[The audio from the radio report is now online]

Some budget experts will tell you that economic forecasting is more of an art than it is a science. But if Proposition 76 passes, it might also become a political lightning rod.

That’s because the initiative largely gives the governor not only the power to predict state revenues, but also the power to assess the accuracy of that prediction. And a discrepancy could trigger a fiscal emergency… with spending cuts made either by the Legislature or the governor.

This morning on The California Report, we’re taking a look at another largely unnoticed provision of Proposition 76– the power of economic forecasting.

The initiative certainly seems to strengthen the hand of Governor Arnold Schwarzenegger (or any future governor) when it comes to revenue forecasting. That’s because of both what the measure says and doesn’t say.

Prop 76 says that a fiscal emergency can be declared with a deviation of at least 1.5% between forecasted and actual revenues. But it is largely silent on what figure should be used for the baseline forecast. While some budget analysts I spoke to think it could allow a governor to set the bar anywhere he or she chooses, outgoing Schwarzenegger finance director Tom Campbell says he thinks it would be the estimate now contained in the annual budget bill.

But there’s also ambiguity on what constitutes a fiscal emergency under Prop 76. Most notably, say critics, how should a “gap” between predicted and actual revenues be measured? Prop 76 doesn’t specify.

Multiple budget watchers I spoke with wondered whether the 1.5% gap (specified in 76) could be created simply by the discrepancies in cash flow from one month to the next. One budget watcher, who spoke on background because he wasn’t speaking for his boss, told me “there is a ton of play in terms of the monthly cash flow patterns.”

Regardless, the declaration of a fiscal emergency would start the clock ticking for the Legislature to resolve it. So if there’s bickering for a couple of weeks about the numbers, that’s also time lost before the governor gets to unilaterally resolve the shortfall.

The Legislative Analyst’s recent report on Prop 76 concludes that the frequency of fiscal emergencies would largely be at the discretion of the governor. But Fred Silva, budget analyst with the Public Policy Institute of California, thinks there are simply too many eyes looking at revenue numbers for anything overly shady to happen.

Still, Silva says Prop 76 is a major shift in power… and the measure’s “gray areas” would probably have to be resolved through some kind of enacting legislation.