State Budget Projections Becoming More Volatile; South Dakota More Predictable

A new Rockefeller/Pew report finds that states are having a harder time getting their revenue projections right:

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The last three recessions have boggled state revenue predictions, as have the last three economic recoveries. In FY2011, 2012, and 2013, the state projections were short by more than 2%.

South Dakota’s performance this year has been a little better than that national average: this week’s new revenue projections for the current fiscal year are only 1.22% below the amounts adopted by the Legislature one year ago. Add one-time money, and the state ends up with 1.28% ($17.8 million) more than it originally budgeted.

South Dakota’s budget volatility may be less than that in other states due to the absence of a corporate income tax in our fair state:

Nowhere is volatility greater than with corporate income tax revenue. The data showed that the median forecasting error rate over the 27 years was 2.8 percent for the corporate income tax compared with 1.8 percent for the personal income tax and 0.3 percent for the sales tax. Of the three, corporate taxes make up the smallest share of state revenue; personal income taxes make up the largest [“Managing Volatile Tax Collections in State Revenue Forecasts,” Rockefeller Institute for Government and Pew Charitable Trusts, March 2015].

That doesn’t mean a corporate income tax is bad; it just means your state government has to maintain sensible budget reserves keyed to economic data.


3 Responses to State Budget Projections Becoming More Volatile; South Dakota More Predictable

  1. Kim Conlin

    This means we lowly state employees get our raise cut. And no I AM NOT an employee who makes over $30,000. I am not a bureaucrat, but a simple Mental Health Assistant who takes care of those who cannot take care of themselves at HSC. My colleagues are those who do heroic work all three shifts, so no bashing of state employees, please!

  2. mike from iowa

    Good luck,Kim Conlin. iowa is looking to close 2 mental health facilities this year. Apparently,with a stroke of a pen,Guv Terry Braindead will magically cure everyone’s needs for mental health care. :)

  3. When I worked in NW Iowa as a Paramedic, it was always dreaded when an individual came in that needed a court committal. The ED physician would have to carve out an hour or so that they could play phone tag to try and find a bed somewhere in the state of Iowa. Then, if they found a bed, either a deputy or an ambulance crew would be tied up for at least 3 hours driving across the state to drop them off. Now we can add even more time on to that throughout the state (including overtime) in order to end up driving an individual even farther to find an open bed.
    Mental health care at its best.