Download The long awaited March Revenue Forecast was presented this

The long awaited March Revenue Forecast was presented this afternoon to the JBC and a captive
audience of legislators, department staff, lobbyists, and media. Despite a higher than expected revenue
forecast, the JBC, legislative council, and the Governor's Office of Planning and Budgeting were cautious
about equating the growth to an improved financial situation for the state.
Natalie Mullis, Chief Economist for Legislative Council, began the presentation by describing the growth
of the national economy and Colorado's economy from improvements in the industrial, construction,
and manufacturing sectors. The National GDP is expected to grow by 2.4% in 2012. Although credit is
still tight throughout the United States, it is loosening with an overall increase in auto, business, and
individual loans. The United States has experienced 17 straight months of job growth with the last
quarter recording 245,000 jobs added a month. In Colorado, the largest job growth is a result of the
booming oil and gas industry. Strength in the tourism and agriculture industries also are helping bring
Colorado out of the recession.
Ms. Mullis explained to the JBC that Colorado's revenue was $108 million higher than projected in
December. Most importantly, General Fund revenue for FY 2012-13 will be $164.5 million higher than
the 4% required reserve. OSPB Director Sobanet presented a very similar revenue forecast. (There was a
less than 1% difference between the two forecasts.) Both forecasts showed that Colorado's personal
income growth would not exceed 5% this year; therefore, SB 09-228 funding for transportation will not
be implemented. Legislative Council predicted that in 2013 personal income growth would hit 5.1%,
thus triggering the revenue flow directed by SB 09-228.
Although the revenue forecast was positive overall, both Legislative Council and OSPB stated that they
remain cautious about state and national economic growth. Currently, growth is being constrained by
the expiration of pay roll tax cuts and federal sequestration. Also, due to high gas prices, the European
debt crisis, continuing decline of housing prices, and slow personal income growth all parties remain
reserved about whether this recovery is sustainable. Ms. Mullis and Director Sobanet also did not
include Medicaid caseload growth in their revenue forecasts. Legislators seemed very concerned about
the high gas prices. Chair of the JBC, Representative Gerou, asked how the high gas prices would affect
an economic recovery and retail sales in Colorado. Staff responded that gas prices actually have less of a
negative effect on the United States economy than it did thirty years ago because of efficiency
measures. Interestingly enough, in Colorado, high gas prices actually help the statewide economy
instead of hurt it due to the large oil and gas industry in Colorado.
OSPB suggested that the extra general fund revenue for FY 2012-13 should be used to ease the cuts on
higher education, K-12 education, and local government water project grants. Senator Brophy directly
asked Director Sobanet if the Governor's office considered enacting the Senior Homestead Exemption
since the revenue came in higher than expected. Director Sobanet made it very clear that the Governor
intended to ask for the continued suspension of the Senior Homestead Tax Exemption. Both Director
Sobanet and Ms. Mullis informed the committee that possible federal sequestration (which could reach
50% for some programs) was not factored into the revenue forecasts. JBC Chair Cheri Gerou wrapped
up the presentation with a note of caution that although the general fund revenue was higher than
expected, $164.5 million was not that much money in the scheme of the state’s budget. The JBC has the
remainder of this week to completed figure setting for the FY 2012-13 state budget. The Long Bill is
scheduled for introduction on March 26th.
Office of State Planning and Budgeting March Revenue
Forecast: http://www.colorado.gov/cs/Satellite?c=Document_C&childpagename=GovHickenlooper/Doc
ument_C/CBONAddLinkView&cid=1251618223917&pagename=CBONWrapper
Legislative Council March Revenue
Forecast: http://www.colorado.gov/cs/Satellite?c=Document_C&childpagename=CGALegislativeCouncil%2FDocument_C%2FCLCAddLink&cid=1251618268735&pagename=CLCWrapper