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Taken for a ride
Nov 18, 2013 - By Steven R. Peck
Once again, our state's budget has been based on a revenue prediction far off the mark
When it is time for the governor and the Wyoming Legislature to fashion a new budget for the state, revenue projections from a panel of economists known as the Consensus Revenue Estimating Group are viewed as fiscal gospel.
That's odd, because CREG is almost always wrong.
This fiscal year, the inaccuracy amounts to $300 million between what CREG said Wyoming would have to work with in its budget and what revenue actually exists. This isn't the first time this has happened, nor the second, third, fourth or fifth. In fact, if there has been a CREG estimate that hasn't been off by at least tens of millions of dollars, it is hard to remember when.
Now comes the necessary disclaimer about the difficulty of the CREG task, the hard work and integrity of the CREG economists -- good people, to be sure -- and enormity of the job CREG must do. Our energy-heavy economy fluctuates, and predicting the future is not easy. CREG has its formulae, its indicators and its methods. It does the best it can with the data it has.
Fine. But $300 million? Wyoming could do a lot with that.
Think back to the somber pronouncements from the Capitol that accompanied the hail of "nay" votes on program after program during the biennial budgeting process at the beginning of the year. To hear tell, the state was about to go broke, and only a heroic combination of torturous planning and dumb luck could keep the wolves from the fiscal door.
Following the lead of our top state officials, Wyoming citizens cinched up their belts another notch and prepared to ride out the budgetary storm. There was no other way, we were told again and again. Everyone's hands were tied. The numbers. Look at the numbers. The numbers don't lie.
Then, last month: Oh, by the way, we actually had $300 million more than we told everyone we had.
Gov. Matt Mead is right to call for a quick increase in highway spending based on the windfall. Other program managers around the state might see hope glimmering.
The problem is that new budgeting won't take place for another fiscal quarter, with any new spending plans not kicking in until next summer -- assuming they can be passed in Cheyenne, where many legislators relish the prospect of pinching every penny under any and all circumstances, the better to demonstrate that they are "looking out for the taxpayer's money" -- shielded, as usual, by a doomsday revenue forecast.
And, wouldn't you know it, 2014 is an election year.
On top of all that, CREG will be out with a new estimate by then. Want to bet what it will say?
On balance, it probably is better that the CREG always misses low instead of high. But so often has this happened that an examination of CREG methods vs. outcomes is in order.
Lacking that, at some point the governor and Legislature, in examining all their available budget resources and data, might want to factor in the nearly perfect -- as in perfectly wrong -- revenue forecasts from CREG and then budget accordingly. Take the CREG number and add 10 percent, or 5 percent, or 2 percent -- something.
We have years of experience with the CREG process now, and that experience ought to be a tool of at least some worth when evaluating the revenue estimate upon which so many important decisions are based.
Wyoming has been taken for a ride by inaccurate revenue forecasts too often. Shouldn't we be better at this by now? After all, the numbers don't lie.