Forecast Uncertainty

Summary of Revenue Forecast Uncertainty for the Current Biennium

In Minnesota’s February 2026 Budget and Economic Forecast, total revenues for the FY 2026-27 biennium are forecast to be $67.464 billion. This forecast was constructed seventeen months before the current biennium closes. If this forecast has the same accuracy measured by the percentage of closing revenues as our previous seventeen-months-ahead forecasts, then, on average, FY 2026-27 closing revenues should be between $65.411 and $69.517 billion ($67.464 ± $2.053 billion). An alternative approach for determining a likely range for closing revenues uses statistical variation in the historic errors, and it gives a range of $63.997 to $70.931 billion ($67.464 ± $3.467 billion) for closing revenues with 90 percent statistical confidence.

Estimating Revenue Forecast Uncertainty

The difference between the level of revenues forecast and the amount actually collected at the end of a biennium—the forecast error—is a gauge of forecast accuracy. The mean absolute error (MAE) is the average of the errors’ absolute values (that is, treating negative and positive errors the same). Since accuracy in forecasting a single biennium’s revenues improves the closer we get to the end of the two-year period, we calculate separate errors for each time a biennium is part of the forecast: 32, 29, 20, 17, 8 and 5 months from actual. We then average those errors over FY 1990-91 to the most recent closed period, FY 2022-23. This report is the first to incorporate forecast errors calculated for the FY 2022-23 biennium.

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Forecast Uncertainty