Revenue forecast brings good cheer
The Colorado Statesman
The state unwrapped an early holiday present on Dec. 20 when a quarterly forecast showed this year’s tax revenues could be $231 million higher than earlier predictions, allowing Gov. John Hickenlooper to restore $89 million he had earlier proposed cutting from K-12 education.
“The cuts to K-12 education in next year’s budget were the last and hardest to make,” Hickenlooper said. “That’s why we want those cuts to be the first restored.”
The news, he added, was “a bit of holiday cheer” for lawmakers weighing continued cuts to state spending.
Based on a stronger-than-expected economy‚ with General Fund revenues up an anticipated 3.2 percent over a September projection — the governor’s office planned to amend its budget request to the Joint Budget Committee to ask for an additional $110 million for the State Education Fund, $30 million more for higher education financial aid, and $8 million added to local severance tax grants. (The revised budget figures still include substantial cuts to higher ed and severance grants.)
Gov. John Hickenlooper briefs reporters on a revised quarterly revenue forecast as Office of State Planning and Budgeting executive director Henry Sobanet stands by to answer questions on Dec. 20 in the governor’s office at the State Capitol.
Photo by Ernest Luning/The Colorado Statesman
The governor also wants to devote $8 million more to help low-income seniors pay property tax, rent and energy bills — bringing the total to $17.5 million — though his request won’t restore the entire $98.6 million “homestead exemption” that gives seniors a break on property taxes due on homes they’ve owned for at least a decade.
“We’ve been waiting for this kind of good news,” said House Minority Leader Mark Ferrandino, D-Denver. “Along with the recent decline in the state jobless rate, this new sign of a more robust economy is beginning to look like a trend.”
Republican lawmakers lauded the revised projection as good news for the state’s economy but said seniors should get the homestead exemption and that lawmakers still need to fix runaway entitlement spending.
“We’re very pleased to be able to say that the state’s economy is recovering,” Hickenlooper told reporters last Tuesday. “The rebound has occurred across a number of different industries,” he said, adding that he was pleased to see “clear trends” showing improvement in the state’s unemployment rate, which has dropped from 8.6 percent to 8 percent in recent months.
While the governor and his budget chief, Henry Sobanet, cautioned that the state is still struggling — “Colorado’s certainly not out of the woods yet,” Hickenlooper said — the trends are pointing in the right direction. In particular, Hickenlooper said, the manufacturing and the oil and gas industries are showing growth “at significant levels,” and the economy as a whole looks to have shed some of the sluggishness evident this summer.
“It doesn’t mean we can relax or slow down on our efforts to promote businesses, to reduce regulations and red tape, but this is definitely a good day,” Hickenlooper said.
“While I am disappointed that Gov. Hickenlooper continues to propose a property tax increase on Colorado’s seniors most in need, Colorado’s slow economic recovery gives us reason for optimism,” said House Majority Leader Amy Stephens, R-Monument, in a statement.
Hickenlooper told reporters that suspending the property tax break for seniors — a budget-balancing tool invoked by Republicans and Democrats alike over the last decade — was still necessary, despite the projected revenue gains.
“We’d like to restore it,” he said. “We just don’t see where the other revenues are coming from unless you cut K-12 education or higher education.” His budget proposal, he said, will provide more money “for those who are the neediest of our seniors.”
JBC member state Rep. Jon Becker, R-Fort Morgan, said the budget adjustments highlight underlying problems with state spending.
“Today’s forecasts show that entitlement spending continues to threaten education funding in Colorado. House Republicans are prepared to lead the state in developing a Colorado-specific safety net to help those citizens most in need,” Becker said in a statement. “We hope that Gov. Hickenlooper and our friends across the aisle will provide the necessary bipartisan leadership to find a program that best fits the needs of our state’s most vulnerable citizens.”
Ferrandino, who served on the JBC until he was elected to lead House Democrats last month, warned against popping the champagne corks prematurely.
“It’s too soon to declare victory over the Great Recession,” he said. “Now is definitely not the time to ease up on our economic development and job creation efforts.”
It’s a point Hickenlooper also made, saying his administration doesn’t plan to “get carried away” with the optimistic forecast and instead would “be very prudent” reacting to signs of faster growth.
“The overall economy is still expanding only modestly as it continues the difficult process of rebuilding from the credit and housing boom and bust,” said Sobanet, the executive director of Colorado’s Office of State Planning and Budgeting, in a statement announcing the new numbers.
This forecast contrasts sharply with the one he released three months ago, which he reminded observers was considered “too optimistic” in some quarters. Sobanet said the revised projections incorporate “trends we were unable to see and perceive, and some risks that we were worried about ended up going away.”
Still, at a briefing in the governor’s office, Sobanet said the European fiscal crisis could endanger the current rosy outlook.
“The biggest potential change is a major disruption in Europe,” he said. “If the Eurozone breaks up, this forecast is wrong.”
The risk is two-fold, Sobanet said. Problems in Europe could jolt worldwide banking markets, leading to a credit disruption like the one that stopped the economy in its tracks three years ago. And the continent buys a lot of goods and services from the state, so if the European economy slows down it could cost Colorado businesses.
Hickenlooper added that partisan bickering in Congress — which he contrasted with what he termed Colorado’s “collaborative” model on budgetary matters — could also derail optimistic trends. Shaking his head, he lamented “the inability of Washington to do more than find one-month solutions,” and said congressional gridlock only adds to the uncertainty in Europe.
“Either one of those could deflate whatever momentum there is in the economy,” he said.
The right approach, Hickenlooper said, is to “maintain true vigilance” and “continue to look for less expensive ways to do our jobs, to find increases in productivity.”