Economists and budget analysts are cautiously optimistic about state revenues during the next few years, forecasting a modest growth of 2.9 percent this year and 4.9 percent next year.
They also confirmed that the state has raised enough money to wipe out last year’s $332 million shortfall. That would free up some cash this year that was originally allotted to solve that deficit.
But they also point to plenty of unknown factors that could produce wild swings in the state’s finances, such as uncertainties in the national economy and lawsuits.
A forecasting error of one percent during the next three years, for example, could swing revenue collections by as much as $500 million.
Actually, the forecasting difficulties led the Finance Advisory Committee to prepare two revenue scenarios for the next few years, one optimistic and the other a little bit more pessimistic.
In both cases, however, if any surplus now isn’t set aside to fill the anticipated drop in revenues in FY2014, when the one-cent sales tax increase expires, legislators could be looking at a shortfall anywhere between $600 million and $1.2 billion.
However, if policymakers save any surpluses during the next two years for FY14, the potential deficit shrinks to about $50 million.
“My position would be — don’t spend the excesses,” said Rep. John Kavanagh, chairman of the House Appropriations Committee. “Put them aside so that we have a decent ‘rainy day’ fund. So regardless of what the level of the cliff is, it won’t be as steep as it would (be) were we to return to the days of wine and roses and outrageous government growth.”