Experts Know How Fragile Budget Figures Are

John Wildermuth
Journalist and Political Commentator

Here’s the question that haunts everyone putting together a budget:

What’s the difference between an estimate and a guess?

The answer, all too often, is “not much.”

The experts know that, which is why their prognostications often overflow with weasel words, such as “likely,” “barring,” “assumes,” “generally,” “based on limited data” and the like.

All those words, for example, are taken from the first few pages of the recent Legislative Analyst’s Office report on Gov. Jerry Brown’s May budget revise.

The definition of a true expert is someone who knows just how much he doesn’t know. And the people who deal with budget numbers every day know exactly how volatile those figures are and aren’t shy about saying so.

Legislative Analyst Mac Taylor, for example, said that the governor’s view of the economy and anticipated state revenues “seems too pessimistic” and forecast revenues $3.2 billion higher than Brown’s numbers.

But Taylor and his green-eyeshade brigade know that budget estimates are just that. What seems like a conservative figure in May can turn out to be a product of wild-eyed optimism a year later.

“No matter which revenue assumptions are used in the budget,” Taylor said in the May 17 report, “there is a risk that revenues will end up considerably lower than projected. (Obviously, there is a greater risk of this if the state uses our office’s higher revenue projections for the 2013-14 budget plan.)”

But in what often resembles a high-stakes game of “Telephone,” the farther you get from the folks who actually know how tenuous their assumptions are, the more likely people are to take those same numbers as gospel truth.

The caveats disappear as people – i.e., legislators – see exactly what they want to see. And by the time you get to the various interest groups with their eyes focused on a chunk of state money, every estimate seems a conservative one.

Legislators shouldn’t get all the blame for the fun with numbers game. Brown’s Department of Finance moved past conservative all the way to downright dour with their May revise take on the state’s fiscal future, which, not so coincidentally, happened to fit their boss’ plan to keep any surplus dollars away from the grasping hands of Democratic legislators.

But at least the state figures are based on real numbers, albeit interpreted differently. And when the actual, hard money figures come in next year, people can see whether the governor or the LAO had it right.

Elsewhere in the world of public and semi-public funding, that’s not always the case.

Take, for example, San Francisco’s successful bid for the 2016 Super Bowl. Does anyone really believe that one single game will bring between $300 million and $500 million to the Bay Area?

That’s the number economists came up with in 2010 and San Francisco has used it ever since to show locals what a great financial deal the game will be for Northern California.

It’s a wonderful number, made even better by the fact that, unlike the state budget figures, no one will ever be able to prove it wasn’t so.

John Wildermuth is a longtime writer on California politics.

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