Better revenue forecasting: Is fiscal stress a stimulant? A look at Nevada local governments

Revenue forecasting is one of the most critical and often difficult tasks in governmental budgeting. It is critical because it determines the parameters upon which the budget is based. It is difficult because many outside influences can impact revenue results and cause variances with the forecast. If revenue is under projected, valuable services may not be provided during the fiscal year and an unexpected surplus may be created at year-end. By the time it becomes apparent that surpluses are developing, the damage to on-going programs and services, which may require consistency and budget stability for efficient delivery, may be done. If revenue projections are overestimated, cuts in services may be necessary in order to realign the budget and bring it back into balance. Overprojections could also deplete reserves, leaving the municipality even more vulnerable to future shortfalls. Such variations are not very palatable to taxpayers who desire efficiency in government and continuous high quality services.