State’s financial seers have thankless job

By Bobby Harrison/NEMS Daily Journal

JACKSON – The five experts who predict state revenue collections have a thankless job.
They are never right.
And they’re the first to admit it.
A group known informally as the revenue estimating committee is supposed to project how much money the state will bring in during a 12-month period, then make its recommendations to the governor and legislators. In turn, their projection is used to build the state budget each year.
For the first six months of the current fiscal year, the committee is off the mark by about 8 percent. Revenue collections are $181.2 million below the estimate. It was the same story last year, when revenue was $380 million below the estimate.
The experts also have been wrong in the other direction. Four years ago revenue was $318 million above the estimate.
But they face the most criticism when revenue falls before their projection – most likely because in those times legislators and the governor are placed in a difficult budget-cutting situation.
The Legislature and Gov. Haley Barbour are struggling now with a budget shortfall caused by lower-than-projected revenue, and the experts have come under increased scrutiny.
“How can I have any confidence in whatever estimate the committee gives me?” Senate Appropriations Committee Chair Alan Nunnelee, R-Tupelo, asked during a recent meeting with two of the revenue estimators, Treasurer Tate Reeves and state Economist Phil Pepper.
“We provide our best estimate,” Pepper replied.
“We do the best job we can and we miss it every year.”
Reeves agreed: “We are always going to be wrong.”
That, Reeves said, is the reason the law requires the Legislature to budget only 98 percent of the projected revenue. The 2 percent cushion leaves the state with more than $90 million in case revenue collections do not meet projections.
But in recent years, the Legislature and Barbour have agreed to appropriate the full 100 percent. That choice, they have argued, is better than leaving agencies, especially education, not fully funded during revenue slowdowns.
But without the cushion this year, massive budget cuts have been necessary.
Both Pepper and Reeves have pointed out that in recent years, more often than not, the revenue has exceeded projections. For instance, for fiscal years 2004 through 2008, revenue came in above the projection made by the estimating committee.
But in fiscal year 2009 the national economy sagged, and so did state revenue collections.

Committee makeup
The revenue estimating committee consists of Pepper, Reeves, state Fiscal Officer Kevin Upchurch, Robert Sumrall of the Legislative Budget Committee staff and Tax Commission Chair Ed Morgan.
Reeves is a statewide elected official. Upchurch and Morgan are appointees of Barbour. Pepper works for the state College Board, and Sumrall works for the Legislative Budget Committee, which includes Lt. Gov. Phil Bryant, Speaker Billy McCoy and 12 other legislators.
The revenue estimating committee is in fact an informal group. Bryant said it is not even stipulated in state law. But the group meets – behind closed doors – at the behest of the Legislative Budget Committee to develop a revenue projection.
Nunnelee said he is filing legislation to require the estimating group to take a vote that will be recorded.
“When you ask individual members if they voted for the estimate, they say it is a consensus of the group,” Nunnelee said. “What happens is everybody’s business becomes nobody’s business. They need to take a recorded vote and be accountable for what the vote is.”
Asked if the group should meet in public, Nunnelee said he would not oppose that.
The Legislature and the governor are not bound by the recommendation of the experts, but most often accept it.
Earlier this decade, then-Gov. Ronnie Musgrove refused the recommendation, saying it was too optimistic. In the end, the Legislature appropriated based on that recommendation.
Musgrove vetoed the budget bills, but the Legislature quickly overrode him. Later that year, Musgrove was forced to make budget cuts when revenue came in lower than projected, as he predicted it would.
But Barbour and the current members of the Budget Committee have yet to reject any recommendation of the estimating committee.

Contact Bobby Harrison at (601) 353-3119 or bobby.harrison@djournal.com.