Low state revenues may mean no TABOR refunds next year
DENVER — State revenues have dropped off a bit, enough that it could prevent an automatic refund under the Taxpayer’s Bill of Rights, state economists told lawmakers on Friday.
Projections for the next fiscal year are expected to be down by about $111 million, meaning the state likely won’t reach the revenue cap that automatically triggers a refund under TABOR as had been expected from the last forecast in December, the Colorado Legislature’s chief economist, Natalie Mullis, told members of the Joint Budget Committee.
“We did lower our expectations for general fund revenue,” Mullis said. “In December, we expected that general fund revenue would grow by 1.8 percent this year, which is actually negative if you adjust for population growth and inflation. It’s slowed down a little bit to 1.5 percent in this revenue forecast. That impacts the bottom line.”
In her forecast for the first quarter of 2016, Mullis said that the national and state economies expanded last year, but slowed somewhat in the second half of 2015.
She said a weak global economy is putting a drag on those economies, particularly in the agricultural and natural resource sectors, such as the oil and gas industries.
“We have forecast a slowdown in growth for employment for Colorado statewide, and the major reason for that slowdown is the low commodity prices in our energy sector, our manufacturing sector and other industrial sectors,” she said.
Mullis said oil and natural gas prices continue to decline, to $39 a barrel down from $48 for oil, and $2.25 per thousand cubic feet in natural gas, down from $2.91. She said that’s having a corresponding impact on the state’s severance tax revenues, which are down about 18 percent from last year.
She said those low prices, which Mullis said likely would continue for several more years, will continue to put the kibosh on drilling activity in the state.
Sen. Kent Lambert, R-Colorado Springs, said he’s also concerned about the state’s coal industry.
“We are in the process of killing the coal industry,” said Lambert, who is one of six members of the JBC, which drafts the state’s annual spending plan. “I think that’s going to have a huge impact on the economy and revenue. If these trends continue, I’m concerned about state revenues for the following years.”
Henry Sobanet, director of the governor’s Office of State Planning and Budgeting, said his forecast is nearly identical, saying employment in the state’s oil and gas industry has declined by about 25 percent, and he’s projecting as much as 15 percent more by year’s end.
“We see an incremental downgrade to the top-line general fund revenue as well,” Sobanet said.
The forecast is an important one to state lawmakers because next year’s budget is based on it. The JBC will spend the next few weeks going over those projections to draft a budget for the next fiscal year, which begins July 1.
“Based on (Friday’s) updated forecast, we anticipate having to make significant cuts in the budget,” said Rep. Millie Hamner, a Dillon Democrat whose district includes part of Delta County. “It’s disappointing to have to make these budget cuts at a time when Colorado’s economy is strong. Our unemployment rate is only 3.2 percent, well below the national average of 4.9 percent.”