 2003Q3 2004Q1 2004Q3 2005Q1 2005Q3 2006Q1 2006Q3 2007Q1 2007Q3 2008Q1 2008Q3 2009Q1 2009Q3 2010Q1 2010Q3 2011Q1 2011Q3 2012Q1 2012Q3 2013Q1 2013Q3 2014Q1 2014Q3 2015Q1 2015Q3 2016Q1 2016Q3 2017Q1 2017Q3

U.S. Personal Income U.S. Wages and Salaries

Page 11 of 32 Nevada Total Personal Income and Total Wages and Salaries 2000Q1 to 2017Q4 Source: BEA $150 Percent Change $140 2007Q4 to 2017Q4 28.6% $130

$120

$110

$100

$90 Dollars

of $80 Percent Change 2008Q1 to 2017Q4 Billions $70 16.6%

$60

$50

$40

$30 2000Q1 2000Q3 2001Q1 2001Q3 2002Q1 2002Q3 2003Q1 2003Q3 2004Q1 2004Q3 2005Q1 2005Q3 2006Q1 2006Q3 2007Q1 2007Q3 2008Q1 2008Q3 2009Q1 2009Q3 2010Q1 2010Q3 2011Q1 2011Q3 2012Q1 2012Q3 2013Q1 2013Q3 2014Q1 2014Q3 2015Q1 2015Q3 2016Q1 2016Q3 2017Q1 2017Q3

NV Personal Income NV Wages and Salaries 153

Page 12 of 32 154

U.S. vs. Nevada Personal Income Growth Rates 2001Q1 to 2017Q4 Source: BEA 15.0%

U.S. Average Percent Change 12.5% 2010Q3 to 2017Q4 4.0% 10.0%

7.5%

5.0%

2.5%

0.0% Percent Change - Same Quarter 1-Year Ago ‐2.5% NV Average Percent Change 2010Q3 to 2017Q4 ‐5.0% 4.2%

‐7.5% 2001Q1 2001Q3 2002Q1 2002Q3 2003Q1 2003Q3 2004Q1 2004Q3 2005Q1 2005Q3 2006Q1 2006Q3 2007Q1 2007Q3 2008Q1 2008Q3 2009Q1 2009Q3 2010Q1 2010Q3 2011Q1 2011Q3 2012Q1 2012Q3 2013Q1 2013Q3 2014Q1 2014Q3 2015Q1 2015Q3 2016Q1 2016Q3 2017Q1 2017Q3

U.S. Personal Income Growth Rates NV Personal Income Growth Rates

Page 13 of 32 U.S. vs. Nevada Wage and Salary Growth Rates 2001Q1 to 2017Q4 Source: BEA 15.0%

12.5% U.S. Average Percent Change 2011Q1 to 2017Q4 10.0% 3.9%

7.5%

5.0%

2.5%

0.0%

‐2.5% NV Average Percent Change ‐5.0% Percent Change - Same Quarter 1-Year Ago 2011Q1 to 2017Q4 4.2% ‐7.5%

‐10.0%

‐12.5% 2001Q1 2001Q3 2002Q1 2002Q3 2003Q1 2003Q3 2004Q1 2004Q3 2005Q1 2005Q3 2006Q1 2006Q3 2007Q1 2007Q3 2008Q1 2008Q3 2009Q1 2009Q3 2010Q1 2010Q3 2011Q1 2011Q3 2012Q1 2012Q3 2013Q1 2013Q3 2014Q1 2014Q3 2015Q1 2015Q3 2016Q1 2016Q3 2017Q1 2017Q3

U.S. Wage and Salary Growth Rates NV Wage and Salary Growth Rates 155

Page 14 of 32 156

U.S. Per Capita Personal Income 2000Q1 to 2017Q4 Source: Census Bureau, BLS and BEA (Seasonally Adjusted Annual Rates) $52,500 Percent Change $50,000 2008Q2 to 2017Q4 21.8% $47,500

