Summary of Revenue Forecast Uncertainty for the Current Biennium
In Minnesota’s November 2022 Budget and Economic Forecast, total revenues for FY 2022-23 are forecast to be $59.928 billion. This forecast was constructed eight months before the current biennium closes. If this forecast turns out to have the same degree of accuracy as the average of our eight-months-ahead forecasts, we can expect FY 2022-23 closing revenues to be between $59.038 and $60.818 billion (+/- $0.89 billion).
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 2020-21.