DENVER – The state will take in less money in 2016-17 than previously forecast by economists due in large part to the struggling global economy, but the roughly $90 million decrease in revenue, is a proverbial drop in Colorado’s $26 billion budget bucket.
Lawmakers will use the March forecast to set the fiscal year 2016-17 budget in the next week, but not much has changed from when the governor released his recommended budget in November. That is largely because lawmakers made mid-year adjustments to the 2015-16 budget to provide a budgeting cushion in case of a downturn.
Lawmakers on Friday received a forecast from Natalie Mullis, chief economist with the Legislative Council, and the governor’s budget office. This year the forecasts were extremely close.
“We did lower our expectations for general fund revenue,” Mullis said. “We already had expectations for slowed growth in revenue. 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 and inflation. It slowed down again a little bit, to 1.5 percent in this revenue forecast,”
In addition to the slowed economy, the budget will face pressure from an estimated $59.3 million that must be refunded to Colorado taxpayers because of revenue limits put in place by the Taxpayer’s Bill of Rights. That tax return – what people would claim on their April 2017 income tax returns – is down from previous projections because revenue is lower.
But Democrats and Republicans had a very different interpretation of the numbers.
“I would think it’s going to be still the biggest budget we have in Colorado history at the end of the day,” said Sen. Kent Lambert, R-Colorado Springs.
He added that more analysis of the impact of the forecast needed to be done, but he didn’t expect drastic cuts will be needed.
Rep. Millie Hamner, D-Dillon, disagreed. The chairwoman of the Joint Budget Committee said she anticipates having to make “significant cuts in the budget.”
“It’s disappointing to make these budget cuts at a time when Colorado’s economy is strong,” she said in a statement. “Our unemployment rate is only 3.2 percent, well below the national average of 4.9 percent.”
Lambert had a much less positive take on the economy, cautioning that the state is going to feel the decline in operations in the oil and gas industry as gas prices plummet. He also lamented the increasing price of energy and said the cause was the push away from cheap coal-powered plants.
For Democrats, the focus was on the impact of TABOR to the budget.
Gov. John Hickenlooper, a Democrat, has been pushing for lawmakers to remove a huge swath of money from the general fund to eliminate the required TABOR refunds in the foreseeable future.
Republicans, particularly Senate President Bill Cadman, have opposed that proposal.
Colorado taxpayers will get a refund on the income taxes they file in April, and the refunds are triggering the permanent implementation of a state-version of the federal Earned Income Tax Credit, which is estimated to result in $85 million to $100 million in refunds in the 2016 tax year. Refunds are expected to return about $168.9 million worth in tax year 2017, and $350.9 million in refunds are expected in the 2018 tax year.
Democrats say those returns don’t make much of a dent in the budgets of individual Coloradans, but have a huge negative impact on the state budget.
Republicans generally view the returns as an important check on the growth of big government and bureaucracy.
The issue will likely not be resolved this legislative session.
Contact Megan Schrader: 286-0644