September Quarterly Revenue Estimates
The Legislative Council staff and Governor’s Office of State Planning and Budgeting (OSPB) issued their September forecasts today. Both forecasts were slightly down from the June forecasts, showing decreases in General Fund Revenue while also warning of future economic concern.
According to Legislative Council:
• Headwinds to economic growth is starting to emerge. Unemployment rates in the US and Colorado are at historic lows. Job creation is healthy in Colorado, though lower than last year. Colorado’s inflation rate (1.4 percent) is slightly below the federal rate.
• But the impact of “trade tensions” are starting to be realized. US exports are down 1 percent in 2019, and down 6.4 percent in Colorado. This is most impacting the agricultural and manufacturing sectors.
• We expect strong growth in 2019, with slowing growth in 2020. We are not forecasting a recession, but the recession risk remains elevated.
According to OSPB:
• The mostly likely risk is a slowdown, not an economic contraction.
Impact on General Fund Revenues
Regarding General Fund revenues, Legislative Council sees a downward revision compared to June – down $76 million in FY 2019-20, and $120 million in FY 2020-21. These represent decreases of 0.6 percent and 0.9 percent respectively compared to the June forecast. (Please note – General Fund revenue is projected to continue to grow, just at a slightly slower pace.) OSPB also projects General Fund decreases compared to June, though smaller decreases compared with Legislative Council.
Legislative Council has decreased its projection of required TABOR refunds due to decreased revenues exceeding the TABOR limit.
Legislative Council Estimated TABOR Refund
Fiscal Year March Estimated TABOR Refund June Estimated TABOR Refund September Estimated TABOR Refund
FY 2018-19 $64.6 $574.7 $428.3
FY 2019-20 $0 $310.0 $264.3
FY 2020-21 $0 $342.1 $142.9
FY 2021-22 N/A N/A $134.5
Dollars in millions. Please note – the projected refund amounts listed above will change with the December forecasts, based on changes in TABOR revenue (GF and cash fund) and projections of CPI and population growth.
The OSPB refunds are forecasted to be higher in FY 2020-21 ($551.6 m) and FY 2021-22 ($768.4 m) due to higher General Fund and cash fund revenue estimates.
The first $150 million of TABOR refunds is satisfied through the appropriation to the Senior Homestead Exemption. TABOR refunds between $150 million and $400 million are addressed through a temporary income tax reduction. Refunds above $400 million are addressed through a sales tax refund.
Proposition CC is on the November ballot; if passed, all TABOR refunds will be directed in equal shares to K-12 education, higher education, and transportation.
Specific Forecasts are available through the links below.
Summary – So what does this mean?
Revenues are slightly down, and the required TABOR refund is slightly down (according to Legislative Council), though OSPB predicts larger TABOR refunds in the out years.
The September forecast is a snapshot showing the direction of State revenues. The September forecast is important because the Governor will base his November 1 budget request on this forecast.
The next forecast will be issued on December 20. Please let us know if you have any questions.
Ed Bowditch and Jennifer M. Cassell
Bowditch & Cassell Public Affairs