States’ Revenue Estimating
Cracks in the Crystal Ball
- Errors in revenue estimates have worsened progressively during the fiscal crises that have followed the past three economic downturns. Between 1990 and 1992, a quarter of the states had errors of 5 percent or more. In 2001 and 2003, nearly half the states were off by 5 percent or more. In 2009, almost three in four states missed the mark by 5 percent or more.
- 2009, the first full fiscal year of the Great Recession, ended with the largest overestimates in revenue forecasting of any year studied. This translated to a roughly $50 billion shortfall that states had to cover.
- Unique among past downturns, the Great Recession was also notable for major declines in all three major state taxes.