Colorado Revenue Forecast Shows Modest Increase

DENVER — Friday, Dec. 20, 2013 —  The State’s general fund budget forecast for the current budget year (FY 2013-14) as well as for FY 2014-15 is 1 percent higher than the September forecast, the Governor’s Office of State Planning and Budgeting (OSPB) announced today. General fund revenue comes mostly from income and sales taxes.

This modest increase reflects tax collections to date. OSPB continues to expect a pause in the robust growth rates that certain tax revenue sources have exhibited since the end of the Great Recession. In particular, income from investments sales likely spiked on a one-time basis last year.

Under this forecast and current law spending levels, the State’s reserve is projected to be $241 million above the required amount for FY 2013-14. However, expected budget supplemental requests and the impacts of the recent floods will reduce this amount substantially. These changes will be requested in early January 2014.

Of any excess in FY 2013-14, $30 million will go to the Colorado Water Conservation Board (CWCB) Fund, and 75 percent of the remainder will be credited to the State Education Fund.

Under the governor’s Nov. 1 budget request, the General Fund reserve requirement was raised to 6.5 percent of appropriations in FY 2014-15. Even with this increase, the State is projected to end the year with $95.8 million in excess reserves.

“Economic activity in Colorado is a primary factor determining State revenue levels,” the OSPB reports. “The state’s human capital and entrepreneurial energy is helping growth in today’s more technological and knowledge-based economy. Colorado’s specialization in diverse industries is also helping its economic foundation.”

OSPB reports that cash fund revenue subject to TABOR will grow 2.9 percent to $2.62 billion in FY 2013-14. This growth will be led by an increase in severance tax revenue as well as transportation-related revenue. Smaller increases in these sources will contribute to slower cash fund revenue growth of 0.9 percent in FY 2014-15. Revenue from the hospital provider fee will decline over this period as more Medicaid program support is received from the federal government. Additionally, limited gaming revenue will remain sluggish as gaming activity in Colorado has not returned to levels observed before the Great Recession.

The OSPB forecast does not project that the State will reach its TABOR revenue cap through FY 2015-16. The State is, however, within 4 percent of reaching the cap in FY 2013-14 and within 3 percent of the cap in FY 2014-15 and FY 2015-16. Thus, it could be reached with higher than expected growth in income and economic activity over the next few years. If revenue exceeds the cap, the State would need to refund the excess revenue or ask voters to retain it.