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Locating Good Data for Your Revenue Forecasting

Many of us are now putting the finishing touches on our revenue forecasts for the next budget year or biennium. This is always a daunting task — even in normal times, but as we all know, these are anything but normal times. The COVID-19 pandemic and its dramatic effects on our local economies (and the national one) has caused upheaval that we’ve never had to deal with before. Since our traditional approaches to revenue forecasting will not be sufficient in this crisis, I thought we’d explore a few ideas about where to find good data as we look for more accurate ways to predict future revenues. 

Traditional Revenue Forecasting 

In normal times, we’d be getting out our various resources and working to understand what these might be portending for the future. As we’ve described in past workshops and blog posts, revenue forecasting is traditionally a function of understanding the mechanics of the revenue, the evolution occurring in our tax base, and comparing what we are thinking to what various forms of trend analysis tell us. 

GFOA (Government Finance Officers Association) describes the art of revenue forecasting as an equal measure of qualitative and quantitative analysis. Quantitative analysis involves looking at past trends, changes in the revenue base, and changes in the mechanics of the revenue. Past trends include collecting and “normalizing” data (where we take the known anomalies out of it) and considering what the trend lines are suggesting for future months and years. Trending can include quantitative analysis, such as linear regression (in its various forms), and more. Knowing what is happening in the revenue base involves tapping into to data sources such as new development, new retailers, household formation, and more. I actually think this element is a mix of quantitative and qualitative — but more on that later. Lastly, changes in the mechanics of the revenue itself need to be considered. For example, an important consideration this year is the effect of an Implicit Price Deflator (IPD) that is below 1%. It results in the need for additional steps in order to determine property tax revenues. You can find out more about that issue by reviewing our updated Revenue Guide for Cities and Towns or our Revenue Guide for Counties.

Qualitative analysis involves the best judgement of those involved in the forecasting process. Once we develop the quantitative data, how does it “feel?” Does it seem to reflect what we think is likely to happen? Is it consistent with what we are seeing and hearing from others who may have some insight into the issues that drive revenues? Our professional judgement is an important factor in developing revenue estimates for our governments. Many of us who have this responsibility have been engaged in these discussions for a long time. What seems right, and why? Conversely, if you are fairly new to revenue forecasting, it may help to ask around and seek out the guidance and insight of colleagues who have had more experience.

Revenue Forecasting in a Non-Traditional Year 

As we’ve established, this is not a normal year, and next year doesn’t appear to be a normal year either. (And let’s just hope this pandemic mess is sorted out by 2022!) The analysis of the revenue base and the mechanics should be the same. What’s changing is the reliance on trends. Not only are the trends of little use during the pandemic, the tax collection schedules have been disrupted by a series of proclamations resulting in receipts coming in to local governments over inconsistent periods of time; meaning we can’t even rely on the revenue reports we are getting to reflect the revenue from that period of time! 

In our July Revenue Forecasting Under Current COVID Impacts webinar, Toni Nelson and I reviewed a few alternatives for attempting to forecast revenues in this environment. We recommend you become familiar with the Washington State Economic and Revenue Forecast Council (ERFC). They produce numerous and timely reports that provide significant detail about what’s happening in the state’s economy and, therefore, its revenues. Fortunately, the ERFC shares their work broadly, and you’ll find a variety of helpful resources on their website, such as this July 28 presentation to local governments on the state’s economic outlook. While there is some regional information, the focus is largely statewide, and so the one drawback may be that it is too generic for some needs.

A second resource we’ve pointed people to is the King County Office of Economic and Financial Analysis (OEFA). Like the ERFC, the OEFA is staffed by experts and the organization shares its work willingly. They have numerous forecasting resources available on their website that remain timely and on-point.  

Lastly, I’d recommend you check out Facteus. This is a commercial data development firm that sells subscriptions to their data and insights — with Insights being one of their products — a stealth pun! Many local governments won’t be in the market for their services, but Facteus provides a weekly update on retail trends on their website. Their data comes from electronic transactions (debit card, credit card, and online sales) from the prior week. So, it is very timely, and one of the problems with the other available data sources is a lack of timeliness. We’ve found this to align well with our experience in the Northwest with the effects of the COVID-19 pandemic. You can subscribe to their weekly updates, which will provide you with a stream of timely data. 


These are indeed unusual times. As Toni and I have routinely said, the effect of the pandemic on your revenues will “depend” on your tax structure and your tax base. For example, I’m consulting with two local governments; one whose revenues will be heavily impacted by the pandemic and another that is seeing strong revenues continuing into the summer.

In any event, forecasting revenues is always a daunting task. Now a pandemic has turned everything upside down (for some of us at least). Happy budgeting!

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About Mike Bailey

Mike served as a Finance Consultant for MRSC for several years before retiring in 2020.

Mike writes about local government financial management, local government budgeting, financial leadership, and strategic planning processes.