OLS Pegs Revenue Shortfall at $526 Million as Final Stage of Budget Forecasting Process Begins
For the 9th consecutive year, the Office of Legislative Services (OLS) is projecting less revenue than the administration in its initial presentation to the Senate and Assembly budget committees. This year OLS is projecting that revenues could be a total of $526 million below the administration’s revised projections for this fiscal year and initial projections for the next fiscal year, which begins July 1.
While the overall difference in estimates is less than 1 percent (0.78 percent) of the overall budget, and the lowest amount and percentage in the last three years, any potential revenue shortfall will impact the budget process.
These initial estimates are only the first step in the process for developing the amount of revenue that will be available for the upcoming budget. In May, the administration and OLS will both return to the budget committees to provide revised projections for the current and upcoming year. These estimates benefit from at least two months of more data about economic trends and tax collections, including, most importantly, final income tax collections from April.
This administration has generally made May adjustments to current-year revenue projections but usually not to next year’s projections. In addition, the gap between OLS and the administration usually shrinks in May, especially for the current year, since ten months of actual collections are in the bank and both parties are only projecting two months of additional collections.
It is these May revenue estimates that will form the basis for the revenue projections that will be contained in the final budget and the magnitude of the potential revenue shortfall (or potential revenue increase if there is a positive “April surprise” in the income tax).
If past decisions are any predictor of future behavior, the legislature will use whichever revenue estimates are higher, as it allows legislators much more flexibility on the final spending decisions in the budget.
For now, this budget season looks a lot like last year, with no major budget battles and only minor adjustments with limited policy implications in the final budget. This will be bad news for the 170 individuals and groups that testified at three public hearings, most of whom sought increases in spending for their favored interests.
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