This story by Sara Wilson appeared on Colorado Newsline on September 23, 2022.
Economic growth in Colorado has slowed in 2022 following a quick recovery from the recession caused by the COVID-19 pandemic, with inflation and rising interest rates contributing to the deceleration, according to economic forecasts presented to the state Legislature’s Joint Budget Committee on Thursday.
The risk of a recession has “escalated considerably” because of monetary policy decided by the Federal Reserve and global events like the war in Ukraine, the forecast prepared by the Legislative Council Staff says.
“This forecast anticipates continued, yet slowing, expansion, but the path forward has narrowed. With a worsening economic outlook around the world, the possibility of a national downturn looms,” the forecast reads.
That downturn could affect the General Assembly’s spending power on new initiatives as it prepares to come back in session in January.
There are also indicators of a healthy economy, however, such as the state’s unemployment rate at 3.4% in August and a historic level of job openings that exceed pre-pandemic numbers. Even though the unemployment rate ticked up slightly, the governor’s Office of State Planning and Budgeting’s forecast said it was because of an increase in labor force participation that outpaced job creation, rather than job losses.
Those unemployment and job creation stats were what lawmakers chose to focus on in their official messaging.
“Colorado’s economy continues to grow and outpace the nation with high numbers of job openings, despite the pressures from global inflation and rising federal reserve interest rates that have increased costs for families,” Joint Budget Committee Chair state Rep. Julie McCluskie, a Democrat from Dillion, said in a statement.
“The general fund forecast remains very solid with high levels of reserves that will protect the state from downside risks to the forecast,” she said.
Thursday’s forecast does not expect much additional growth from the previous fiscal year’s revenue. The cash fund revenue subject to the Taxpayer’s Bill of Rights, or TABOR, is predicted to continue rising, but at a slower pace, according to the Legislative Council Staff.
The Legislative Council Staff anticipates general fund revenues to be $17.95 billion in the current fiscal year, $18.06 billion in the 2023-24 fiscal year and $18.25 billion for the 2024-25 fiscal year. The OSPB’s estimate differs slightly, with $16.4 billion in the current fiscal year and $16.7 billion for the 2023-24 fiscal year. Fiscal years begin July 1.
Their forecast anticipates that in the 2023-24 fiscal year, which is currently unbudgeted, the General Assembly will have $1.08 billion more available to spend than in the previous year. Most of that, however, will likely be consumed by the Legislature’s existing spending obligations for items like Medicaid, education, increases in employee compensation, and capital construction and IT projects.
That would leave the General Assembly with just $85 million available in discretionary funds for the 2023-24 fiscal year.
According to both the Legislative Council Staff and OSPB forecasts, the state is also expected to collect billions of dollars in tax revenue above a cap set by TABOR over the next three fiscal years, meaning that money will have to be refunded to taxpayers and can’t be used to offset the effects of rising inflation on the state’s financial situation.
“Revenue subject to TABOR is expected to exceed the cap in each of the forecast years, but the highest refund amount is expected to have occurred in the most recent completed fiscal year,” the OSPB forecast reads.
Legislative Council Staff forecast the excess to be $3.63 billion in the current fiscal year, $2.28 billion in the 2023-24 fiscal year and $1.9 billion in the 2024-25 fiscal year. The OSPB forecasts not as much excess: $1.9 billion in the current fiscal year, $685 million in the 2023-24 fiscal year and $742 million in the 2024-25 fiscal year.
Regardless, it means Coloradans can expect money from TABOR refunds when they file taxes in April. Most qualified taxpayers have received TABOR refund checks this year — $750 for single filers and $1,500 for joint filers — or should receive them soon. The refund amount will most likely be less in April.