$45,000

$42,500

$40,000 Percent Change $37,500 2008Q2 to 2017Q4 6.2% $35,000 Dollars per Person (Annually) Person per Dollars

$32,500

$30,000 2000Q1=100 $27,500

$25,000 2000Q1 2000Q3 2001Q1 2001Q3 2002Q1 2002Q3 2003Q1 2003Q3 2004Q1 2004Q3 2005Q1 2005Q3 2006Q1 2006Q3 2007Q1 2007Q3 2008Q1 2008Q3 2009Q1 2009Q3 2010Q1 2010Q3 2011Q1 2011Q3 2012Q1 2012Q3 2013Q1 2013Q3 2014Q1 2014Q3 2015Q1 2015Q3 2016Q1 2016Q3 2017Q1 2017Q3

U.S. Per Capita Personal Income U.S. Per Capita Personal Income ‐ Inflation Adjusted

Page 15 of 32 Nevada Per Capita Personal Income 2000Q1 to 2017Q4 Source: Census Bureau, BLS and BEA (Seasonally Adjusted Annual Rates) $47,500

$45,000 Percent Change 2007Q4 to 2017Q4 $42,500 11.7%

$40,000

$37,500

$35,000 Percent Change 2005Q2 to 2017Q4 Dollars per Person (Annually) $32,500 -8.3%

$30,000

2000Q1=100 $27,500

NV Per Capita Personal Income NV Per Capita Personal Income ‐ Inflation Adjusted 157

Page 16 of 32 158

U.S. vs. Nevada Per Capita Personal Income 2000Q1 to 2017Q4 Source: Census Bureau and BEA (Seasonally Adjusted Annual Rates) $52,500

$50,000 U.S. Percent Change 2008Q2 to 2017Q4 $47,500 21.8%

$45,000

$42,500

$40,000

$37,500 NV Percent Change $35,000

Dollars per (Annually) Person 2007Q4 to 2017Q4 11.7% $32,500

$30,000

$27,500

U.S. Per Capita Personal Income NV Per Capita Personal Income

Page 17 of 32 U.S. vs. Nevada Per Capita Personal Income (Inflation Adjusted) 2000Q1 to 2017Q4 Source: Census Bureau and BEA (Seasonally Adjusted Annual Rates) $52,500

$50,000

$47,500

$45,000

$42,500

$40,000 U.S. Percent Change 2008Q2 to 2017Q4 $37,500 6.2%

$35,000 Dollars per Person (Annually)

$32,500

$30,000 2000Q1=100 NV Percent Change $27,500 2005Q2 to 2017Q4 -8.3% $25,000 2000Q1 2000Q3 2001Q1 2001Q3 2002Q1 2002Q3 2003Q1 2003Q3 2004Q1 2004Q3 2005Q1 2005Q3 2006Q1 2006Q3 2007Q1 2007Q3 2008Q1 2008Q3 2009Q1 2009Q3 2010Q1 2010Q3 2011Q1 2011Q3 2012Q1 2012Q3 2013Q1 2013Q3 2014Q1 2014Q3 2015Q1 2015Q3 2016Q1 2016Q3 2017Q1 2017Q3

U.S. Per Capita Personal Income ‐ Inflation Adjusted NV Per Capita Personal Income ‐ Inflation Adjusted 159

Page 18 of 32 160

U.S. vs. Nevada Per Capita Personal Income Growth Rates 2001Q1 to 2017Q4 Source: Census Bureau and BEA 12.5% U.S. Average Percent Change 10.0% 2010Q3 to 2017Q4 3.2%

