Portland's Budget Forecast: Mostly Sunny

The city’s Finance Committee last week gave us their two cents, or rather, two tenths of a percent when they trimmed the budget to lower the proposed 2.2% tax increase city manager Pat Finnigan submitted to a much more palatable 2.0%. The cut was heralded by all involved in the process as a victory, as not only would the tax increase be lower, but that no city services would be cut and for the first time in three years, there would be no layoffs of city employees.

Good so far.

It is really quite amazing that with a large unionized staff, the rising cost of healthcare and the skyrocketing price of fuel, the finance folks were able to keep the tax rate lower than one might expect during the inflationary times in which we live. The most amazing part is how they did it.

In case you didn’t get the memo, the good times are just ahead. The real story here isn’t the budget and the resultant low-to-them-but-not-to-us tax increase. The real story is the Picassos behind the curtain that forecast revenue.

In good times, forecasting revenue is an easy task. One only has to take a look at year-over-year, month-over-month or even week-over-week trends, find an appropriate percentage, plug that into an Excel workbook and watch the numbers increase in each column. In good times, some forecasters will even knowingly nudge down the percentage, to make things look really great when a month comes and goes, and turns out better than expected. That’s when governments have surpluses and businesses have profits.

In bad times, forecasting is an art. It’s the art of pleasing your boss. A person in charge of making forecasts always has a boss. The boss of the forecaster has the ability to do the forecast and, in many cases, has a better understanding of what the forecasted numbers should be. But because the boss needs plausible deniability when explaining any shortfall to the ownership, or in this case, the taxpayers, the stop-gap forecasting position lives on.

I was in just such a position. I used to forecast circulation revenue at a certain 75 cent newspaper here in town. Times were (and are) tough for the paid newspaper business. All trends were pointing down – way down. I knew it, my boss knew it. But it didn’t matter. The expectation was that my forecasts were to be flat, or show modest growth. The decline became so rapid, and the meetings so vicious when my forecasts were inevitably off, that I would produce two forecasts – one that reflected the true trend and a second oil-on-canvas masterpiece that made everyone rejoice. The first month the true forecast came out dead-on, I was relieved of my forecasting duties.

See, as a forecasting artist, I wasn’t paid to be right. I was paid to be wildly optimistic. It looks to me that the revenue forecast we got from the city must have come from just such an artist.

The city’s revenue forecast is based on the assumption that the good times are literally just around the corner. It’s based on more people paying taxes on new cars, paying more for services, real estate values going up and etcetera. Basically, the optimism we are only going to have to contribute an additional 2.0% to, is based on the concept of continuous, sustained growth. But wouldn’t it be the fiscally responsible thing to cut services, eliminate positions, consolidate offices and perform other cost cutting measures until such a time that there is some evidence of it? No need, says the city, the 365-day forecast reads “clear skies.”

So here we are. Citizens of Portland in the know standing open-jawed in awe as the city heralds the fact that they “only” had to increase taxes by 2% and “expects” an increase in revenue when in reality, based on flat, or more than likely, lower revenue, the increase in taxes should probably be in the “mostly cloudy” 4-5% range.

Meteorologists rejoice! The weather forecast never looked so accurate.

(Jeffrey S. Spofford, the circulation manager for The Portland Daily Sun, lives in the Oakdale neighborhood and can be reached at jspofford@maine.rr.com.)