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State Changing Way It Calculates Economic Forecasts

In an effort to produce more accurate estimates of state revenue, the state of Indiana is once again changing the way it calculates its economic forecasts.

The state gets regular budget forecasts both from IHS Global Insight, a national financial modeling firm, and from the Revenue Forecast Technical Committee, a team of Statehouse budget hawks.

One member of that committee is Dan Novreske, who told the House Ways and Means Committee Tuesday that the state can no longer rely on its gross domestic product for its models. Instead, a model from December of 2010 tracks the state’s unemployment rate, the Standard and Poor’s 500 stock index and what are called transfer payments – income paid by the state which is not for services rendered.

Veteran’s benefits and unemployment payments fall under this umbrella and Novreske says they now make up 21% of Hoosier income. So it’s under that structure that Ways and Means will begin assessing the budgets of individual agencies starting next week. Bloomington State Rep Peggy Welch sits on the committee and says she’s still trying to fully understand the formula. "Nonetheless," she says, "it appears change is in order."

“The problem was," she says, "in the last couple years, we have really missed the target. And so if you keep missing, you say ‘what do I need to do to change?’ And so that’s what the experts did.”

The governor’s budget proposal, also heard by Ways and Means Tuesday, flatlines state spending and authorizes more cuts to meet anticipated revenue.

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