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Preface

This report is grounded in what budget people do -- including forecasting revenues, calculating budgets needed to continue current levels of government services, and dealing with unexpected fluctuations in economic circumstances. Few people find these topics interesting. Many consider them only in order to examine the basis for trends that affect them adversely. This report reflects this reality. The text, designed to be a "quick read," summarizes its conclusions and the reasons for them. The supporting details appear in appendices.

Readers should recognize that two types of forecasts appear in the text without repetitious reminders of how they differ. The forecasts -- of revenues from current taxes, spending for current services, and thus shortfalls and fiscal flexibility over the next decade -- are built just as revenue and spending forecasts are built for annual government budgets. They are professional forecasts of circumstances beyond the control of decision-makers. Since the estimates reflect a close consensus among professional estimators and a widely accepted methodology, they closely approximate what other professionals would produce if asked to address the same subjects. Such forecasts are never exactly right. They are usually close to right. And, right or not, they are generally considered authoritative.

Forecasts of the responses of decision-makers to predicted fiscal circumstances are another matter. Their empirical base is inherently weaker. There is no close consensus on how to predict political behavior. Actions of participants in the political process can affect outcomes in ways experts are unable to predict as easily as economic and tax collection growth, public school enrollment, and inflation. Forecasts of how decision-makers will respond to the predicted fiscal circumstances are not authoritative; they inherently reflect predictions of what people with power to decide will decide. Their only empirical base is how similarly situated decision-makers, primarily legislators and governors, have made similar decisions when confronted with similar circumstances in the past. This approach makes sense in specifying a baseline of what policy would likely be, given unchanged behavior by participants. But it is only a starting point in considering the range of policy choices available to the participants.

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© 1999 The National Center for Public Policy and Higher Education