HJR 707: Joint Subcommittee Studying the Balance of Power Between the
Legislative and Executive Branches
September 19,
2005
The Joint Subcommittee
to Study the Appropriate Balance of Power Between the Legislative and
Executive Branches held its third meeting on September 19, 2005, and continued
its dialogue with representatives from the Office of the Secretary of
Finance and the Department of Taxation on ways to improve the current
revenue-forecasting process.
REVENUE-FORECASTING
PROCESS
Pamela Currey, Deputy
Secretary of Finance, responded with additional information to the following
three questions initially posed by subcommittee members at the June 28
meeting:
Question: Is Gross
Domestic Product (GDP) a better indicator of the Commonwealth's future
tax revenues than the Virginia Department of Taxation's econometric model
currently used for revenue projections?
The Tax Department's
model proved superior-resulted in a smaller tax
deviation-in 12 of the last 15 years.
Ms. Currey explained that GDP is not a good indicator for predicting Virginia's
revenue because it is very broad and includes factors affecting the global
economy. Virginia's econometric model is better because it is designed
to capture the activities and phenomena that more directly affect Virginia's
economy.
Question: Can
first quarter tax revenues be used to estimate the general fund revenue
for the year?
Although using this
type of ratio method is simple and appears reasonable, Ms. Currey pointed
out that statistically it is not a good predictor of end-of-the-year revenues.
The Tax Department's econometric model proved superior to the first quarter
ratio model in 15 of the last 25 years. In fact, if the first quarter
ratio model had been used, the Commonwealth would have experienced a budget
shortfall in 14 out of the last 25 years. Using the Tax Department's econometric
model resulted in only 3 budget shortfalls.
Question: How
long was the Missouri budget impasse?
The budget impasse
in Missouri lasted for six months from November to April.
Members expressed
concern that the econometric models for the past few years were underestimating
tax revenues and not allocating adequate weight to certain factors, including
population growth, money supply, and federal spending. There was also
disappointment regarding the lack of availability of information on the
leading indicators of the economy and tax data that would have shown a
surge in the economy during the critical months prior to the passage of
the budget in May 2004. The administration explained that some of the
tax data has a lag time, for example, two months for sales tax activity
and one year or more for federal income tax information for large filers.
Legislative members do receive real-time revenue forecasts each month
by e-mail. However, the data does not contain in-depth analysis that would
assist members in understanding the revenue drivers and the current economic
landscape. The joint subcommittee asked staff for the next meeting to
determine the cost to establish an independent revenue-forecasting division
in the legislative branch that would be responsible for analyzing economic
and tax collection data, identifying economic trends, and providing independent
evaluation of revenue projections.
LEGISLATIVE SESSIONS-OPTIONS
REGARDING TIME CONSTRAINTS
Staff presented the
joint subcommittee with the following three options to address time constraints
inherent in the present legislative sessions:
- Amend the Constitution
to allow 60-day sessions during odd-numbered years without requiring
a two-thirds vote.
- Amend the Constitution
to permit an organizational session of the General Assembly in December.
Many states hold organizational sessions prior to the regular session
to swear in members, elect officers, assign members to committees, and
adopt rules. The General Assembly could also use this time to confirm
some of the gubernatorial appointees and to elect incumbent judges and
other judicial officers.
- Amend the Constitution
to allow the General Assembly by less than the currently required two-thirds
vote to apply to the Governor to call for a special session of the legislature.
The subcommittee
requested staff to prepare draft legislation of the first two options
for review at the next meeting. In addition, members discussed the merits
of limiting the number of bills a member could introduce as another way
to better manage the workflow of the legislative session. However, the
subcommittee agreed that this proposal probably lies within the province
of the Joint Rules Committee as it deliberates the procedural resolution.
NEXT MEETING
At the time of this
publication, the joint subcommittee had not scheduled its fourth and final
meeting when it will receive a progress report from the Joint Subcommittee
on Gubernatorial Appointments and consider and finalize its recommendations
to the 2006 Session.
Chairman:
The Hon. R. Steven
Landes
For information,
contact:
Ginny Edwards,
DLS Staff
Website:
http://dls.state.va.us/powers.htm
|