Yes, yesterday’s projections by the Council on Revenues were confusing. But reporting added to the confusion.
Here’s the lead from Governor Abercrombie’s press release:
The Council on Revenues (COR) today projected a lower economic forecast for the current and upcoming fiscal years.
But news reports all highlighted a projected increase in revenue growth from 11% to 14.%.
And it was all confusing enough readers could be excused for wondering whether it was good news or bad news.
Here’s the headline and subhead from KITV’s report.
Council On Revenues Projects 14.5% Economic Growth
Projection Based On Downgraded Growth 9.5%, Projected Revenues Increase 5%
So, let’s see…growth projected at 14.5%, but really only 9.5%? And despite 14.5% growth, “it all adds up to about $120 million less coming into the state.”
Okay. I was dizzy after that story.
The Star-Advertiser did modestly better.
The state Council on Revenues Tuesday issued its quarterly general fund forecast, predicting revenue growth of 14.5 percent in the current fiscal year that ends June 30, 2012, up from 11 percent predicted in July.
Revenue in the next fiscal year is expected to climb 6.5 percent, up from 6 percent in the previous forecast, with more modest growth forecast in succeeding years.
Increases are due primarily to temporary tax law changes that are expected to bring in more than $600 million over the next two fiscal years to help balance the budget and end the previous administration’s practice of delaying tax refunds.
Isn’t the first paragraph (14.5% revenue growth) contracted by the second paragraph (6.5% expected revenue growth)?
And the third paragraph refers to “increases,” but this doesn’t appear to refer to the increases in the prior paragraph.
The third graph also refers to “temporary tax law changes that are expected to bring in more than $600 million,” although the story goes on to finally clarify that this was the legislature’s estimate, which the Council on Revenues has rejected.
Pacfic Business News didn’t do any better.
The council raised the growth forecast for the current fiscal year, which began July 1, to 14.5 percent, an increase from the previous forecast of 11 percent, said council Chairman Richard F. Kahle Jr.
The council is forecasting growth for Fiscal Year 2013 to be at 6.5 percent, which was an increase from the previous forecast of 6 percent, he said.
However, the 3 percent growth forecast in FY 2014 and 5 percent for each of the three years after that, were downgrades from the previous forecasts of 6 percent for each of those years, he said.
Now I’m dizzy enough that I should sit down.
Civil Beat’s Nanea Kalani was the only one who presented it in an understandable fashion, immediately breaking down the 14.5% into its different components.
The Hawaii Council on Revenues upgraded its tax revenue forecast for the current fiscal year to 14.5 percent growth from 11 percent, despite sluggish job growth and “tremendous uncertainty” with the U.S. economy.
The group said its forecast is made up of three parts: pure economic growth; lingering effects from last year’s tax refund delay; and impacts from new tax laws that took effect in July.
The group decided Tuesday on an underlying economic growth forecast of 5.2 percent for the current fiscal year. That compares to a negative 0.9 percent growth for the fiscal year that ended June 30.
Another 4.3 percent of the growth forecast is attributed to the lingering effect of delaying tax refunds in July 2010.
The remaining 5 percent of the forecast is tied to tax law changes made by the Hawaii Legislature earlier this year.
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Putting aside the CoR’s dreadful track record with respect to forecasting, the bottom line of this efforts, to me , is that the major share of increases in Hawaii revenues will come largely from jiggering of tax matters. That’s not growth.
I’ve stopped reading these “Council on Revenues” stories. Typically they make overly optimistic predictions to support unfettered spending and then have “unexpected shortfalls.”
I expect the same will happen here.
it would be interesting, given how they compile these numbers, for them to look back and see which economist has the “best”/most accurate track record. and then maybe weight their numbers to that person/model. if anything to see if they can improve their crystal ball, given all the rides on these numbers.
on a similar note for you open gov’t types, do they provide these data so we can look under the hood of their aggregate model and see which economists is really saying what?
While I share some of Richard’s thoughts, today’s hybrid edition delivered to Hilo was clear as mud. I was never a financial expert but a child could do better.
Andrew Perreira at KHON did what I thought was a decent job of making clear that the revenue increases were due to tax increases, and that without those increases, forecasted tax revenue would be dropping.
Enough with the character assassination, Kalaheo.
This blog doesn’t need any of that.
Paul Brewbaker, Carl Bonham, Jack Suyderhoud, and the other members of the Council of Revenues are professionals who do their best to read the tea leaves and provide their collective best estimate of what the future will bring for our state’s economy and government revenues.
All of those folks will talk endlessly, if asked, about their models, the assumptions that they made, and the sensitivity of the results to factors that could make them not occur.
They do not cook the books to support “unfettered spending”
Robert,
A starting place for looking under the hood is the Council on Revenues website
http://state.hi.us/tax/a9_1cor.htm
Brewbaker shows his chops in this presentation
http://hawaii.gov/labor/wdc/Brewbaker%20Presentation.pdf
Bonham is a principal in the projections put together by the UH Economic Research Office
see http://www.uhero.hawaii.edu/
Ian, I can see your point with regard to the Governor’s PR and the KITV blurb with which you started, but I understand the rest of it, I think.
Regarding the Star-Advertiser report, you asked “Isn’t the first paragraph (14.5% revenue growth) contracted by the second paragraph (6.5% expected revenue growth)?” The answer to your question is “no” because the first paragraph refers to the remainder of FY 2011-2012 and the second to FY 2012-2013. This is consistent with what PBN wrote. The Civil Beat account broke the 14.5% growth forecast for the remainder of FY 2011-2012 into its three constituent elements.
So, it wasn’t ALL bad. Still, not very encouraging that the Governor appears to have gotten it wrong. And KITV was no better; I went to the full story and I have NO idea what they’re talking about.