Remember all the “fun” last week as reporters and budget junkies tried to make heads or tails out of the June revenue forecast?
The revenue forecast showed a negative $12 million difference between the March and June forecasts for the two budgets yet the impact on the ending fund balance for 2011-13 showed a reduction of $575 million.
So how exactly does that math work?
Quite well when you account for the fact the Legislature didn’t assume any future revenue loss as a result of booking the tax amnesty funds in its budget balance sheet and then making adjustments for economic and non-economic activity since the March revenue forecast.
The real discrepancy between the June revenue forecast and the budget balance sheet from the day before was approximately $165 million. This is due to the Legislature not assuming what the potential revenue loss would be from net penalties and interest when booking the tax amnesty funds. Thus the Legislature booked the full amount without discounting the future loss penalties and interest.
The rest of the ending fund reduction from $738 million to $163 million for 2011-13 can be explained by both the economic and non-economic activity since the March revenue forecast.
So while the net difference between the two forecasts was only a negative $12 million, that actual economic revenue loss was much greater but was canceled out by legislative actions that added more revenue to available resources except for the before mentioned failure to account for the loss of net penalties and interest from the tax amnesty funds.
The bottom line for the budget as a result of the June revenue forecast is an $84 million deficit for 2009-11 and a scant $163 million reserve for 2011-13 (0.5% of spending).
Here is video of the somewhat confrontational Q&A between the forecast council members and reporters last week trying to make sense of the forecast:
One positive development as a result of last week’s chaos, budget staff realize they need to all get on the same page in how they account for state spending and revenue. This development is well worth the week of confusion it took to decipher what actually happened.
[Reprinted from the Washington Policy Center blog.]
[photo credit: flickr]