At a hearing of the Joint Committee on Ways and Means yesterday (October 8, 2009), DOR Commissioner Navjeet Bal presented testimony on revenue collections for the first quarter of the current fiscal year, and data on projections for collections going forward.
At the conclusion of her testimony, Sen. Steven Brewer (D-Barre) asked the commissioner for DOR's estimate of the shortfall, to which Ms. Bal replied, "$400 million to $600 million."
Her estimate placed DOR's view of the revenue shortfall at the higher end of the shortfall ranges presented by other economists who testified.
Many revenue forecasters, including those presenting yesterday, see signs of recovery in the economy. But the difficult part for forecasters is predicting when those signs of recovery will begin to translate into improved revenue collections, since it is widely acknowledged that a lag exists between the state of the overall economy and the health of revenue collections.
For instance, as has been previously noted in this blog, while the national economy was showing signs of distress in late 2007, the fall off in revenue collections did not appear until September 2008. Now, while the economy looks like it is getting better, revenue collection has continued to fall. When will collections stabilize and start to improve is the question that vexes forecasters.
At this point, it is probably safer to plan for a steeper decline in revenues than may actually occur, since it is far easier to respond to a scenario of increasing revenues than it is to have to later this year cut the revenue forecast — and spending — again. The administration expects to announce its revised FY10 revenue estimate next week, with spending reductions to follow.