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State Revenue Forecasts and Political Acceptance: The Value of Consensus Forecasting in the Budget Process
Author(s) -
Mikesell John L.,
Ross Justin M.
Publication year - 2014
Publication title -
public administration review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.721
H-Index - 139
eISSN - 1540-6210
pISSN - 0033-3352
DOI - 10.1111/puar.12166
Subject(s) - consensus forecast , revenue , context (archaeology) , counterfactual thinking , state (computer science) , process (computing) , economics , politics , forecast error , budget process , recession , computer science , econometrics , macroeconomics , political science , finance , history , law , epistemology , algorithm , operating system , philosophy , archaeology
Concerns about political biases in state revenue forecasts, as well as insufficient evidence that complex forecasts outperform naive algorithms, have resulted in a nearly universal call for depoliticization of forecasting. This article discusses revenue forecasting in the broader context of the political budget process and highlights the importance of a forecast that is politically accepted—forecast accuracy is irrelevant if the budget process does not respect the forecast as a resource constraint. The authors provide a case illustration in Indiana by showing how the politicized process contributed to forecast acceptance in the state budget over several decades. They also present a counterfactual history of forecast errors that would have been produced by naive algorithms. In addition to showing that the Indiana process would have outperformed the naive approaches, the authors demonstrate that the path of naive forecast errors during recessions would be easily ignored by political actors .