University of Iowa to Update the State's Revenue Forecasting Model
The move came as a legislative committee opened a hearing into the state's budget forecasting system, with lawmakers complaining they were forced to repeatedly cut state spending because revenue forecasts were being revised downward.
"The reforms we're announcing today will ensure that we have the best information possible and that we bring some of the best and brightest business leaders to the table to map out a path to even better budgets in the future," Vilsack said.
Changes Vilsack announced included:
Expanding the Economic Forecasting Council, a panel of university economists that meets regularly to chart the direction of the state's economy. Vilsack wants to add representatives of the manufacturing, retail and accounting sectors.
Seeking ways to coordinate more closely with the Chicago Federal Reserve, which charts regional economic trends.
Calling for the Institute for Economic Research at the University of Iowa to update the state's revenue forecasting model.
Under state law, the Revenue Estimating Conference makes a projection of how much the state will collect in taxes, and lawmakers and the governor are required to use that as the base for the budget.
During the past year, the three-member conference reduced its forecast four times when revenues failed to meet projections.
One of the analysts is picked by the Legislature and one by the governor, and a third is an independent economist.
Vilsack replaced his pick at midyear, naming former banking superintendent Holmes Foster to the conference.
The Legislative Oversight Committee summoned the analysts Tuesday to explain why the projections were so persistently wrong.
"There is no way to be completely accurate," Foster said, warning that long-term projections are always risky in a volatile economy.
Mike Lipsman, who tracks revenues for the Department of Revenue, said no one could have predicted economic turmoil that resulted in the biggest budget crunch in 50 years.
"There are a lot of broken trends, a lot of broken patterns in the last year," Lipsman told lawmakers.
Rep. Jamie Van Fossen, R-Davenport, who runs the tax-writing House Ways and Means Committee, said Vilsack's proposals likely would meet little resistance in the Legislature, but conceded that economic forecasting is always going to come down to a guess.
"I don't know if there's anything we can forecast," Van Fossen said.
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