Estimating Revenues

Reference Number: CTAS-730

A common method for projecting the next fiscal year’s estimates is to take the current year’s eight or nine months actual, divide by the number of months, and multiply by 12 for a full year’s estimate. This method assumes that the estimated three or four months’ average will be the same as the actual months of receipts. However, very few revenues follow an average, constant pattern. The operating budget includes revenues from many sources (local, state, and federal). To be more accurate in preparing estimates, the budget coordinator should review each revenue separately, and use a different method to project each revenue. The following two methods are suggested for the various revenue sources.

1. Revenue Estimates Based on Precise Factors. Revenues from the state and federal governments for specific or earmarked purposes are based on precise factors; therefore, each revenue source must be individually calculated based on these factors. Below are the revenue sources included in this category.

State grants
State reimbursements
State educational payments
Federal educational payments
Federal grants
Contracts with other local governments and citizen

2. Revenues That Fluctuate Monthly. This group of revenue fluctuates monthly based on the economy, collection procedures, or legally required payment deadlines. A best method to estimate revenue is to (1) compare the current year’s receipts for the same period of time for the previous year, (2) calculate the percentage increase or decrease, and (3) apply this percentage change to the uncollected months. The sum of this year’s actual plus the projected uncollected months will provide a reasonable estimate for the current year. For estimating next year’s receipts, use the current year’s revised estimates and add or decrease using your best judgment. The revenue sources which best fit this group are—

Current property taxes
Delinquent property tax
Litigation taxes
Pick-up taxes
Interest and penalties on property tax
Business taxes
Local option sales tax
Wholesale beer tax
Hotel/motel tax
In-lieu of tax payments
License and permits
Wheel tax
Fines
State beer tax
State alcoholic beverage tax
State gas and fuel taxes
State mixed drink tax
Charges for current services
Ambulance charges
Fees in-lieu of salary or excess fees collections
Other similar revenues