The state Legislature recently passed a bill that empowers the Independent Fiscal Office (IFO) to use dynamic scoring in revenue estimates.
“This is a topic that’s near and dear to my heart because of the potential impacts it has in so many different areas,” Rep. Frank Ryan (R-Lebanon) told Pennsylvania Business Report.
Ryan wrote language in the bill, which passed the Senate on Friday.
Unlike static revenue estimates, dynamic models account for independent variables like probable output or interest rate changes as a result of proposed legislation. Dynamic scoring also takes into account individual and business responses to proposed policy changes, Ryan said.
“The way I’ve built the legislation it provides flexibility for the IFO because they are an independent agency and able to use multiple, different sources of data, but they have to disclose the sources of the data,” Ryan said.
Nothing in the new law changes the IFO’s ability to produce static analytics, Ryan said. Instead, the amendment enables administrative officers to request that the IFO produce a dynamic analysis in addition to the traditional static one.
“Dynamic scoring is not directive in nature, it’s prescriptive in nature. What that means is that the legislature can ignore the results of the findings if they wish. It’s basically saying, ‘Here’s an additional reference point.’ They’d always provide the static analytics and then the dynamic analytics based on the multivariate model,” Ryan said.
Opponents of dynamic scoring argue that it relies too heavily on assumptions and is subject to political pressure. Supporters say the static model ignores crucial macroeconomic factors.“There will be some people that will say that dynamic scoring can be misused and that’s a concern, which is why I made it prescriptive in nature instead of directive in nature,” Ryan said. “The decision is always in the hands of the legislature or the governor because the governor can always veto.”
Ryan’s legislation originally passed the House as H.B. 230 on March 16 in a 128-74 vote. It was reported by the Senate Finance Committee shortly thereafter on March 24.
H.B. 230 was tabled on May 25, but language from it was added to H.B. 336 as part of companion legislation in the Senate. That legislation passed the Senate on Friday with a vote of 28-22. It was presented to the governor on Monday and is awaiting his signature.
“These Pennsylvania Code sections were written in the ’40s and ’50s and they’re in need of a major overhaul. We need to completely modify our tax structure in the Commonwealth,” Ryan said.
Ryan, a certified public accountant, said that the use of dynamic scoring will provide more insight into the impacts of proposed legislation on issues like pensions and property taxes.
“We have a number of issues in Pennsylvania that we identify as critical risk factors. Dynamic scoring capability would enable us to weigh the implications of those risk factors and determine the best course of action,” Ryan said.