Indicators of revenues and expenditures of state and local governments: a measurement model approach

Government fiscal officers, practitioners and policy makers constantly deal with uncertainties in revenue and expenditure projections. These uncertainties create difficulties in resource allocation decisions when significant deviations occur. Clearly, certain variables account for these uncertainties and knowing them prior to revenue and expenditure planning may minimize potentials for errors. This study seeks to determine the identities and reliability of these variables through the application of a measurement model to aggregate data under the formulation that certain variables create uncertainties and affect significantly both revenues and expenditures of state and local governments. The results reveal that inflation, population, unemployment rate, time, government bond rate, and real long-term debts per capita are the most reliable indicators of both revenues and expenditures.