Understand the impact of economic and policy changes on your tax revenue
State and local economies are constantly evolving with changes in economic structure, industry mix, demographics, public policy and unforeseen economic shocks ultimately shaping the uneven flow of government revenues. However, as regional economies become increasingly intertwined, events previously thought of as irrelevant or far-flung can now have direct local level impacts. Everything from new tariffs to changing consumer spending to new import patterns can influence local government revenue. For example, weakening economic growth in key Asian economies may weaken export demand for producers in your area. Fluctuating exchange rates and new tariffs may curtail ability for producers to meet demand or influence consumer spending.
Bottom line? Basic trend models that take a one-dimensional view of geographies without holistically incorporating local, national and global impacts and perspective are insufficient to reliably predicting government revenues.
As a strategic partner to state and local fiscal leaders, we work with our clients to quantify how economic and policy changes impact their jurisdictions’ capacity to plan, budget and deliver vital public services. We work closely with city, county, and state budget officers and legislative leaders to inform their revenue estimating and budget process by providing independent forecasts of tax and non-tax revenues that help fiscal process stakeholders achieve better rigor and consensus. We develop our custom tax revenue forecasting models by deriving statistical relationships between changes in the levels of individual tax receipts (e.g. personal and corporate income taxes, sales and use taxes, etc.) and trends in the key economic variables that generate the revenues.