7.5%

5.0%

2.5%

0.0%

‐2.5%

NV Average Percent Change

Percent Change - Same Quarter 1-Year Ago ‐5.0% 2010Q3 to 2017Q4 2.8% ‐7.5%

‐10.0% 2001Q1 2001Q3 2002Q1 2002Q3 2003Q1 2003Q3 2004Q1 2004Q3 2005Q1 2005Q3 2006Q1 2006Q3 2007Q1 2007Q3 2008Q1 2008Q3 2009Q1 2009Q3 2010Q1 2010Q3 2011Q1 2011Q3 2012Q1 2012Q3 2013Q1 2013Q3 2014Q1 2014Q3 2015Q1 2015Q3 2016Q1 2016Q3 2017Q1 2017Q3

U.S. Per Capita Personal Income Growth Rates NV Per Capita Personal Income Growth Rates

Page 19 of 32 U.S. vs. Nevada Per Capita Personal Income Growth Rates (Inflation Adjusted) 2001Q1 to 2017Q4 Source: Census Bureau and BEA 12.5%

10.0% U.S. Average Percent Change 2010Q3 to 2017Q4 1.6% 7.5%

5.0%

2.5%

0.0%

‐2.5%

2000Q1=100

Percent Change - Same Quarter 1-Year Ago ‐5.0% NV Average Percent Change 2010Q3 to 2017Q4 ‐7.5% 1.1%

U.S. Per Capita Personal Income Growth Rates ‐ Inflation Adjusted NV Per Capita Personal Income Growth Rates ‐ Inflation Adjusted 161

Page 20 of 32 162

U.S. Wages and Salaries per Employee 2000Q1 to 2017Q4 Source: BLS and BEA (Seasonally Adjusted Annual Rates) $60,000

$57,500 Percent Change 2008Q4 to 2017Q4 $55,000 19.8%

$52,500

$50,000

$47,500

$45,000 Percent Change 2007Q1 to 2017Q4 $42,500 3.1%

Dollars per Employee Dollars per Employee (Annually) $40,000

$37,500

$35,000 2000Q1=100 $32,500

$30,000 2000Q1 2000Q3 2001Q1 2001Q3 2002Q1 2002Q3 2003Q1 2003Q3 2004Q1 2004Q3 2005Q1 2005Q3 2006Q1 2006Q3 2007Q1 2007Q3 2008Q1 2008Q3 2009Q1 2009Q3 2010Q1 2010Q3 2011Q1 2011Q3 2012Q1 2012Q3 2013Q1 2013Q3 2014Q1 2014Q3 2015Q1 2015Q3 2016Q1 2016Q3 2017Q1 2017Q3

U.S. Wages and Salaries per Employee U.S. Wages and Salaries per Employee ‐ Inflation Adjusted

Page 21 of 32 Nevada Wages and Salaries per Employee 2000Q1 to 2017Q4 Source: BLS and BEA (Seasonally Adjusted Annual Rates) $60,000

$57,500

$55,000 Percent Change 2008Q1 to 2017Q4 $52,500 10.7%

$50,000

$47,500

$45,000

$42,500 Percent Change

Dollars per Employee Dollars per Employee (Annually) $40,000 2007Q4 to 2017Q4 -5.4% $37,500

$35,000

$32,500 2000Q1=100

NV Wages and Salaries per Employee NV Wages and Salaries per Employee ‐ Inflation Adjusted 163

Page 22 of 32 164

U.S. vs. Nevada Wages and Salaries per Employee 2000Q1 to 2017Q4 Source: BLS and BEA (Seasonlly Adjusted Annual Rates) $60,000 U.S. Percent Change $57,500 2008Q4 to 2017Q4 19.8% $55,000

$52,500

$50,000

$47,500

$45,000

$42,500 NV Percent Change 2008Q1 to 2017Q4

Dollars per Employee (Annually) $40,000 10.7%

$37,500

$35,000

$32,500

U.S. Wages and Salaries per Employee NV Wages and Salaries per Employee

Page 23 of 32 U.S. vs. Nevada Wages and Salaries per Employee (Inflation Adjusted) 2000Q1 to 2017Q4 Source: BLS and BEA (Seasonally Adjusted Annual Rates) $60,000

