1. FORECASTING STATE GENERAL FUND REVENUE IN INDIANA ASSOCIATION OF UNIVERSITY BUSINESS AND ECONOMIC RESEARCH CONFERENCE INDIANAPOLIS, INDIANA OCTOBER 10, 2011

2. Began in the early 1970s in response to competing revenue forecasts impairing the budgeting process. It is a consensus process directly involving the Executive and Legislative branches. The process depends on an agreement to agree and is not statutory.

3. 3 Indiana Revenue Forecast Two Step Process Revenue Forecast Revenue Forecast Statistical Equations (Captures the relationships between economic activity and tax revenues) Legislative Services Agency Diane Powers Dr. Jim Landers Dr. Larry DeBoer Diana Agidi IHS Global Insight Economic Variables Revenue Forecast Technical Committee MembersAdvisors David DukesJohn Grew David Reynolds William Sheldrake Erik Gonzalez Susan Preble Bob Lain Dr. John Mikesell Budget Agency Bob Lain Randhir Jha Shannon Bibby Economic Forecast

4. In December of each even-numbered year a forecast through the following biennium is released. Monthly reports on actual collections vs. forecast targets are released. In April of each odd-numbered year an update to the previous December forecast is released. Monthly reports on actual collections vs. forecast targets are released. In December of each odd-numbered year an update to the previous forecast is released.

5. Begin with error analysis of the previous forecast. Review and quantify administrative changes, recently enacted statutes, and legal rulings that will impact revenues. Review and decide on the statistical equations that best relate economic conditions to revenues. Plug in the economic forecast from IHS Global Insight and forecast smaller revenue sources based on trends. Present the forecast to the State Budget Committee.

6. STRENGTHS LongevityTechnically rigorous, but not a purely academic exercise.Independent, but aware of the realities.

7. CHALLENGES Separating the noise from the facts when considering actual revenue collections. Too much importance can be given to the monthly targets.The task is growing more and more complex.Being sensitive to the realities without letting them dictate the results.