FORECASTING STATE GENERAL FUND REVENUE IN
INDIANA
ASSOCIATION OF UNIVERSITY BUSINESS AND
ECONOMIC RESEARCH CONFERENCE
INDIANAPOLIS, INDIANA
OCTOBER 10, 2011
Began in the early 1970s in response to competing
revenue forecasts impairing the budgeting process.
It is a consensus process directly involving the Executive
and Legislative branches.
The process depends on an agreement to agree and is not
statutory.
Indiana Revenue Forecast
Two Step Process
Revenue Forecast
Legislative
Services Agency
Diane Powers
Dr. Jim Landers
Dr. Larry DeBoer
Diana Agidi
Revenue Forecast Technical Committee
Members
Advisors
David Dukes
John Grew
David Reynolds
William Sheldrake
Erik Gonzalez
Susan Preble
Bob Lain
Dr. John Mikesell
Economic Forecast
IHS Global
Insight
Economic Variables
Budget Agency
Bob Lain
Randhir Jha
Shannon Bibby
Statistical Equations
(Captures the relationships between
economic activity and tax revenues)
Revenue
Forecast
3
In December of each even-numbered
year a forecast through the following
biennium is released.
Monthly reports on actual collections
vs. forecast targets are released.
In April of each odd-numbered year
an update to the previous December
forecast is released.
Monthly reports on actual collections
vs. forecast targets are released.
In December of each odd-numbered
year an update to the previous
forecast is released.
Begin with error analysis of the previous
forecast.
Review and quantify administrative
changes, recently enacted statutes, and
legal rulings that will impact revenues.
Review and decide on the statistical
equations that best relate economic
conditions to revenues.
Plug in the economic forecast from IHS
Global Insight and forecast smaller
revenue sources based on trends.
Present the forecast to the State Budget
Committee.
STRENGTHS
Longevity
Technically rigorous, but not a purely academic exercise.
Independent, but aware of the realities.
CHALLENGES
Separating the noise from the facts when considering actual revenue
collections.
Too much importance can be given to the monthly targets.
The task is growing more and more complex.
Being sensitive to the realities without letting them dictate the results.