DENVER — Monday, Dec. 21, 2015 — The Governor’s Office of State Planning and Budgeting (OSPB) today released its quarterly economic forecast.
As with prior forecasts, the state’s economy is projected to continue to steadily grow, though not at the robust level experienced in 2014. At the present time, the contraction in the oil and gas industry, a tight labor market, and various global economic headwinds are contributing to slower growth in employment levels and in some categories of state taxes. The diversity in the Colorado economy and continued in-migration of new residents adds resiliency against dragging factors.
OSPB expects General Fund revenue to increase 2.1 percent in FY 2015-16. Projected revenue for FY 2015-16 is 1.7 percent lower compared with September. Corporate income tax collections continue to decline and under perform expectations as a result of weak corporate earnings. Further, declining oil prices have also lowered expectations for income tax revenue from royalty payments.
General Fund revenue growth is still expected to rebound in FY 2016-17 from continued economic expansion and with less downward impacts from the factors weighing on growth this fiscal year. However, the FY 2016-17 General Fund revenue growth rate of 6.7 percent is still below the rates experienced in most years of the current expansion.
Under this forecast, the State’s General Fund reserve is projected to be $156.5 million below the required amount of 6.5 percent of appropriations in FY 2015-16. This shortfall is close to the assumption in Governor Hickenlooper’s budget request. Assuming this forecast and the budget request, the State will end FY 2016-17 with $47.1 million above the 6.5 percent reserve requirement. Meanwhile, under this forecast, transfers to capital construction and transportation will occur at full amounts in FY 2015-16, and at half amounts in FY 2016-17. There are no transfers expected in FY 2017-18.
Based on preliminary figures, TABOR revenue exceeded the Referendum C cap by $152.9 million in FY 2014-15 (an additional $3.6 million from prior years will be added to this amount). TABOR revenue will be below the limit in FY 2015-16, and again above the limit by $212.0 million in FY 2016-17, and $340.9 million in FY 2017-18.
Revenue above the Referendum C cap from FY 2014-15 will be refunded through the State Earned Income Tax Credit (EITC) to qualified taxpayers and the sales tax refund to all taxpayers. The sales tax refund is projected to average $19 per taxpayer, while the EITC will average about $217 per qualifying taxpayer.
Under this forecast, there will be no TABOR rebates in FY 2015-16. In FY 2016-17, rebates will go out under the sales tax refund formula and in FY 2017-18, the refund will occur through a temporary income tax rate reduction and the sales tax refund.
Cash fund revenue subject to TABOR in FY 2015-16 will be $103.7 million, or 3.8 percent, higher than FY 2014-15, primarily as a result of growth in revenue from the Hospital Provider Fee. This growth will offset a sharp decline in revenue from severance taxes. Cash fund revenue will increase 1.2 percent in FY 2016-17.
Click here for the full forecast report from OSPB.
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