The General Assembly has received the March revenue forecasts from both the Legislative Council and the Office of State Planning and Budgeting.
In comparing the Legislative Council forecasts from December to March, the General Fund expectations were reduced by $294.4 million due to expectations of slower economic activity. The reductions in the March forecast also impacted the amount expected for TABOR refunds, which are now estimated to be $64.8 million in FY18-19. These refunds will be reimbursements to local governments for property tax exemptions. No surplus is expected in FY19-20 or FY20-21.
Despite the reduced revenue expectations, the overall budget situation has improved. The March revenue forecast shows an increase of $76 million from the December estimates, including an increase of $13.7 million into the state’s General Fund from Wells Fargo Settlement money. According to the Legislative Council Forecast, the General Assembly is projected to have $1.18 billion more available in the General Fund than was previously budgeted in FY18-19.
Office of State Planning and Budgeting (OSPB)
The OSBP’s forecast shows less of a revenue reduction, with a decrease in revenue projection by $200.8 million as compared to the December forecast. The forecast for FY 19-20 was reduced by $193.8 million.
The OSPB forecast noted an important change to the December revenue forecast with regards to school finance funding. The March forecast anticipates an increase in the local share of funding for K-12, which reduces the amount of funding required by the state. Governor Hickenlooper’s 19-20 budget request had set aside $261 million in general funds for this possible backfill of school finance funding, but it is no longer required in this year’s budget. The OSPB noted that this change in the local share backfill allowed more room in the budget for the new administration’s priorities.
OSPB projections for TABOR refunds slightly differ from Legislative Council’s, projecting $39.7 million in FY18-19.
**Both forecasts do not take inflationary increases from the current budget year and constitutionally-required spending on education into account.
The recent federal Tax Cuts and Jobs Act has shifted taxpayer behavior. As a result, there continues to be uncertainty within both forecasts. This uncertainty has impacted both the FY17-18 and FY 18-19 tax collections. Additionally, the South Dakota v. Wayfair decision is expected to result in an estimated $47-$72 million in additional sales tax collections when fully implemented.
The Joint Budget Committee will choose which forecast to use to balance the budget within the next two days. In the past, the Committee has often chosen the more conservative of the two forecasts. Upon introduction of the long bill (budget bill), the legislation will be debated in the Senate and then the House. Each chamber will have an opportunity to try to amend the bill; however, experience has shown that few budget amendments are successful.