The Governor’s Office of State Planning and Budgeting (OSPB) released its quarterly economic forecast today.
“Today’s strong forecast shows Colorado is roaring back. We are seeing a strong recovery in 2021 as more Coloradans get vaccinated and return to work but our economic success is tied to our public health so we continue to encourage Coloradans to get vaccinated to protect themselves, our economy, and jobs,” said Governor Polis. “Our COVID-19 rates are sixth lowest in the nation, and combined with the state stimulus, we are making once-in-a-generation transportation investments to efforts to power small businesses, decrease traffic, and reduce pollution.”
The economic forecast shows that at both the national level and state level, the U.S. economy is building back better in 2021, and while challenges exist, GDP is likely to grow at its fastest pace in decades. Aggregate household finances are strong, with wage growth and government aid supporting high savings and low debt, underpinned by accommodative financial conditions. New business formation has stabilized at a high level after rapid increases through the midpoint of this year. Increased COVID-19 cases are constraining global supply chains, and increasing inflation expectations so the state continues to urge every Coloradan to get the safe and effective vaccine.
Colorado’s unemployment rate continues to decrease, which is a positive sign for Colorado’s near-term economic outlook. While job recovery in the tourism and leisure and hospitality sectors continues to build back, Colorado has seen a significant recovery in demand for these services. There are downside risks to the forecast from continued disparities in the labor market and supply chain disruptions along with continued inflationary concerns. Overall, however, risks remain balanced.
General Fund revenue is projected to increase to $15.3 billion in FY 2021-22, a 7.2 percent change from the prior fiscal year. The projection for FY 2021-22 is $260.6 million higher than the June forecast. The growth rate is expected to moderate to 3.9 percent in FY 2022-23 and 4.7 percent in FY 2023-24. This upward revision is due to high revenue collections in recent months across all revenue streams as well as strong economic expectations going forward.
Total cash fund revenue subject to TABOR was $2.2 billion in FY 2020-21, a 2.0 percent reduction from the prior fiscal year. In FY 2021-22, cash fund revenue is projected to increase by 10.4 percent followed by 6.3 percent growth in FY 2022-23 and 5.5 percent growth in FY 2023-24.
After exceeding the Referendum C cap (as restored by S.B. 21-260) by $453.6 million in FY 2020-21, revenue subject to TABOR is expected to remain above this cap through the duration of the forecast period. Current projections show that revenue will be $1,260.1 million above the cap in FY 2021-22, $1,277.3 million above the cap in FY 2022-23, and $1,467.3 million above the cap in FY 2023-24, triggering the temporary income tax rate reduction to 4.5% in each year.
Under this forecast, the General Fund ending balance is projected to be $1,863.2 million above the statutory reserve level of 13.4 percent of appropriations in FY 2021-22.