WA Tries to Hit a Moving Target: The State Budget
Published on Mon, Mar 7, 2011 by Chris ThomasRead More County & State
OLYMPIA, Wash. - It's like a math problem that can't be solved, as state budget forecasters struggle to predict how much income Washington State and others can count on.
A new report says in 2009, half of the states overestimated their revenues by more than 10 percent and, despite technology improvements, forecasting errors have become more frequent. It says the recession is part of the problem, and some of the inaccuracies can be blamed on the types of income states depend on.
The Pew Center on the States released the report in conjunction with the Nelson A. Rockefeller Institute of Government. Pew researcher Stephen Fehr says Washington has learned just how fast the revenue picture can change when people stop buying things.
"If you're a state that relies on sales tax heavily - whether it's Washington or Florida or Nevada - it's going to hit you even harder, and that's going to make it more difficult to predict how much you have coming in when you're faced with that kind of volatility. That's what happened in those three states."
Washington relies on sales tax for more than half of the state's income.
The study examined the last 23 years of budget forecasts for every state. Forecast accuracy matters to states for the same reason it matters to individual households, explains Fehr.
"It's just like when you estimate your own revenue for your own family budget: You've got to know about how much money you have coming in. It's important for a state to get that right."
The study says some states are now doing more frequent forecasting or changing the timing of their forecasts to improve accuracy. Washington requires that what it terms both "optimistic" and "pessimistic" versions of the forecast be made.
The latest forecast came out in November, with the state Economic and Revenue Forecast Council saying the economy is "off life support, but still in intensive care." The next forecast is expected in about two weeks.
The Washington revenue forecast can be viewed online at www.erfc.wa.gov. The Pew report is also available online, at www.pewtrusts.org.
A new report says in 2009, half of the states overestimated their revenues by more than 10 percent and, despite technology improvements, forecasting errors have become more frequent. It says the recession is part of the problem, and some of the inaccuracies can be blamed on the types of income states depend on.
The Pew Center on the States released the report in conjunction with the Nelson A. Rockefeller Institute of Government. Pew researcher Stephen Fehr says Washington has learned just how fast the revenue picture can change when people stop buying things.
"If you're a state that relies on sales tax heavily - whether it's Washington or Florida or Nevada - it's going to hit you even harder, and that's going to make it more difficult to predict how much you have coming in when you're faced with that kind of volatility. That's what happened in those three states."
Washington relies on sales tax for more than half of the state's income.
The study examined the last 23 years of budget forecasts for every state. Forecast accuracy matters to states for the same reason it matters to individual households, explains Fehr.
"It's just like when you estimate your own revenue for your own family budget: You've got to know about how much money you have coming in. It's important for a state to get that right."
The study says some states are now doing more frequent forecasting or changing the timing of their forecasts to improve accuracy. Washington requires that what it terms both "optimistic" and "pessimistic" versions of the forecast be made.
The latest forecast came out in November, with the state Economic and Revenue Forecast Council saying the economy is "off life support, but still in intensive care." The next forecast is expected in about two weeks.
The Washington revenue forecast can be viewed online at www.erfc.wa.gov. The Pew report is also available online, at www.pewtrusts.org.
