Your guide to NYC's public proceedings.
Q&A
Debate over OMB's revenue forecasting approach
1:01:59
ยท
5 min
Council Member Brannan challenges OMB Director Jiha on the agency's conservative approach to revenue forecasting, particularly regarding business and personal income tax collections. Jiha defends OMB's methodology and explains the rationale behind their conservative estimates.
- OMB adjusted their business tax forecast upward by $935 million for FY25
- Jiha cautions against being too aggressive in forecasting due to economic uncertainties
- Brannan expresses concern that overly conservative estimates are used to justify unnecessary budget cuts
Justin Brannan
1:01:59
Okay.
1:01:59
I wanna talk about business and personal income tax collections.
1:02:03
So both business and personal income tax collections continue to surpass expectations, but OMB's revenue forecasts remain overly conservative.
1:02:13
While OMB has adjusted its estimates upward in the prelim plan, evidence suggests that OMB is still significantly under forecasting revenue growth, which in turn unjustifiably weakens the city's budget outlooks and in the past has justified harmful cuts.
1:02:30
So let's start with business taxes where OMB made its biggest revision.
1:02:34
Through the January, the city had collected $4,700,000,000 in business taxes, 500,000,000 more than at this point last year.
1:02:43
The council is more optimistic with a projection of 800,000,000 in growth, yet OMB's forecast only projects a $588,000,000 increase, effectively forecasting no additional business tax revenue growth over the remainder of the fiscal year.
1:02:58
So given that business tax collections are running significantly ahead of last year's pace, and you testified earlier that Wall Street is doing well, Why does OMB continue to assume that revenue growth will stall in the second half of the fiscal year?
Jacques Jiha
1:03:14
We adjusted upward our business tax forecast by $935,000,000 in '25 because, again, to reflect the strong growth that we see in both corporate taxes and UBT.
1:03:32
We will monitor collections for the month of February, March, and April to see.
1:03:38
And if the strength continues, they will be reflected in the executive budget.
1:03:46
But I would caution at this moment in time against being too aggressive in our forecast.
1:03:54
Okay?
1:03:55
Times we we are in a very uncertain time.
1:03:59
We have conflicting policies being implemented.
1:04:02
Okay?
1:04:03
And current policies being implemented.
1:04:05
Tariffs, on one hand, you have different things.
1:04:08
The stock market is very unstable at this point in time.
1:04:13
So I would I would be cautious about being too aggressive in our forecast.
Justin Brannan
1:04:20
So you so the economic indicators that that you're saying would justify such a dramatic slowdown in business tax revenue is all that uncertainty from Washington?
Jacques Jiha
1:04:30
There's a lot of uncertainty.
1:04:31
You know?
1:04:32
You I mean, you could see what's going on in market.
1:04:34
The market has been repricing many of the new policies have implemented.
1:04:38
I mean, not by accident, the past month and past couple of days you see what's going on in the stock market because there is a repricing taking place.
1:04:47
So I would be extremely cautious in terms of not being too aggressive in our forecast.
Justin Brannan
1:04:55
Does OMB acknowledge that that they have consistently under forecasted revenue growth?
Jacques Jiha
1:05:01
No.
1:05:01
It's because it's it's you have you have to understand.
1:05:05
We come out with our with our forecast.
1:05:09
Two months later, everybody has come out with their forecast.
1:05:11
They have two months of data, okay, that they see.
1:05:16
When we do our forecast again, we hear of everybody.
1:05:19
Okay?
1:05:20
Two months later, they do their forecast and they exceed us.
1:05:23
I mean, because they have more information.
1:05:25
As you get more information, you adjust your forecast, which is what forecasters do.
1:05:29
It's not because we've been consistently under forecasting.
1:05:32
No.
1:05:33
And two, don't forget, we always make it clear to the rest of the world.
1:05:39
We tend to be conservative in our forecast because we're making long term spending decision based on an economy, on a forecast of the economy that fluctuates on a day to day basis.
1:05:53
So you are always better off being conservative so that you don't make budget unnecessary budget cuts if you, for whatever reason, you overforecast.
1:06:03
So it doesn't take a genius to say, you know what?
1:06:07
OMB is always conservative.
1:06:08
If we add $500,000,000 or more, we're gonna be right because OMB has always said we're conservative.
1:06:14
Okay?
1:06:15
So you hear folks talking as if, you know, the forecast is always right.
1:06:20
We from the get go, we say to to the rest of the world, we are conservative in our approach because we are making long term spending decision based on a forecast.
1:06:33
Okay?
1:06:33
The spending is real.
1:06:36
The other side is a forecast that could go up and down.
1:06:38
So therefore, you better make sure you have the revenue stream to back the spending that you're making.
Justin Brannan
1:06:46
I think our economists do a little bit more work than just adding $500,000,000 to your forecast, but I I appreciate that.
1:06:55
I mean, I don't we don't take any solace like, being told I mean, look, the mayor famously said that the migrant crisis was going to bankrupt the city.
1:07:04
We all know that that was never true.
1:07:08
The council doesn't take any solace in being told, hey, you guys were right because ultimately cuts were made that we now see were never necessary in the first place.
1:07:18
So I understand why OMB has a reputation for being way more conservative.
1:07:24
But, and it's fine if we're just talking about sort of hypothetical forecasts.
1:07:29
But when those conservative estimates are used to justify cuts, that's that's that's the problem.