March 1st, 2011

Revenue forecasts made by America’s state governments are increasingly missing the mark, a trend that is aggravating political, fiscal and social pain as most of the 50 states grapple with budget shortfalls, according to two leading think tanks.

The widening mistakes in revenue forecasts, which added up to $49 billion in fiscal year 2009, were due more to shifts in the economy than to wrongheaded experts.

“The main cause of the increase in volatility appears to be the state’s growing reliance on income taxes and the ways in which highly volatile capital gains affect income tax revenue,” the Pew Center on the States and the Nelson A. Rockefeller Institute of Government said in a new study.

Lawmakers and governors are now in budget-writing season and are looking at forecasts that revenue across all 50 U.S. states will be at least $100 billion shy of costs in fiscal 2012, which begins for most states on July 1. Policy makers use the estimates to set spending for schools, roads and healthcare.

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