State budget forecast has some nuggets of good news
Lawmakers received good news on the economic and budget fronts this morning.
State economists now estimate that the Colorado economy will continue to grow, albeit slowly, and generate enough revenue to maintain a balanced General Fund budget this year and next. This is a change from recent years, when the legislature and governor faced declining revenues and the need to make budget cuts.
In one closely watched development, the governor's economists in the Office of State Planning and Budgeting projected that General Fund revenues for the current fiscal year will be $78.1 million above their March estimate. This increase triggers an additional $67.5 million for public schools under the School Finance Act (SB 11-230).
Overall, both Legislative Council Staff economists and the OSPB project the state will end the current year more than $300 million above the required reserve, all of which will be used for public schools – $67.5 million to the Public School Fund and the rest to the State Education Fund ($244 million under the council forecast, and $258 million according to OSBP).
The Legislative Council Staff economists project a bit stronger economic and revenue growth going forward than their counterparts in OSPB. They see General Fund revenues growing by 3.1 percent in FY 11-12 and 5.9 percent in FY 12-13. In contrast, OSPB projects no growth in FY 11-12 and 3.5 percent growth in FY 12-13. In terms of revenues, the Legislative Council staff projects $209 million more in FY 11-12 and $396 million more in FY 12-13.
To put the additional revenues into perspective, the Legislative Council's estimate for total General Fund revenues in FY 12-13 is only $36 million more than the amount collected in FY 07-08, the high-water mark for the state's primary budget. The OSPB projects the state will bring in $355 million less in General Fund revenues than it did in FY 07-08. Yet the number of college students, people receiving Medicaid and students in public schools has grown substantially since then.
Rep. Mark Ferrandino, D-Denver, a member of the Joint Budget Committee, and Natalie Mullis, the legislature's chief economist, pointed out that although projections for FY 12-13 show solid revenue growth, increases in caseloads and costs of providing services must be addressed when developing next year's budget. In fact, Ferrandino cautioned that there would likely be continued budget cuts going forward.
Legislative Council Staff economists predict that Colorado's Unemployment Insurance (UI) Trust fund will return to solvency in FY 11-12 as claims for benefits drop and financing reforms adopted in HB 11-1288 kick in. The wage base for UI charges will increase from $10,000 to $11,000 in 2012 and will be indexed to growth in average weekly earnings for covered employees. New rate schedules will go into effect along with a credit for employers that have few layoffs starting Jan. 1, 2013.
The recent decision by the Colorado Limited Gaming Control Commission to cut the tax rates on gaming beginning July 1 is expected to result in a drop of $300,000 in FY 11-12 in distributions to Community Colleges under Amendment 50.