by Sarah Curry
Director of Fiscal Policy Studies
In doing some research for JLF’s upcoming alternative to the Governor’s budget I stumbled upon some startling data. The research division responsible with forecasting revenue numbers to be used in budget negotiations got some number extremely wrong in the wake of the ‘Great Recession’. In November 2007 they were quoted, ” We are not concerned about a recession because the job market in North Carolina is relatively healthy. ” Wow, that was a wrong thought – guess they didn’t see record unemployment making North Carolina receive national headlines for highest unemployment in the Southeast. But that doesn’t top this quote from January 2008, “…a U.S. recession is not likely and N.C. will continue to fare better than the nation.”
Other data this research division relayed to legislators was to expect +4.6% growth of baseline General Fund Revenues for the 2008-2009 fiscal year. When the real numbers were available, the actual growth was ?11.2%. That’s a 15.8% difference in forecasted and actual growth calculations. Their reasoning of this, “Fiscal Research handles revenue forecast risk differently than many states. Our assessment of the possibility of recession, 30%, is lower than most.”
Looks like it’s time for a new method to determine how much money the State will have available during budget negotiations. The crystal ball of government is obviously broken and it’s time to fix the antiquated model to something that works.