Utah forcasts economic volatility quite well, according to the Pew Charitable Trusts' February 2014 report, “Managing Uncertainty,” that offers state policymakers strategies to smooth revenue volatility through sound fiscal budgeting.
The report examines the variability of revenue volatility — the extent to which economic and fiscal levels change year to year — across all 50 states between 1994 and 2012, and recommends the best ways to respond in times of uncertainty.
“The economic ups and downs of the past two decades illustrate how volatile state revenue can directly influence the timing and size of budget shortfalls and surpluses,” the report said.
In addition, the report outlined three ways in which revenues have fluctuated and added volatility over the past 20 years: the alignment between tax revenues and economic performance; state economic factors, including range of industries and population; and the state tax structure and policies inherent.
Utah Governor Gary R. Herbert published a post on his blog Thursday, saying the findings of the report “lauded” Utah for its ability to “manage uncertainty.”
Herbert also said that managing a state budget and correctly forecasting revenue is not always “smooth sailing.” The Pew report found that for policymakers to chart a “steady course” despite persistent financial uncertainty they need to regularly examine the particular causes of economic volatility, and it's “something Pew says Utah has done ‘more comprehensively’ than any other state.”
Utah requires a revenue volatility study every three years, and that has resulted in favorable changes to the state budget.
One of the authors of the report and manager of the state budget policy at Pew Charitable Trusts Brenna Erford told the Deseret News that “While Utah doesn’t do everything they can do, they do many things that are a good example to other states.”
Erford said the studies Utah conducts every three years are good practice as volatility changes over time. She was pleased that these studies have led to actual policy changes, and that they are becoming an invaluable tool to inform public policy. Additionally, the fact that in the 2013 legislative session Utah lawmakers added a requirement to track volatility in federal funds makes it immensely easier if these funds were to ever dry up.
However, Erford said there were some things Utah could improve.
She said Utah could “look at volatility to inform (policymakers) of when, how and how much is needed in reserve funds” to appropriately react to varying economic conditions. As well, she thought Utah could do a more sufficient job in stating very clearly what reserve funds are for so they can be allocated properly and efficiently.
Erford said the one thing to remember is “the economic upswing should be the opportunity to save for the inevitable downswing.”
Erik Raymond is experienced in national and international politics. He relocated from the Middle East where he was working on his second novel. He produces content for DeseretNews.com. You can reach him at:
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