Balanced Budgets and State Surpluses: The Politics of Budgeting in Illinois

Albritton, Robert B.; Dran, Ellen M.

doi:10.2307/975588

Cited by 5 publications

(2 citation statements)

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“…Another study that investigated forecasting in New Jersey found that forecasts favored underestimation bias with the means of the forecast errors being significantly different from zero (Gentry, 1989). A study on forecasting in Illinois also found a conservative bias (Albritton & Dran, 1987). Finally, a 1992 study found that the use of outside consultants resulted in an underestimation bias except when there political competition existed .…”

Section: Sources Of Bias In Revenue Forecastsmentioning

confidence: 98%

Consistent underestimation bias, the asymmetrical loss function, and homogeneous sources of bias in state revenue forecasts

Voorhees

2006

Journal of Public Budgeting, Accounting &Amp; Financial Management

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One component of revenue forecast error has been attributed to the phenomena of consistent underestimation bias due asymmetrical loss. Because underestimation of revenue forecast results in less loss to forecasters than overestimations, there appears to be a bias for forecasters to underestimate revenue forecasts. This paper confirms this hypothesis. Additionally, with the greater usage of national forecasting organizations that provide economic forecasts on which revenue forecasts are based, a secondary source of forecaster bias may be present in many state level forecasts. This hypothesis is supported by the increase in number of states using such organizations and a decrease in the standard deviation of the annual mean percentage state forecast error.

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Section: Sources Of Bias In Revenue Forecastsmentioning

confidence: 98%

Consistent underestimation bias, the asymmetrical loss function, and homogeneous sources of bias in state revenue forecasts

Voorhees

2006

Journal of Public Budgeting, Accounting &Amp; Financial Management

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“…Voorhees (2006) arrives at a somewhat smaller estimate of 1.5 percent for the period 1979 to 2002. A number of other studies fi nd evidence of systematic revenue underestimation at both the state and municipal levels (see Albritton and Dran 1987;Bretschneider, Bunch, and Gorr 1992;Feenberg et al 1989;Kong 2007;Vasche and Williams 1987).…”

Section: Evidence Of Systematic Revenue Underestimationmentioning

confidence: 99%

Budget Slack, Institutions, and Transparency

Rose

Smith

2011

Public Administration Review

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Economic theory suggests that it is optimal for governments to use precautionary saving as a countercyclical tool. However, the availability of surplus funds often triggers political pressure for tax cuts and spending increases. Mechanisms for alleviating that pressure include limiting the transparency of slack resources and limiting politicians' discretion to use slack resources for purposes other than stabilization. Th is article investigates the extent to which these two mechanisms are substitutes. In particular, the authors examine whether the widespread adoption of budget stabilization funds (BSFs) in the U.S. states over the past several decades has been accompanied by a decline in conservative revenue forecast bias. Using panel data from 47 states over a 22-year period, they fi nd that the adoption of a BSF reduces revenue underestimation by approximately two-thirds; however, the size of the eff ect depends in part on how much a state saves in the BSF and the rules governing BSF deposits and withdrawals. Th e results suggest that BSFs have the unintended eff ect of increasing fi scal transparency.

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1990

ASHE‐ERIC High. Edu. Rept.

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Balanced Budgets and State Surpluses: The Politics of Budgeting in Illinois

Cited by 5 publications

References 1 publication

Consistent underestimation bias, the asymmetrical loss function, and homogeneous sources of bias in state revenue forecasts

Consistent underestimation bias, the asymmetrical loss function, and homogeneous sources of bias in state revenue forecasts

Budget Slack, Institutions, and Transparency

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