Examining the Determinants of Expenditure Forecasts

Peter A. Jones and Vincent Reitano

International Journal of Public Administration, 2022, vol. 45, issue 11, 845-858

Abstract: Local governments forecast revenues and expenditures as part of their budget process. Despite growing evidence of biased revenue forecasts, there is limited research on expenditure forecast bias. To contribute the literature, this article uses theory on the forecast information set that considers factors associated with biased expenditure forecasts. Two-way fixed effects regression models are estimated with a panel of all Kentucky school districts from 2001 to 2014. 82.1% of districts overestimated expenditures. Model estimates show that revenue forecasts and fiscal reserves are associated with expenditure forecast bias, indicating that forecasters consider financial factors in their information set.

Date: 2022
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DOI: 10.1080/01900692.2021.1916949

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