BEYOND THE NUMBERS
States routinely put at risk some of the country’s highest priorities ― educating children, maintaining a healthy and trained work force, and caring for the elderly, for example ― by failing to employ proven budget methods that would help them plan farther into the future. A few improvements would make considerably more information available to policymakers and the public for budget debates, as we explain in a new paper and detail in an interactive map.
States could plan more effectively by, for instance:
- Getting a stronger grasp of likely revenues. Projecting how much revenue the state can expect to collect beyond the next couple of years enables policymakers to anticipate and respond to predictable changes in revenue. Otherwise, policymakers are left blind to predictable declines (or increases) in state revenue and vulnerable to tax-cut proposals that impose large revenue losses several years into the future. Only 11 states forecast revenue at least four years into the future.
- Producing a revenue estimate in partnership between the governor and legislature (known as consensus revenue estimating). This reduces the likelihood of a political fight over the correct revenue number, which can derail a more productive policy debate. Only 28 states use consensus revenue estimating.
- Getting a stronger grasp of real costs. Knowing the cost of maintaining the current level of services beyond a single year gives policymakers a heads up when major cost increases are coming before it’s too late to avoid a fiscal emergency. This information (called a current services budget) also shows if states are in danger of chronically generating less revenue than needed to meet obligations (called a structural deficit). Only five states and the District of Columbia regularly prepare current services budgets extending beyond one budget year.
- Putting it all together. Any of these practices would by itself help a state. Even better, they should put them together and prepare high-quality, multi-year revenue forecasts and multi-year expenditure forecasts on a current-services basis. That would offer the best possible information and lay the groundwork for productive debate on potential policies. Just three states — Alaska, New York, and Washington — use both multi-year revenue and multi-year current services budget forecasting, at least for broad categories of spending and revenues.
Click through the map below to learn more about how each state performs on these practices.