Lawmaker Wants to Get ‘Fake Revenue’ Out of His State’s Budgeting Process

An empty House of Representatives chamber in the Pennsylvania State Capitol building in Harrisburg, Pennsylvania.

An empty House of Representatives chamber in the Pennsylvania State Capitol building in Harrisburg, Pennsylvania. Shutterstock.

 

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Pennsylvania state Rep. Seth Grove is pushing for consensus budget forecasting.

CHICAGO — A Pennsylvania state lawmaker says he’d like to see the state end a habit of using unrealistic revenue estimates for budget planning.

“We’ve had some horrible practices in Pennsylvania,” state Rep. Seth Grove said as he discussed the budget making process during an event here on Monday. One of these practices, as he described it, involves spending legislation that factors in “fake revenue.”

Essentially, lawmakers approve spending that depends on revenues that are unlikely to materialize. “Plugging in some revenue that really never will come to fruition,” as Grove puts it.

“When you build non-realistic revenue on ever-increasing demands of spending, you create automatic deficits,” he added.

Grove, a Republican who hails from a district near York and has held office since 2009, has authored a bill that would introduce what’s known as “consensus forecasting” for Pennsylvania's revenues.

It would involve creating a 12-member Joint Revenue Estimation Committee. Members would include the state’s secretary of revenue, secretary of the budget, minority and majority leaders of the Senate and House Appropriations Committees, members of the public appointed by the governor and lawmakers and the director of the state’s Independent Fiscal Office.

Pennsylvania’s budget process currently incorporates three main revenue estimates that help to guide spending limits and targets and to determine if the state budget is balanced.

The first estimates in a fiscal cycle are in the governor’s budget proposal. Next, before signing appropriations legislation into law, the governor is required to sign off on an official revenue estimate prepared by the secretary of revenue and secretary of the budget. Then, about halfway through each budget cycle, there’s a “re-estimate” for revenues expected in that fiscal year.

Grove’s legislation would dilute the control the governor’s office now wields over such forecasts. It calls on the proposed committee to produce general fund revenue estimates twice each fiscal year. The estimates would need approval from 11 committee members in order to be adopted.

If the committee fails to adopt an estimate, then the governor and lawmakers would have to use a revenue forecast from the Independent Fiscal Office when approving general fund spending.

The bill also says that the committee has to report on the error rates of its revenue estimates, and that if these error rates exceed 3 percent, the panel has to revise its forecasting model.

Pennsylvania's General Assembly is controlled by the GOP. But Gov. Tom Wolf is a Democrat. Wolf in June signed an on-time spending package for the first time in his four-year term. Prior years have seen stalemates and bitter sparring over priorities and how to cover costs.

Pointing to past budget battles, Grove says with his bill he’s aiming to depoliticize the forecasting process. He told Route Fifty the legislation has low odds of getting enacted in the waning days of the current legislative session, but he sees it as a conversation starter.

The state lawmaker said he was inspired to pursue the bill after he came across a report by the Volcker Alliance that identifies consensus revenue forecasts as a best practice for states. The Alliance was one of the groups that organized Monday’s event, which featured discussions about state fiscal issues, including preparing for the next recession.

Report cards” that Volcker has released on state budgeting practices show that at least 29 states used consensus revenue forecasting in 2017. Some of these states, such as Connecticut and Louisiana, have nevertheless had serious financial difficulties in recent years.

Jonathan Ball, a legislative fiscal analyst in Utah, a state often recognized for budgeting best practices, was also on hand at the Chicago forum. When he ticked off steps state policymakers could take to make sound budgeting decisions, consensus forecasting was the first thing he mentioned. “Take the politics out of your targets,” he said.

Ball said this approach to forecasting is useful not only for revenue, but also for large expenditure categories like Medicaid, public education enrollment growth, and infrastructure.

“If you set targets in a nonpartisan group, and all agree on those, you’re less likely to be fighting about where you want to go,” he said, “and can pay attention to how you’re going to get there.”

Bill Lucia is a Senior Reporter for Government Executive's Route Fifty and is based in Washington, D.C.

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