Local government revenue forecasting: Using regression and econometric revenue forecasting in a medium-sized city

Local government revenue forecasting: Using regression and econometric revenue forecasting in a medium-sized city

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Article ID: iaor1996717
Country: United States
Volume: 7
Issue: 3
Start Page Number: 315
End Page Number: 335
Publication Date: Jul 1995
Journal: Public Budgeting and Financial Management
Authors:
Keywords: statistics: regression, time series & forecasting methods, management, planning, government, forecasting: applications, economics, urban affairs
Abstract:

Fiscal stress has forced local governments to pay increasing attention to revneue trends and has increased the importance of financial forecasting in local government. After reviewing the role of revenue forecasting in financial planning and discussing the use of regression and econometric analysis in revenue forecasting, this article applies this technique to forecast several key revenue components in a medium-sized city. Three general conclusions may be drawn: (1) systematic revenue forecasting and long-range planning are necessities, not luxuries, (2) risk averison to ‘technical’ revenue forecasting can be overcome, and (3) the implementation of a systematic revenue forecasting system does not require a battery of ‘rocket scientists’. As municipal revenue bases come to rely less on relatively stable property taxes and more on less stable sources such as sales taxes, fees, and charges, the use of a regression and econometric based model should prove increasingly fruitful.

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