Inaccurate North Dakota Revenue Forecasts Make Sound Policy Choices Difficult

In this letter to the editor in the Fargo Forum from Tom Fiebiger, a former state legislator whose name has been thrown around as a possible US House candidate for Democrats, makes a valid and important point.

Fiebiger complains that the state’s forecasts for revenues have been off by troublingly wide margins, and that’s hurt the ability of legislators to make sound policy decisions. For those of you who don’t know, when the legislature sets the budget for the biennium, they’re actually basing their spending and revenue decisions on projections which estimate how much money the state will have.

Just to give you an idea of how far off the projections have been, consider this chart comparing the legislative projection for general fund revenues versus actual revenues. The projection was off by almost $1.7 billion, or over 49 percent (all data pulled from the North Dakota Office of Management and Budget’s monthly revenue reports):chart_3 (1)

So far in the 2013-15 biennium, revenues are again coming in ahead of projections. In four out of the six months in the biennium for which we have revenue numbers so far actual revenues have come in ahead of projections. From July 1st – December 31st of last year, the state has collected $134 million more in general fund revenues than projected, a 9.1% variance:

 

chart_2 (1)

The way things are going, expect that variance to grow, probably to the point of rivaling last biennium’s variance.

I don’t care if you’re a Democrat, a Republican or other, revenue projects that are off by nearly 50% are a problem.

“Maybe you want to dismiss this letter as just another Democrat wanting to spend more money,” Fiebiger writes in his letter. “Well, it’s the people’s money, not the Legislature’s or the governor’s. We expect and deserve real and accurate projections.”

He’s right. While Fiebiger and other liberals would no doubt like to use these unaccounted for windfalls to increase spending on projects, we should remember that conservatives might have had an easy time making the case for tax relief based on more accurate revenue projections.

Late last year I brought up the consistently large variances in these revenue reports with a Republican member of the state House. I was told that many in the Republican majority like that the projections lowball revenues because they think it helps restrain spending. Maybe that’s true, but anyone who followed the fight over income tax relief between the House and the Senate last year (the House passed over $500 million but had to compromise with the Senate on a much smaller $250 million package) knows that it impedes tax reform too.

It’s time we started getting these projections right.

Rob Port is the editor of SayAnythingBlog.com, a columnist for the Forum News Service, and host of the Plain Talk Podcast which you can subscribe to by clicking here.

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