Eye On Boise

TUESDAY, JULY 12, 2011, 1:39 P.M.

Ferguson on revenue forecasting: ‘People’s lives and health are at stake’

Idaho's recently retired chief economist, Mike Ferguson, asked if he feels vindicated by today's news that fiscal year 2011 tax revenues actually exceeded his much-criticized forecast – rather than running $140 million lower than the forecast, as lawmakers and Gov. Butch Otter predicted – said, “I'm certainly glad that the revenues came in stronger than the numbers the budget was based on. I guess it's essentially about the last forecast I'll probably do, and it's nice to end on a positive note that way. I guess I don't really like to go there in terms of tit for tat and vindication.”

Ferguson said throughout his quarter-century-plus career as the state's chief economist, “I never … had any pressure to modify my forecasts for political reasons. I was always able to produce the best and most honest forecasts that I could produce.” He said, “The thing that I think changed, and that is worrisome, is that the governor and the Legislature have taken to essentially rejecting the work of professional economists that are hired and paid a salary to do that work. And if it was just some kind of abstract thing, it wouldn't really matter too much, but people's lives and health are at stake, people's futures are at stake, in terms of the quality of the education system, the way that people receive services relating to health care, disabilities.”

Ferguson originally forecast $2.43 billion in state tax revenue for fiscal year 2011, but the governor and Legislature instead chose to budget to a much lower estimate of $2.29 billion. In the end,  2011 revenues came in at $2.444 billion. Now, Ferguson noted, it's happened again for fiscal year 2012. “There's no bet – it didn't get the circus effect,” he said. “But the situation is every bit as grave in terms of the consequences for public services, because the year and a half ago that my forecast was rejected, that was the first time ever that a governor had rejected the professional forecast and expressly adopted something different. And that happened again this year. So basically, there's a pattern emerging.”

Lawmakers and the governor this year budgeted based on a prediction of 3 percent growth in state revenue in 2012 over 2011, rather than the 6.9 percent state economists forecast. “Well, that yields a number for fiscal year 2012 that is actually lower than came in in actuality for fiscal year '11,” Ferguson noted, reducing forecasted revenue for next year by $91.5 million to just $2.43 billion. Adding 3 percent to the actual 2011 collections of $2.444 billion would have meant revenues of $2.517 billion for next year. “If you apply the growth rate to $2.444 billion, you get a number for fiscal year 2012 that is considerably higher than the number that the Legislature used and the governor used, and that the school cuts are based on and that the Medicaid cuts are based on,” Ferguson said. Asked if that means Idaho is poised to make painful budget cuts in the coming year that it doesn't need to make, he said, “That would be a logical conclusion.”

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Betsy Z. Russell
Betsy Russell covers Idaho news from the state capitol in Boise and writes the Eye on Boise blog.

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