$57,500

$55,000

$52,500

$50,000

$47,500

$45,000 U.S. Percent Change 2007Q1 to 2017Q4 $42,500 3.1% Dollars per Employee Dollars per Employee (Annually) $40,000

$37,500

$35,000 NV Percent Change $32,500 2000Q1=100 2007Q4 to 2017Q4 -5.4% $30,000 2000Q1 2000Q3 2001Q1 2001Q3 2002Q1 2002Q3 2003Q1 2003Q3 2004Q1 2004Q3 2005Q1 2005Q3 2006Q1 2006Q3 2007Q1 2007Q3 2008Q1 2008Q3 2009Q1 2009Q3 2010Q1 2010Q3 2011Q1 2011Q3 2012Q1 2012Q3 2013Q1 2013Q3 2014Q1 2014Q3 2015Q1 2015Q3 2016Q1 2016Q3 2017Q1 2017Q3 U.S. Wages and Salaries per Employee ‐ Inflation Adjusted NV Wages and Salaries per Employee ‐ Inflation Adjusted 165

Page 24 of 32 166

U.S. vs. Nevada Wages and Salaries Per Employee Growth Rates 2001Q1 to 2017Q4 Source: BLS and BEA 7.0% U.S. Average Percent Change 6.0% 2009Q2 to 2017Q4 2.1% 5.0%

4.0%

3.0%

2.0%

1.0%

0.0%

‐1.0% Percent Change - Same Quarter 1-Year Ago ‐2.0% NV Average Percent Change 2009Q2 to 2017Q4 ‐3.0% 1.2%

‐4.0% 2001Q1 2001Q3 2002Q1 2002Q3 2003Q1 2003Q3 2004Q1 2004Q3 2005Q1 2005Q3 2006Q1 2006Q3 2007Q1 2007Q3 2008Q1 2008Q3 2009Q1 2009Q3 2010Q1 2010Q3 2011Q1 2011Q3 2012Q1 2012Q3 2013Q1 2013Q3 2014Q1 2014Q3 2015Q1 2015Q3 2016Q1 2016Q3 2017Q1 2017Q3

U.S. Wages and Salaries per Employee Growth Rates NV Wages and Salaries per Employee Growth Rates

Page 25 of 32 U.S. vs. Nevada Wages and Salaries Per Employee Growth Rates (Inflation Adjusted) 2001Q1 to 2017Q4 Source: BLS and BEA 7.0%

6.0%

5.0% U.S. Average Percent Change 2009Q2 to 2017Q4 4.0% 0.6%

2000Q1=100 3.0%

2.0%

1.0%

0.0%

‐1.0% Percent Change - Same Quarter 1-Year Ago ‐2.0% NV Average Percent Change ‐3.0% 2009Q2 to 2017Q4 -0.3% ‐4.0% 2001Q1 2001Q3 2002Q1 2002Q3 2003Q1 2003Q3 2004Q1 2004Q3 2005Q1 2005Q3 2006Q1 2006Q3 2007Q1 2007Q3 2008Q1 2008Q3 2009Q1 2009Q3 2010Q1 2010Q3 2011Q1 2011Q3 2012Q1 2012Q3 2013Q1 2013Q3 2014Q1 2014Q3 2015Q1 2015Q3 2016Q1 2016Q3 2017Q1 2017Q3

U.S. Wages and Salaries per Employee Growth Rates ‐ Inflation Adjusted NV Wages and Salaries per Employee Growth Rates ‐ Inflation Adjusted 167

Page 26 of 32 168

U.S. vs. Nevada Median Household Income 2000 to 2016 Source: Census Bureau $61,000

$59,000 U.S. Percent Change 2008 to 2016 $57,000 17.4%

$55,000

$53,000

$51,000

$49,000

$47,000 Dollars (Annually)

