Thus, both houses of the Legislature and the Executive Office begin with the same revenue forecast in developing their proposed budgets. If additional revenues are needed to meet the level of spending in the Governor's recommendations or in the Appropriations Act, specific revenue-raising measures must also be proposed, since deficit spending is prohibited by the State Constitution. By taking a look at how the General Revenue forecast is made, a good understanding of how the conference process works can be obtained. The objective of the General Revenue Estimating Conference is to make a determination as to the amount of funds available for appropriation from the General Revenue Fund. The diagram on the next page shows the process by which this takes place.
Tax revenues are, of course, directly related to economic activity.
Thus, forecasting the economy is a necessary step in arriving at a revenue projection. The revenue estimating process begins with a national economic forecast. The conference subscribes to a national economic forecasting service. This service provides an analysis of current economic conditions and prepares forecasts of the future course of the U.S. economy. Typically, the service offers a baseline forecast and supplements this with alternatives reflecting possible but less likely scenarios.