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ABSTRACT.
Over a decade ago, Bretschneider and Gorr proposed two directions for future research in government forecasting: one was to extend the research on developing and evaluating alternative forecasting methods and the other, to look at forecasting as a human activity and examine how organizational factors affect forecasting. What has happened since then? To see partially what has been done and what remains to be done, this paper provides a review of the literature on government revenue forecasting with a primary focus on the state level and identifies areas for future research in government revenue forecasting.
INTRODUCTION
Forecasting is an integral part of organizational decision-making, which lays the foundation for the successful operation of an organization and stays at the center of the organization's long-term planning and development (Klein, 1984; Makridakis, 1996). In the same vein, government revenue forecasting,1 as the starting point of government budget cycle, sets the level of future government spending and plays an important role in government budgeting and financial management process.
A review of the literature on government revenue forecasting in the two directions suggested by Bretschneider and Gorr indicates that the attention devoted to forecasting methodologies far outweighs the attention given to revenue forecasting as an organizational activity. Even on the organizational dimension, forecasting methodology occupies an important position and accuracy has been the primary, if not sole, criterion in selecting forecasting methods (Auerbach, 1999; Bretschneider & Gorr, 1987; Hass & Knittel, 1998; Jonas, Rest, & Atkinson, 1992; Rubin, Mantell & Peters, 1999; Shkurti, 1990; Shkurti & Winefordner, 1989; Yokum & Armstrong, 1995). Only a limited number of studies looked at other aspects, such as organizational learning (Klay, 1985; 1992), being informative to forecast users, and being relatively inexpensive and easy to use (Agostini, 1991). While the technical part of government revenue forecasting is important, revenue forecasting is a science only up to a point; it is also an art. After all, a budget is first and foremost a public statement that reflects policies and priorities and is fraught with political considerations, and revenue forecasting is better understood in the proper context of governmental and political system. In brief, government revenue forecasting "is not just a technical or statistical area, but the domain of psychology, sociology, politics, management...