Economic analysis is an analytic tool used by OSBM to help ensure that the economic implications of major policy changes, whether statutory, budgetary, or regulatory, are well understood. There is a defined role for this type of analysis in the budget process and rule review process. It is also used to guide a wide range of daily transactions. Read more about revenue forecasting, economic impact review for administrative rules, and the methodology.
State Revenue Forecasting in North Carolina
Article III of the NC constitution requires that the governor’s recommended budget include anticipated revenues for the relevant fiscal period. To ensure that the state does not incur a deficit, the governor is required to repeatedly survey the collection of revenue and take necessary action with expenditures when a deficit becomes apparent. As a result, OSBM monitors the state’s economy and incoming revenues to estimate and project future revenues. In the state budget, OSBM reports major trends that may influence revenues and expenditures in the current fiscal year and future.
- OSBM reviews current revenue information from the NC Department of Revenue and the Office of State Controller. The Fiscal Research Division (FRD) of the General Assembly also makes revenue forecasts.
- OSBM and FRD work together to produce a joint forecast for the state on a regular basis. The most recent joint forecast was produced February 2023. See past forecasts.
- In addition, the office coordinates with the Department of Transportation on estimates of the highway funds.
- OSBM gathers inflation data and national economic indicators from the U.S. Energy Information Administration, the U.S. Bureau of Economic Analysis, the U.S. Census Bureau, and the U.S. Bureau of Labor Statistics.
- Local economic information is gathered from the NC Department of Commerce and the NC Employment Securities Commission.
OSBM reviews the economic impact of proposed permanent agency rule changes based on the legal requirements set forth in the Administrative Procedure Act, Chapter 150B of the General Statutes, and the instructions of the State Budget Manual (section 10).
When reviewing the economic impact of a proposed rule change, OSBM coordinates with the regulating agency and other interested or impacted agencies. After review, the Rules Review Commission, supported by the Office of Administrative Hearings, conducts a review for legal authorization and clarity.
For revenue forecasting, OSBM uses a range of analytic techniques, including regression, exponential smoothing, and weighted averages. In the context of rule review, OSBM uses cost-benefit analysis.
OSBM contracts for proprietary data from the private sector. These data are projections of future economic activity in the nation and the state. They are primarily used for projecting future state revenue.