By Jim Christie

SAN FRANCISCO (Reuters) - To borrow from itsgambling parlance, Nevada is likely to extend its economic andfiscal losing streak well into the future.

Once one of the fastest-growing states, Nevada now facesthe prospect that recovery from its deep economic slump willlag -- perhaps substantially -- a national rebound.

Nevadans are resigned to that dour outlook. A recentMason-Dixon Polling & Research Inc poll found 42 percent ofresidents expect the state's economy to stay the same over thenext year and 29 percent anticipate it to worsen.

They have good reason to be glum. Credit counseling agencyCredAbility ranks Nevada as the most financially distressedstate.

"It's the only state at a crisis level," said John McCosh,a spokesman for the Atlanta-based credit counseling agency.

Nevada, a state of 2.64 million, has come to symbolize theextremes of the U.S. economy's boom and bust and now holds thecountry's records in jobless and foreclosure rates.

The slumping state economy has also worked its way intonational politics, as leading Democrat and Senate MajorityLeader Harry Reid of Nevada fights for votes from a depressedelectorate.

Nevada's unemployment rate was at 14.3 percent in July,compared with 9.6 percent nationally in August, and nonfarmpayrolls in the Las Vegas region, the state's main economicengine, shrank by a worrisome 2.3 percent in July from a yearearlier.

The Las Vegas area's median home price was off 58.4 percentin July from its November 2006 peak and home sales in theregion dropped 22.2 percent in July from June and 18.8 percentfrom a year earlier, according to real estate informationservice MDA DataQuick.

Foreclosures continue to weigh on the region's housingmarket. It had the highest foreclosure rate among U.S. metroareas with populations of 200,000 or more in July, with one inevery 71 housing units having received a foreclosure filing, ormore than five times the national average, according to onlineforeclosure marketplace RealtyTrac. Nevada in July held ontothe highest state-level foreclosure rate for the 43rdconsecutive month, RealtyTrac added.

Meanwhile, in Carson City, the state capital, revenue is soweak that state leaders expect a shortfall of up to $3 billionin the two-year state budget cycle beginning next July if theyhold spending at current levels.

At $3 billion, Nevada's deficit would be about 46 percentof its roughly current $6.5 billion budget, said economist JohnRestrepo, a principal at Restrepo Consulting Group LLC andmember of the Nevada Economic Forum, which projects general taxrevenue for the state government.

"The options are relatively limited," Restrepo said. Henoted that a new governor will be elected in November andlawmakers will have to accept more spending cuts along with taxincreases of some kind to balance the state government'sbooks.

LEANER GOVERNMENT

Nevada's government faces a historic fiscal reckoning, saidJeremy Aguero of the economic and fiscal research firm AppliedAnalysis, in Las Vegas.

"The hard choices that we didn't make before are going tobe very apparent," he said.

Republican Assemblyman Pete Goicoechea expects Nevada'scoffers to be so thin for so long that he has raised the ideaof taxing food sales, since imposing a personal income tax iswidely opposed.

"It's a broad-based tax, easy to collect and completelycontrolled by the voters," he said. "I don't know if thatparticular tax would be worse than the cuts to the programswe're looking at."

Goicoechea added: "There will be cuts to essentialservices. We will start getting into public safety, health andhuman services and education. That's when it starts gettingsticky."

Local governments are also cutting spending because retailsales tax revenue has plunged as unemployment has spiked, saidKevin Knutson, director of management and budget for Reno. Thecity may see its credit rating lowered because of unpaid renton a city lot used for parking next to a casino.

"As consumer spending goes, so go our revenues," Knutsonsaid. "We've assumed it's going to continue to drop."

Local officials in and around Reno have responded byreining in spending and by consolidating more than 60 servicesin recent years. Knutson said another 50 services could bemerged amid further spending cuts.

Government in Nevada will grow leaner and leaner untilrevenue revives. But that requires tourism to rebound andenough foreclosures to be cleared from inventory for homebuilding to resume, each largely dependent on outside forces,said Rick Shelton of the Greater Las Vegas Association ofRealtors. "Our neighbors' circumstances are paramount to ourcircumstances." (Reporting by Jim Christie; Editing by Dan Grebler)