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The Palgrave Handbook of Government Budget Forecasting Edited by Daniel Williams · Thad Calabrese Palgrave Studies in Public Debt, Spending, and Revenue Series Editor Gerald J. Miller Arizona State University Pheonix, AZ, USA Palgrave Studies in Public Debt, Spending, and Revenue is a broad-ranging and interdisciplinary series dedicated to studying the latest issues, trends, and developments influencing a government’s role in its economy. The series of studies covers not only the economy’s impact on government size and scope but also the effects of governmental policies on efficient allocation of resources, distribution of income, and macroeconomic stabilization. The series is also dedicated to a fuller understanding of the policies and policy tools through which government leaders develop this role, from fiscal policy to budget and various incentives that provoke particular behaviors. The subjects covered resonate in university economics, public affairs, public policy, public management, and governance schools and departments. This series’ primary attention is on North America (especially the United States and Canada) and related comparative policy research. National and sub-national (including state, pro- vincial, regional, metropolitan, and local) topics are included. At the same time, the series tracks comparable developments in China and the European Union. The series focuses on fiscal systems as influenced by the public sector and the economy, in addition to contemporary themes relating to fiscal policy, taxation, public debt, education finance, fiscal federalism, and the effects such policy designs as those found in antipoverty programs, healthcare, agri- culture, and defense have on fiscal systems. Books in this series focus on research and compelling professional practices addressing public policy issues that create varying degrees of inevitability in the behavior of individuals, tax- payers, organizations, capital markets, and financial systems. More information about this series at http://www.palgrave.com/gp/series/14595 Daniel Williams • Thad Calabrese Editors The Palgrave Handbook of Government Budget Forecasting Editors Daniel Williams Thad Calabrese Austin W. Marxe School of Public Robert F. Wagner Graduate School and International Affairs of Public Service Baruch College New York University New York, NY, USA New York, NY, USA ISSN 2662-5148 ISSN 2662-5156 (electronic) Palgrave Studies in Public Debt, Spending, and Revenue ISBN 978-3-030-18194-9 ISBN 978-3-030-18195-6 (eBook) https://doi.org/10.1007/978-3-030-18195-6 © The Editor(s) (if applicable) and The Author(s) 2019 This work is subject to copyright. All rights are solely and exclusively licensed by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. The publisher, the authors and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication. Neither the publisher nor the authors or the editors give a warranty, express or implied, with respect to the material contained herein or for any errors or omissions that may have been made. The publisher remains neutral with regard to jurisdictional claims in published maps and institutional affiliations. Cover illustration: Carol and Mike Werner / Alamy Stock Photo Cover design by eStudio Calamar This Palgrave Macmillan imprint is published by the registered company Springer Nature Switzerland AG. The registered company address is: Gewerbestrasse 11, 6330 Cham, Switzerland Contents 1 Introduction 1 Daniel Williams and Thad Calabrese Part I International and National 9 2 Macroeconomic Theory and Forecasting 11 Gerald D. Cohen 3 Evaluating Government Budget Forecasts 37 Neil R. Ericsson and Andrew B. Martinez 4 Budget Preparation and Forecasting in the Federal Republic of Germany 71 Dörte Busch and Wolfgang Strehl 5 Revenue Forecasting in Low-Income and Developing Countries: Biases and Potential Remedies 89 Marco Cangiano and Rahul Pathak 6 The Reliability of Long-Run Budget Projections 115 Rudolph Penner 7 CBO Updated Forecasts: Do a Few Months Matter? 133 James W. Douglas and Ringa Raudla v vi Contents Part II State and Local 153 8 State Revenue Forecasting Practices: Accuracy, Transparency, and Political Participation 155 Emily Franklin, Carolyn Bourdeaux, and Alex Hathaway 9 Forecasting Post-Crisis Virginia Tax Revenue 177 Melissa McShea and Joseph Cordes 10 Bias Associated with Centrally Budgeted Expenditure Forecasts 201 Thad Calabrese and Daniel Williams 11 Excessive Revenue Underforecasting: Evidence and Implications from New York City’s Property Tax 217 Geoffrey Propheter 12 Small Local Government Revenue Forecasting 241 Vincent Reitano 13 Current Midyear Municipal Budget Forecast Accuracy 257 Daniel Williams and Thad Calabrese Part III Subject Matter Specialties 273 14 Using Fiscal Indicator Systems to Predict Municipal Bankruptcies 275 Jonathan B. Justice, Marc Fudge, Helisse