Budget analysis and forecast Homework

MPA 5860 Public Budgeting

Summer 2021 Term II

Module 2: Revenue Projections

· Pay attention to the reporting periods on the Revenue Status report.

· Make sure you understand what the numbers reflect, particularly the last two columns (To Date Increase/Decrease Over Estimate and To Date – Percent Collected). In other words, try to recreate the calculations to reach the result so you are clear on what is being measured.

· Since analysts need to understand the nature of the revenue source and the impact of the economic environment on revenue collection, you are expected to research the internet for information about WV to answer some of these questions.

The following questions refer to the PDF entitled West Virginia Revenue Status Report Dec 2021

1. Personal income tax is the largest source of revenues for the state. What percent of the estimated collections for FY2022 does it represent (round to the nearest tenth)? What sort of problems could occur if collection of this tax revenue ends at 90% for FY2022? (Show your calculations).

2. Business and occupation tax is more than $6.7 million under projections midway through the year. Is this something the state should be concerned about? Why or why not?

3. Collection of severance tax has exceeded projections in both FY2021 and 2022. What is severance tax? What economic factors would explain the variance?

4. What explanation can you give to explain why West Virginia’s revenue collections to date are generally exceeding estimates? (Hint: look at what happened in the previous year)

The following questions refer to the Excel spreadsheet entitled “West Virginia Monthly State Tax Collections:”

5. On tab 1, plot the historical revenue data of personal income tax using a line graph. Update the title of the graph and insert a linear trendline.

a. What is the direction of the trend?

b. What does the trendline tell you about the stability of this revenue source?

c. What patterns do you see in the data?

6. Follow the same instructions for the General Sales Tax Revenue on tab 2.

a. What is the direction of the trend?

b. Given the timeframe of the data, what factors contributed to the direction of the trendline?