September Revenue Forecast Update

The Joint Budget Committee received the September Revenue Forecasts this morning from Legislative Council and the Office of State Planning and Budgeting (OSPB).

Both forecasts show the economy continuing to grow at a moderate and steady pace through 2019 in Colorado and in the US.  Although the weaknesses in the economy have dissipated this economic expansion is a weak one compared to historical standards and a recession is still a possibility.  The OSPB forecast highlighted that although the economy continues to show modest growth that activity is not uniform throughout the State.

For the fiscal year that ended on June 30, 2017 the both the forecasts reported a preliminary general fund surplus of $28.7 million in excess of the 6.0 percent reserve.  This surplus is a result of large accounting adjustments.

According to Legislative Council this surplus means that the JBC will enter into the discussions about the upcoming 18/19 budget with $666.5 million or 6.0 percent more to spend or save in the General Fund than what is budgeted for FY17-18.  The OSBP forecast has a similar projection of $635.9 million.

In previous forecasts there were several statutory requirements that would have a direct impact on the 18/19 budget.  The passage of SB 267 removed the hospital provider free from under the TABOR cap alleviating some of budget pressures.  There is no projected TABOR refund.  Revenue will continue to fall short of the Referendum C cap each year throughout the forecast period.

As a result of the BP decision and SB16-218 a total of $110.6 million from the general fund was used to pay severance tax refunds during FY15-16 and FY16-17.  These transfers were only authorized during these two fiscal years.  Oil and gas severance taxes are expected to rebound to $143.8 million in FY17-18 and $159.2 million in FY18-19.  Hurricanes Harvey and Irma will impact the US gross domestic product and labor market third quarter revenue expectations.

Colorado’s unemployment remains at historic lows, however, this is likely unsustainable in the long term.  The Unemployment Insurance (UI) Trust Fund balance for FY16-17 was $739.4 million which is up 8 percent from the previous fiscal year.  The UI fund is expected to continue to improve throughout the forecast period.

The Governor’s budget will be submitted to the Joint Budget Committee by November 1st.

Links to the full reports are here: (Legislative Council) (OSPB)