Forecast Uncertainty

Summary of Revenue Forecast Uncertainty for the Current Biennium

In Minnesota’s November 2025 Budget and Economic Forecast, total revenues for the FY 2026-27 biennium are forecast to be $66.262 billion. This forecast was constructed twenty months before the current biennium closes. If this forecast has the same accuracy measured by the percentage of closing revenues as our previous twenty-months-ahead forecasts, then, on average, FY 2026-27 closing revenues should be between $63.750 and $68.775 billion ($66.262 ± $2.513 billion). A statistical approach using the variation in the historic errors gives a range of $61.975 to $70.550 billion for closing revenues with 90 percent 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