STATE and federal revenue expectations have been shortchanged -
again - by the economy's continuing sluggishness.
"We are weakening our forecast" for federal revenue, says Mark
Desautels, an assistant in the office of intergovernmental affairs
at the Congressional Budget Office (CBO).
In August, the CBO added $16 billion to its deficit forecast for
fiscal year 1992, which began on Oct. 1. The increase took into
account anticipated lower tax collections caused by the recession.
This addition, along with an upward revision last January that
added $46 billion to the deficit, brings the total estimated
federal shortfall to $362 billion on the $1.5 trillion 1992 budget.
The latest adjustment still doesn't capture the impact of the
recession because the recovery has proceeded so much slower than
expected, Mr. Desautels says.
The CBO is now at work on the budget projections it must give
Congress on Jan. 23. The deficit will rise by at least $10 billion,
he says. Other analysts expect the deficit, already at a historic
high, to careen beyond $400 billion. That will be added to the
existing $2.7 trillion national debt.
Meanwhile, budgets in 25 states are running in the red, a survey
of legislative fiscal officers found last month. And that number
will increase when the National Conference of State Legislatures
repeats the survey this week, predicts Arturo Perez, a research
analyst with the NCSL.
"No one wants to own up to it until they have to," adds Brian
Roherty, director of the National Association of State Budget
Officers. Governors prefer not to discuss deficits until they draft
corrective measures, he says, but NASBO has unofficial word that
deficits are again widespread.
Budgets due in January
Just how serious the shortfalls are and how the affected states
propose to deal with them will be seen in January. That's when
governors of the 46 states present FY 1993 budgets to their
legislatures. (Alabama, Michigan, New York, and Texas are the four
states that do not operate on a July 1-June 30 fiscal year.) In
general, states must balance their budgets and make up for any
unexpected deficits this year.
The proposed state budgets will incorporate revenue forecasts
that are derived in part from economic projections by independent
sources like DRI/McGraw-Hill of Lexington, Mass. Unfortunately, the
company's econometric model is spitting out "pretty rotten"
numbers, says David Wyss, research director at DRI. …