Balanced budgets and consensus estimating
“Illinois hasn’t had truly balanced budgets for more than 15 years,” reports Illinois Policy, an independent organization generating public policy solutions aimed at promoting personal freedom and prosperity in Illinois, “And state spending has far outpaced growth in residents’ incomes. These are two reasons why Illinois is in desperate need of a spending cap that ensures residents are getting a state government they can afford.
But there’s another key reason Illinoisans need a spending cap: lawmakers can’t reliably figure out how much money they have to spend each year, with state officials consistently producing revenue projections that don’t match one another or the actual amount of revenue the state ends up generating.”
It’s that last line that really alarms us. Illinois can blame its fiscal mess — including the nation’s lowest bond rating — on all sorts of things; many of them dating back for years, like its failure to adequately fund state pension plans. But the first step, as far as we’re concerned, to putting together any kind of budget that can be both politically palatable and fiscally sound, is to start with the right revenue estimates.
And that’s next to impossible, thanks to state law! According to the Illinois Policy Report, “The executive estimate comes from the Governor’s Office of Management and Budget, or GOMB, and is used by the governor in his annual budget proposal. A second estimate comes from the legislative Commission on Government Forecasting and Accountability, or COGFA. Unfortunately, these two estimates rarely match either each other or the amount of revenue that actually ends up coming in.”
The alternative, of course, is consensus revenue estimating. As we wrote for the Volcker Alliance a couple of years back, “Consensus revenue forecasts are made by a group of contributors, often involving the legislature, executive branch, economists, and representatives of the Democratic and Republican parties. The point of a consensus forecast is to make it easier for policymakers to concentrate on expenditures instead of arguing about whether the revenue estimate was politically driven. While consensus revenue forecasts are not necessarily more accurate than ones produced by a governor’s budget office, the process is likely to go more smoothly when all the parties involved in forming a budget agree on a single revenue figure.”
And not to belabor the obvious, that’s exactly what Illinois needs in order to come up with balanced budgets: a process that goes more smoothly.