The dynamics of state revenue forecasting in New York

This dissertation is a case study of state revenue forecasting in New York. While prior research has explored potential sources of forecast error across the states, this dissertation compares the forecasts prepared by different agencies in one state and investigates how different institutional arrangements influence revenue estimation and state budget process. Specifically, this dissertation consists of three interrelated studies that examine the technical and political aspects of executive and legislative forecasts in New York from FY1995--96 to FY2002--03.; The first study explained whether and why executive and legislative forecasts were different. The study found that there were differences among the forecasts produced by the Division of the Budget, the Senate Finance Committee-Majority, and the Assembly Ways and Means Committee-Majority. The three agencies forecasts, though, were close for most of the years, and the variance could be attributed to their different technical assessment and political calculations in the forecasting process.; The second study evaluated New York State revenue forecasting process against the professional standards established by some national organizations, and assessed the performance of each agency in terms of forecast accuracy and other criteria. The study found that New York State revenue estimation process conformed to the majority of the recommended practices, and the three agencies forecasts were accurate and good in terms of credibility, timeliness, and other criteria.; The third study investigated the effect of the coexistence of executive and legislative forecasts on New York State budget process. The findings, though, were not very encouraging: the experience of the consensus conference during the past nine years showed that the Executive and the Legislature had rarely reached agreement on revenue estimates through the consensus process, and the coexistence of executive and legislative forecasts was one important contributor to the State's chronically late budgets.; In conclusion, the three studies indicated that while the three forecasting agencies were technically competent, the political environment was dysfunctional and the coexistence of executive and legislative forecasts without an effective consensus process had a negative impact on the State's budget process.