On revenue and income growth — how does it affect the recession?

Raha said as income has risen in the state, revenue collections haven’t kept pace. He said as people make more, they aren’t spending more.

“It has never happened before,” he said. “That is why I believe that the probability that this is unsustainable is very high.”

“Because this is unprecedented, the probability that this is unsustainable is very high.”

What’s that mean? Usually, people spend more as they make more in a way that keeps up with their earnings. That isn’t happening now. But he doesn’t think we’ll continue to be savers.

“As the idea of the recovery takes place in people’s minds, this difference is likely to flip in favor of revenue growth,” he said. “People will be entering this holiday sales season with pent up demand, money in the bank and a more optimistic outlook about the future,” he said, “if our prediction about the trough in the third quarter is true.”

But, he said, “This is the biggest wild card in our forecast.”

He said they’ve reduced the forecast over the March forecast by $185 million. “For the next biennium, the definition of the General Fund has changed due to Legislative action,” he said. That confuses things a bit. But the forecast has been reduced by $297 million from the March forecast.

Tags: Revenue forecast