The unpredictability of predicting revenue

Thursday is a big day for our state's budgeteers. Our chief economist will present the latest revenue forecast to the Economic and Revenue Forecast Council. Given that legislators are already facing a $4.6 billion shortfall, worries that predicted revenues might fall as much as another $1.5 billion have members feeling very nervous.

Another thing making members nervous is how "off" our recent forecasts have been - "off" to the tune of more than $1 billion in the past year.

Arun Raha, our economist, has struggled to make accurate predictions at a time when our nation's economic recovery is agonizingly slow and all the typical indicators and tools used for forecasting simply aren't panning out. During the most recent forecast meeting in November, council members had a lively discussion about whether Raha's numbers were "overly pessimistic" or "wildly optimistic."

Ways & Means Chair Ross Hunter talks here about the unpredictability of predicting future revenues. He points out Washington is actually doing a better job than most states. While our forecasts have been about 2.8 percent higher than actuals, 70 percent of states have been 5 percent higher.