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Gov. Hickenlooper's budget office releases economic and revenue forecast

Friday, March 18, 2011 — Gov. John Hickenlooper’s Office of State Planning and Budgeting today released a new economic and revenue forecast. The “March 2011 Colorado Outlook: Economic and Fiscal Review” was presented to the Joint Budget Committee.

“A faster-than-expected rebound of income tax is expected to bring an additional $161.3 million into state coffers this fiscal year,” said Henry Sobanet, executive director of the Governor’s Office of State Planning and Budgeting. “Because we believe much of this increase is from one-time sources from capital gains and higher profits, these funds may mitigate some budget cuts but a lot of tough work remains to close our structural gap. Gov. Hickenlooper’s first choice for scaling back reductions would be in K-12 education.”

No decisions have been made about how the $161.3 million will be spent. Until then, a recent law change requires the money go to the State Education Fund, which has been close to insolvency during the economic downturn. Important next steps include the JBC’s final decisions on key program budgets as well as other bills that are required for budget balancing. This process will continue next week.

“The forecast indicates that Colorado’s economy is expected to continue to grow,” Sobanet said. “However, global conditions such as the earthquake in Japan, rising food and energy prices and political unrest in the Middle East create heightened risks for unfavorable economic conditions in the coming months. We are continuing to monitor all economic indicators.”

Highlights from the “March 2011 The Colorado Outlook: Economic and Fiscal Review”:

  • Compared with the December forecast, income taxes are rebounding at a faster-than-expected rate.
  • The growth in revenue this year is expected to mostly be a one-time bounce because the economy continues to struggle with burdensome forces related to the economic downturn. The forecast for FY 2011-12 General Fund revenue is only slightly higher than the assumption used in the Feb. 15, 2011, budget amendment request from Gov. Hickenlooper.
  • Using the Governor’s FY 2011-12 proposed budget, the state will end the fiscal year with a reserve equal to 3.6 percent, slightly below the requested reserve level of 4 percent.
  • Gov. Hickenlooper’s proposed FY 2011-12 budget is 3.6 percent lower than in FY 2007-08. Excluding the proposed revenue measures, General Fund revenue in FY 2011-12 will be 8.1 percent or $625.3 million below the FY 2007-08 level. Thus, a structural gap remains. The Governor will propose measures at the appropriate time to close the remaining gap in the FY 2012-13 budget.

The complete March 2011 Revenue Forecast is available by clicking here.