Colorado’s State revenue forecast reflects steady economy and investment growth
DENVER — Wednesday, Dec. 20, 2017 — The Governor’s Office of State Planning and Budgeting (OSPB) today released its quarterly economic and revenue forecast.
The General Fund revenue forecast for FY 2017-18 is higher by $179.2 million, or 1.6 percent, compared to the September 2017 forecast. The forecast for FY 2018-19 is higher by $106.6 million, or 0.9 percent. After modest increases of just 1.7 percent in FY 2015-16 and 3.0 percent in FY 2016-17, General Fund revenue is forecast to increase at a much stronger rate of 9.9 percent in FY 2017-18. The pickup in economic activity this year, as well as the robust stock market and deferred capital gains from 2016 into tax years 2017 and 2018 are the main causes of the upgraded revenue growth estimates.
“There’s no better time to plan for the future than now,” said Governor John Hickenlooper. “These new resources allow us to take needed strides in bolstering education, transportation and our reserves. We look forward to crafting the plan with the General Assembly in 2018.”
Some of what’s driving this outlook is the recent increased momentum in the U.S. and global economy, along with the prospect of federal tax legislation that could boost growth in the short term. Colorado’s economic growth remains solid, with broad-based job growth and low unemployment. The more populated urban areas along the Front Range, with their greater economic diversity of growing industries, continue to outperform other areas of the state. However, the state’s strong expansion has led to higher costs of living and doing business, as well as among the tightest labor market conditions in the country. These factors have contributed to moderating growth, which is expected to continue through the forecast period.
General Fund revenue growth is forecast to moderate to 4.2 percent in FY 2018-19 as job growth slows in the state’s tight labor market and as some of the factors boosting growth this year are expected to be one-time occurrences. This forecast does not incorporate the impacts of new federal tax changes as final legislation had not been enacted at time of publication. OSPB is working to fully understand and estimate the revenue impacts for the State.
Under the Governor’s November 2017 budget request and this forecast, the State’s General Fund reserve is projected to be $104.2 million above the required statutory reserve amount of 6.5 percent of appropriations in FY 2017-18. The Governor’s November budget request raises the reserve requirement to 7.0 percent of appropriations beginning in FY 2018-19. Under this forecast and the November budget request, the State’s General Fund reserve is projected to be $289.0 million above the higher required statutory reserve amount.
Cash fund revenue is projected to decrease 20.5 percent in FY 2017-18 as the Hospital Provider Fee is replaced with the Healthcare Affordability and Sustainability Fee program, which is a TABOR-exempt enterprise in accordance with SB 17-267. The forecast for FY 2017-18 is $85.7 million, or 3.8 percent, lower compared with projections in September due to a large drop in expectations for severance tax revenue. Cash fund revenue is expected to resume growth in FY 2018-19.
TABOR revenue is projected to be $414.3 million under the cap in FY 2017-18, and below the cap by $429.9 million in FY 2018-19 and $413.3 million in FY 2019-20.