Levine, David D. Bird, and Muhammad Naveed Iftikhar 15 School District Enrollment Projections and Budget Forecasting 303 Peter Jones, Cole Rakow, and Vincent Reitano 16 Budget Uncertainty and the Quality of Nonprofit Charter School Enrollment Projections 325 Todd L. Ely Contents vii 17 Forecasting for Prisons and Jails 345 Bruce D. McDonald III, J. Winn Decker, and Matthew James Hunt 18 Government and Nonprofit Personnel Forecasting 361 Vincent Reitano 19 Forecast Bias and Capital Reserves Accumulation 377 Vincent Reitano, Peter Jones, Nathan Barrett, and Jacob Fowles 20 Consensus Forecasting 397 J. Winn Decker and Bruce D. McDonald III 21 Ensemble Forecasting 413 Kenneth A. Kriz Part IV Conclusion 427 22 Conclusion 429 Daniel Williams and Thad Calabrese Index 437 Notes on Contributors Nathan Barrett, PhD, is an associate director and senior research fellow at the Education Research Alliance for New Orleans at Tulane University, USA. He researches teacher policies, equity in education, education reform, and student discipline. His recent publications have appeared in Educational Researcher, American Journal of Education, and Economics of Education Review. David D. Bird, MBA, JD, is a PhD student at the University of Delaware, USA, with expertise in public administration, public finance, public law, public policy, and qualitative and multi-method research. Carolyn Bourdeaux, PhD, of the Andrew Young School of Policy Studies at Georgia State University, USA, studies state budget, tax, transportation, and environmental policy, as well as land use, economic development, education finance, and administrative reform. Her recent research includes cutback budgeting, tax reform, intergovernmental fiscal relations, and legislative budget processes and decision-making. Dörte Busch of the Berlin School of Economics and Law’s recent work includes evaluation of the law for the promotion and supervision of children in day care and day care of the state of Saxony-Anhalt, and project inventory of the procedural and administrative implementation of the budget for work. Thad Calabrese, PhD, of the Wagner School at New York University, USA, studies public and nonprofit financial management. His research has appeared in the Journal of Accounting and Public Policy, Public Administration Review, Nonprofit and Voluntary Sector Quarterly, Public Budgeting and Finance, Nonprofit Management & Leadership, and National Tax Journal, among others. ix x Notes on Contributors Marco Cangiano, MSc, a former senior staff at the International Monetary Fund (IMF) is a senior research associate with the London-based Overseas Development Institute (ODI) and a senior technical advisor with the Better Than Cash Alliance, consulting for, among others, the IMF, the EC, and the Italian Ministry for the Economy and Finance. Gerald D. Cohen, PhD, is the former Deputy Assistant Secretary for Macroeconomic Analysis at the U.S. Department of Treasury. He was respon- sible for monitoring, analyzing, and briefing senior staff on U.S. macroeconomic developments. He is a co-author of Political Cycles and the Macroeconomy with Alberto Alesina and Nouriel Roubini. Joseph Cordes, PhD, is the Associate Director of the School of Public Policy and Public Administration at the George Washington University Regulatory Studies Center. He is the co-editor of The Encyclopedia of Taxation and Tax Policy, and co-editor of Nonprofits and Business. He has authored or co- authored over 40 scholarly articles and contributed over 20 chapters in edited volumes. J. Winn Decker, MEd, is a PhD student in Public Administration at North Carolina State University, USA, and has served as an intern for the US Senate Committee on the Budget. James W. Douglas, PhD, of the Department of Political Science and Public Administration at the University of North Carolina at Charlotte, USA, researches budgeting and forecasting. His recent research has appeared in Public Organization Review, Policy Studies Journal, Public Administration Review, the Journal of Policy Analysis and Management, and Public Budgeting & Finance. Todd L. Ely, PhD, of the University of Colorado Denver’s School of Public Affairs researches the financing of state and local public services, education finance, and public and nonprofit financial management. He has co-authored Essentials of Public Service, an introductory public administration textbook. Neil R. Ericsson, PhD, is a staff economist in the Division of International Finance, Board of Governors of the Federal Reserve System, Professor of Economics at The George Washington University, and an adjunct professor at the Paul H. Nitze School of Advanced International Studies (SAIS). Jacob Fowles, PhD, of the University of Kansas School of Public Affairs and Administration, USA, researches secondary and tertiary education finance and policy. His research has appeared in Public Administration Review, the