Revenue Estimate Performance
August 12, 2016 | Revenue Estimates
This document examines the performance of General Fund revenue estimates made by the Independent Fiscal Office (IFO) since its inception (September 2011) through June 2016. That time period covers four complete budget cycles. For each fiscal year, this document compares the IFO’s revenue estimates to actual collections for three different estimates that are made at specific times during the fiscal year, as required by the statute that created the office. The three revenue estimates are as follows:
- Official Estimate This revenue estimate occurs in June of the preceding fiscal year. For example, the IFO official estimate for FY 2015-16 was released on June 15, 2015. When appropriate, the estimate is adjusted for any statutory changes that affect General Fund revenues that were not reflected in the June release. The estimate is released prior to the receipt of all revenues for the fiscal year that precedes the official estimate.
- Mid-Year Update This revenue estimate occurs in January of the same fiscal year. For example, the mid-year update for FY 2015-16 was released on January 26, 2016. The update is based on a revised economic forecast and revenue collections for the first half of the fiscal year.
- May Update This revenue estimate occurs during the first week in May of the same fiscal year. The estimate reflects known collections for the first ten months of the fiscal year. A preliminary estimate for the following fiscal year is also released.
The text that follows discusses the performance of IFO General Fund revenue estimates for the past four fiscal years, and describes the factors that contributed to forecast errors. As a general rule of thumb, a total forecast error that is within one percentage point of actual revenue collections is considered a solid forecast. For Pennsylvania, a one percent error would imply a roughly $300 million difference from actual revenues.
 Although the office also makes revenue projections each November as part of its five-year outlook, those estimates are not included in this document because they are not materially different than the official estimate released in the prior June.