Auditor: fiscal notes not perfect

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The fiscal notes on which lawmakers rely for estimating the cost of proposed legislation aren’t always transparent and reliable, a new report finds.

Fiscal notes are documents produced by state agencies to estimate the financial impact of bills before the Legislature. Since 1974, they have played a key role in the legislative process.

In its new report, the Office of the Legislative Auditor finds that while most fiscal notes are based on “plausible assumptions,” many lack transparency. A minority have also been found to contain “debatable assumptions” or outright errors. For example, in one case a simple omission resulted in a fiscal note understating the cost of a bill by as much as $25 million.

“Fiscal notes — at least some of them — have gotten a bad reputation,” said Legislative Auditor James Nobles. He and his staff presented the report to members of the House Ways and Means Committee. No action was taken

Last year, some lawmakers accused agencies of producing biased or inaccurate fiscal notes in an attempt to thwart the passage of certain bills. OLA found no evidence of this in any of the fiscal notes they examined; however, they said the fiscal note process has other problems.

Joel Alter, a program evaluation coordinator with the office, said agencies have admitted putting minimal effort into calculating fiscal notes for legislation they believe is unlikely to be passed. He said they have also had difficulty estimating the proposed cost savings of bills designed specifically to cut costs.

“We observe that agencies have struggled to estimate savings for bills that propose large-scale reforms or proposals that have little or no precedent,” Alter said.

The report makes several recommendations, including:

  • ensuring that agencies clearly explain the assumptions and calculations in their fiscal notes;
  • more effective communication between legislators and agencies regarding the intent and language of bills; and
  • a greater effort to include the likely impact on local entities in fiscal notes.

Nobles acknowledged the frustration many lawmakers feel at the fiscal note process, but he emphasized that it’s an important process that should be improved, not abandoned.

“Fiscal notes are only advisory, and you can disregard them,” Nobles said. “But I would hope that’s not the road we go down.”