Where did the money go???
Well most states are extremely dependent on sales taxes for revenues. There are several states that do not even have income taxes... Texas comes to mind. Beyond the sales tax all the states can really tax is your income... which is primarily what the states cut during the 90s, and property taxes... which are largely retained by the local counties for schools.
When an economic downturn occurs sales tax revenues dip, simply b/c people are consuming less. Most states generally don't tax, or at least at the same rate, purchases like food and medicine. In a state like Nevada, especially after 9/11, with tourism and travel down I would expect sales tax revenues from hotels, restaraunts, rental cars etc... to go down. Plus I would assume that Nevada, like Arizona, taxes hosipitality items like hotels and rental cars higher. In AZ the sales tax to rent a car was 12.6%. With less revenue coming in from income taxes the state falls short.
Growth itself is expensive. Sure in the long term with more citizens you will have more revenue, but you also have more services to provide. The localities and state need to build more roads, schools, expand utility service... provide the basic infrastructure that you need. And all of this is not cheap. And until recently the cost has been borne mostly by the state... developers are now required by law in many places to pick up more of those improvement costs.
Stop drop and roll will not save you in hell. --- seen on a church marque in rural Virginia