AI in Public Budget Forecasting

Public budgets combine estimates of revenue, service demand, payroll, contracts, grants, and long-term obligations. AI may help model these quantities by finding patterns in historical data, combining many predictors, or generating scenarios. It does not remove the need to define what is being forecast. A model predicting annual property-tax receipts is different from one estimating monthly cash flow or the cost of a new service. Forecast horizon, geography, accounting rules, and policy assumptions determine what a number means. Historical data are not a neutral picture of the future. A recession, tax-law change, boundary adjustment, one-time grant, or new development can break patterns learned from prior years. Data may also contain revisions, delayed reports, and inconsistencies between departments. A model that performs well on randomly held-out rows can still fail on a future year if information from that year leaked into training or if the economy changed. Analysts should compare forecasts with simple baselines and prior official estimates, test on later periods, and report errors and revisions. A responsible forecast presents a range or scenarios when uncertainty is material. The budget office should explain which inputs are measured, which are assumed, what events would change the projection, and how sensitive spending plans are to a shortfall. A point estimate may be useful for a spreadsheet, but decision-makers should not confuse it with a promise of revenue. Sensitivity analysis can show how a different growth rate, enrollment level, or grant award affects the plan. Accountability requires a traceable process. Preserve source data, model versions, transformations, and reviewer changes. Analysts should check for missing populations or services and ask whether a forecast shifts resources away from communities that already have weaker administrative data. Officials remain responsible for balancing priorities under law and public input. AI can make forecasting more systematic, but it cannot decide the public’s values or substitute for a transparent budget process.