Thursday, August 28, 2014

The Bad News: New Jersey's revenue-estimating process - the bedrock of the state's annual spending plan - is broken.

The Good News: It can be fixed.

Revenue forecasting in the states Each year, New Jersey estimates how much money it will take in during the upcoming budget year. Lawmakers rely on that figure to know how much the state can invest in schools, roads, and other public services. While revenue estimating is a relatively unknown function of state government, it has entered the spotlight in New Jersey over the past few years as revenue projections have repeatedly been overly confident and inaccurate, leading to last-minute budget maneuvers and accounting gimmicks to keep the budget in balance.

Revenue forecasting in the statesNew Jersey can make a big improvement in its budgeting and take a major step towards a more financially responsible budget by having the governor and the legislature - which both currently make projections independently - jointly produce the official revenue estimate.

This type of "consensus" process helps reduce political gridlock and increases the revenue estimate's value as a trusted starting point for writing the state budget. Adopting a consensus model would mean no more dueling revenue projections, no more ad hominem attacks on the estimators and an overall budget-making process that is far less political.

A new national report by the Center on Budget and Policy Priorities confirms the need for New Jersey to take common-sense steps to fix its revenue-estimating process. In the report's evaluation of how states come up with a revenue estimate for the annual budget, New Jersey scored only a 2 on a scale of 0-5 due to its failure to employ sensible and proven practices that create reliable revenue estimates to guide state spending. This means the state ranked as one of the dozen worst in the nation.

We think the Press of Atlantic City summed it up well in a favorable editorial:

"New Jersey should join the majority of states that make revenue projections in an open, joint process that results in numbers everyone can agree on. Certainly, such projections are an inexact science. But as it is now in New Jersey, politics and wishful thinking drive the process."

Let's hope lawmakers heed the call for a better budget process.

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