State revenues projected to drop an additional $40 million
Legislative economists project that Colorado will face an additional $40 million shortfall in its General Fund budget for fiscal year 2009-10 due to a continued drop in revenues since their September forecast.
While they conclude the recession has ended, the council economists predict the path to recovery will be "long and rocky." These new estimates mean the governor and legislature will have to take additional actions to bring the budget for the current year into balance.
Gov. Bill Ritter proposed a series of measures earlier this year to close the $561 million budget shortfall based on September's revenue forecast. Therefore, the Legislative Council's estimate did not take these proposals into consideration in calculating their shortfall because some still needed to be acted upon by the legislature.
The Council's estimated shortfall, based on current law, totals $600.6 million for fiscal year 2009-10. This is roughly $40 million more than they estimated in September.
The Legislative Council economists see slow growth ahead for fiscal year 2010-11. They project gross General Fund revenues will grow by 4.4 percent, or $175 million, next fiscal year. However, because there are a number of one-time cuts and revenues in the current budget that are not available next year, they estimate that the total funds available to the legislature for next year's budget will be $426 million, or 6.3 percent less than this year.
Tough budget times are likely to continue in the coming years. The Legislative Council staff projects a shortfall of $897.4 million for fiscal year 2010-11. They see a cumulative budget shortfall, counting this fiscal year and next, of $1.5 billion. Again, they do not include any of the actions taken by Gov. Ritter and the legislature to balance this year's budget in arriving at these estimates.
While they indicated that the recession in Colorado is likely over and the recovery is starting, economists project the climb back to pre-recession levels will be gradual. They forecast the economy will grow at a slower rate in the coming year than they predicted in September. While the drop in consumer spending has bottomed, they estimate that sales tax revenues will decline by a greater amount this fiscal year and grow at a slower rate next fiscal year than they predicted in September. On the other hand, they project total income taxes will decline at a slower rate this fiscal year but increase more slowly next fiscal year than they estimated in September.
The Legislative Council economists have grown more cautious about the strength of the economy since their September forecast. They estimate larger declines in employment, total state personal income and wage and salary income for this year -- and slower growth in these measures next year than they did in September.
Fiscal year 2009-10 is the last year of the time-out under Referendum C, and beginning in fiscal year 2010-11 any revenues above the new excess state revenue cap created by Referendum C will have to be returned. However, revenues are not expected to exceed the cap in any year through fiscal year 2011-12.
The amount of revenue the state retained under Referendum C's time-out is currently estimated to total $3.6 billion. Interestingly, this is the exact amount the Legislative Council economists projected would be retained under Referendum C in their September 2005 revenue forecast, issued about a month before the election in which voters approved Ref C.
The governor's economists in the Office State Planning and Budgeting also released revenue estimates today. They project that General Fund revenues will be sufficient to fund the fiscal year 2009-10 budget after accounting for the budget-balancing actions offered by the governor earlier this year. While they project that gross General Fund revenues will decline next year by $49.7 million, they project there will be enough revenue to cover the budget submitted by the governor for fiscal year 2010-11.