Legisplaining: Revenue Estimates

davidwicaiBlog, Legislature

Every March, the Utah Legislature approves a budget for the upcoming fiscal year that begins nearly four months later. To do so, legislators must rely on economic forecasts.

These forecasts, called revenue estimates, are updated every month (except July and August) to provide state leaders a current snapshot of the state’s economy. Throughout the year, they can help state leaders identify and, if needed, address economic problems before they get out of control. As the general session approaches each year, the estimates drive the budget process.

Like nearly half the states, Utah’s revenue estimates are a “consensus” forecast put together jointly between legislative fiscal analysts and the Governor’s Office of Management and Budget. That consensus number is important because it means everybody on Capitol Hill use the same numbers when preparing their budget proposals.

Utah, in fact, is one of only 15 states that uses all of the budgeting best practices recommended by the nonpartisan Center on Budget and Priorities. Besides the consensus revenues, best practices include a public and transparent forecasting process and the use of outside experts.

Revenue estimates will show either a surplus or deficit for two pots of money: the education and general funds. All of the income tax goes into the education fund, while all other revenues (such as sales tax and fees) goes into the general fund. The general fund is the primary source of funding for our department.

Both of those funds will show estimates in terms of one-time and ongoing revenues.

One-time revenue is the updated surplus or deficit for the current fiscal year, which cannot be spent on anything that will require money beyond the current year. The ongoing revenues are the forecasted surpluses or deficits that can be used for programs that will carry an annual cost.

For example, construction costs for a new building are one-time, while the operations and maintenence for that building are ongoing.