State lawmakers get a dose of good news on budget
State revenues are expected to be $116 million higher this fiscal year than projected in December, according to legislative economists. When coupled with cuts and actions already taken by the legislature to balance the budget this session, the state is projected to end the current fiscal year with a $447 million surplus. By law, these funds will be transferred to the State Education Fund.
Legislative economists expect revenues to be $99 million higher in fiscal year 2011-12, which will help to reduce the projected shortfall.
When coupled with the budget-balancing actions taken this session, the projected shortfall drops from $1 billion to $450 million. Additional revenue accounted for $215 million of the drop, and actions to balance the budget accounted for the rest. This shortfall includes a $300 million increase in spending resulting from caseload growth and inflation and assumes that the $447 million surplus from this fiscal year is used to cover costs for next fiscal year.
The governor's economists see stronger revenue growth this year over their December projections but a drop in revenue next year. They project revenue in the current fiscal year to come in $161 million higher than estimated in December. As a result, they project the state will end the fiscal year with a $173 million surplus, all of which will be transferred to the State Education Fund.
However, they estimate the state will bring in $285 million less for fiscal year 2011-12 than was projected in December. They also estimate that the General Fund expenditures will be reduced by $282 million, compared to the December forecast. Based on this projection and the governor's budget package submitted in February, the state will be able to cover expenses and end the year with a 3.6 percent reserve. This is $32 million less than the governor's requested 4 percent reserve.
Part of the reason tax revenues are higher this year is that Colorado received a one-time boost when an individual taxpayer settled up on $40 million in delinquent taxes.
Both sets of economists see the state's economy continuing to grow, but slowly. It is being held back by weakness in the construction and banking sectors, high unemployment, consumer debt and rising energy prices. They are also carefully watching the effects of the earthquake and tsunami in Japan on Colorado's economy.
While this is good news, legislators on the Joint Budget Committee and the state's economists pointed out that Colorado still faces a long-term structural budget deficit. They cautioned that the additional revenue, while welcome, still means difficult decisions on cuts to the state's budget will have to be made.