Rep. Grove bills would reform revenue estimate process, provide more information to IFO

Rep. Grove bills would reform revenue estimate process, provide more information to IFO

Author: Jason Gottesman/Friday, January 12, 2018/Categories: News and Views

Seeking to take out what he sees as the politics of forecasting future revenue, Rep. Seth Grove (R-York) recently introduced two bills that would reform how the Commonwealth arrives at its annual revenue estimate and what information the Independent Fiscal Office is able to see when determining its revenue forecasts and provides independent information to the legislature about state finances.

 

According to Rep. Grove, the bills, House Bill 2011 and House Bill 2013, are measures aimed at “a better budget process and budget governance.”

 

Beginning with House Bill 2013, the proposal put forward by Rep. Grove to determine how the state makes its annual revenue estimates would be put to a commission comprised of twelve different groups representing the Department of Revenue, the Office of the Budget, the Independent Fiscal Office, the four House and Senate Appropriations Committee chairmen, and five members of the public appointed by the governor and four legislative leaders.

 

Speaking to The PLS Reporter, Rep. Grove aruged it is important to try to develop a means to take the politics out of revenue forecasting since, he feels, the development of a certified revenue estimate following the completion of the budget process leads governors from across the political spectrum to align the estimate with the budget, rather than aligning the budget with actual revenues.

 

“I have never trusted a final revenue estimate to date,” he said. “I view them as a political decision rather than an actual estimate and we should have some trust in the numbers.”

Pointing to recent history, Rep. Grove noted a certified revenue estimate following the FY 2016-2017 budget left Pennsylvania facing a $1.5 billion deficit due to the incorrect forecasting of state revenues.

"Right now, I think you can make the argument that revenue forecasts are done to meet the end objectives. The Department of Revenue will certify a number, but how accurate is that number," he wondered. "It’s been like that in Pennsylvania for a long time. At the end of the day, they’ll come back and say we have our spend number and then try to get to the revenue number to get to that amount."

The legislation requires the joint revenue estimates to be approved by 11 of the members—something Rep. Grove said ensures minority party interests are protected—and the must be issued twice a year; one on May 15 and the other on December 16.

Rep. Grove said he believes having a May estimate will help budget crafters get to a well-informed product in advance of the traditional June 30th budget deadline.

"It would force that spend number discussion earlier, rather than later and get everyone on the same page," he said.

Should the parties fail to reach a consensus on a revenue estimate, the revenue estimate developed by the Independent Fiscal Office will be the official revenue estimate.

According to the results of a 2011 study from the Rockefeller Institute, about half the states in the country develop their revenue estimates along a “consensus model” like the one offered by Rep. Grove, but no correlation could be drawn between using consensus revenue forecasting and associated accuracy of a revenue estimate.

Currently, the Department of Revenue along with the Office of the Budget is required to develop and certify the revenue estimate following the completion of each budget.

Revenue spokesperson Jeffrey Johnson said that the department is currently reviewing the Grove legislation, a process not yet completed.

Turning to House Bill 2011, the legislation requires that the Independent Fiscal Office be granted access to the Integrated Central System, which is used by the Office of the Budget in discerning budget information and how revenues are coming in to the Commonwealth’s coffers.

Currently, the Independent Fiscal Office only has access to the same information as the House and Senate Appropriations Committees.

A flash-point for Rep. Grove on the issue, he said, were recent claims by Budget Secretary Randy Albright that the IFO’s projection of a nearly $1 billion deficit at the end of FY 2018-2019 was not accurate.

"The trigger point is the budget office saying [the IFO] is wrong, but the budget office is supposed to be supplying information to the IFO," he said. "If they are wrong, it’s because the budget office is not giving the information to begin with."

He also noted that when House Republicans were floating their concept to close out the $1.5 billion deficit from FY 2016-2017 with transfers from special funds, the IFO said they did not have access to the appropriate depth of information to provide a detailed summary of what the status was with the funds in question.

"If we are supposed to have an entity to give us independent information, they should have the same information as the budget office," he said. "The budget office is clearly holding information the IFO is supposed to have."

Speaking to the bills, Gov. Tom Wolf’s press secretary JJ Abbott noted revenue estimates are already traditionally reached by consensus.

"Revenue estimates are typically agreed to between the Governor, House and Senate," he said 

"The professionals at Revenue do extensive work and modeling to make estimates, and have a track record of doing so in a non-partisan and effective manner. Additionally, they work closely with the Budget Office and IFO. The insinuation that there is something afoul with the process is mere politics."

Currently, both bills have been referred to committee, but have yet to be scheduled for a vote. House Bill 2011 has 16 cosponsors, while House Bill 2013 has eight. All co-sponsorships are from Republican House members.

Speaking to 2018 legislative priorities, House Majority Leader Dave Reed (R-Indiana) indicated that budget reform bills broadly will remain on the radar of the House Republican caucus.

“We hope to work on them, to get those bills to the governor’s desk,” he said.

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