$45,000 NV Percent Change 2008 to 2016 $43,000 1.3%

$41,000

$39,000

$37,000

$35,000 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

U.S. Median Household Income Nevada Median Household Income

Page 27 of 32 U.S. vs. Nevada Median Household Income (Inflation Adjusted) 2000 to 2016 Source: Census Bureau $61,000

$59,000

$57,000

$55,000

$53,000

$51,000

$49,000

$47,000 Dollars (Annually) Dollars U.S. Percent Change 2007 to 2016 $45,000 1.5% $43,000

$41,000

$39,000 NV Percent Change 2000=100 $37,000 2007 to 2016 -11.4% $35,000 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

U.S. Median Household Income ‐ Inflation Adjusted Nevada Median Household Income ‐ Inflation Adjusted 169

Page 28 of 32 170

U.S. vs. Nevada Median Household Income Growth Rates 2001 to 2016 Source: Census Bureau 10.0%

8.0% U.S. Average Percent Change 2012 to 2016 6.0% 3.4%

4.0%

2.0%

0.0%

‐2.0%

‐4.0% Percent Change -Percent Change Year Ago

‐6.0%

‐8.0% NV Average Percent Change ‐10.0% 2012 to 2016 3.4% ‐12.0% 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

U.S. Median Household Income Growth Rates Nevada Median Household Income Growth Rates

Page 29 of 32 U.S. vs. Nevada Median Household Income Growth Rates (Inflation Adjusted) 2001 to 2016 Source: Census Bureau 10.0% U.S. Average Percent Change 8.0% 2013 to 2016 2.6% 6.0%

4.0%

2.0%

0.0%

‐2.0%

‐4.0% Percent Change -Percent Change Year Ago

‐6.0%

‐8.0% NV Average Percent Change 2013 to 2016 ‐10.0% 2000=100 3.0%

‐12.0% 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

U.S. Median Household Income Grwoth Rates ‐ Infllation Adjusted Nevada Median Household Income Growth Rates ‐ Inflation Adjusted 171

Page 30 of 32 172

Nevada General Fund Revenue per $1,000 of Nevada Personal Income by Fiscal Year Actual: FY 1990 - FY 2017 $35

$34

$33

$32

$31

$30

$29

$28 Dollars per $1,000 of Personal of$1,000 Income Dollars per

$27

$26

$25 FY90 FY91 FY92 FY93 FY94 FY95 FY96 FY97 FY98 FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17

General Fund Revenue per $1,000 of Personal Income

Page 31 of 32 Growth in Nevada General Fund Revenue versus Nevada Personal Income by Fiscal Year Actual: FY 1990 - FY 2017 35.0%

30.0%

25.0%

20.0%

15.0%

10.0%

5.0%

0.0%

‐5.0% Percent Change fromFiscal Year Fiscal to Year

‐10.0%

‐15.0% FY90 FY91 FY92 FY93 FY94 FY95 FY96 FY97 FY98 FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17

General Fund Revenue Growth Rates Personal Income Growth Rates 173

Page 32 of 32 174

Sun Mon Tue Wed Thu Fri Sat Notes

Oct 26: Nevada Day 1 2 3 4 5 6 Holiday

7 8 9 10 11 12 13

14 15 16 17 18 19 20

21 22 23 24 25 26 27

28 29 30 31 OCTOBER 2018

Nov 6: Election Day 1 2 3

Nov 12: Veterans Day 4 5 6 7 8 9 10 Holiday

Nov 22: Thanksgiving 11 12 13 14 15 16 17 Day

Nov 23: Thanksgiving 18 19 20 21 22 23 24 Family Day

25 26 27 28 29 30

Dec 3: Last Day to hold 1 Economic Forum meeting

2 3 4 5 6 7 8

9 10 11 12 13 14 15

16 17 18 19 20 21 22

23 24 25 26 27 28 29

30 31

NOVEMBER 2018 DECEMBER 2018

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