DENVER — Monday, March 19, 2018 — The Governor’s Office of State Planning and Budgeting (OSPB) today released its quarterly economic and revenue forecast.
General Fund revenue is experiencing additional expected growth compared to the December 2017 revenue forecast. General Fund revenue is forecast to increase 12.9 percent in FY 2017-18. General Fund revenue is projected to increase at a modest 3.2 percent in FY 2018-19 due to lower employment growth in a tight labor market and as income tax revenue grows more slowly.
“Today’s economic forecast is good news and gives us a chance to put additional dollars toward transportation and education,” said Governor John Hickenlooper. “Our proposal outlines a one-time $500 million allocation to the $9 billion transportation project list, $200 million to education and the remainder to address other pressing issues the legislature is considering.”
Along with the new revenue forecast, the OSPB delivered a letter to the Joint Budget Committee outlining Gov. Hickenlooper’s plan for allocating new revenue.
In FY 2018-19, the Governor’s plan calls for one-time infusions of $500 million to transportation and $200 million to K-12 education. Of the one-time money available, this leaves $96 million for other priorities under debate this legislative session.
In FY 2019-20, the Governor’s plan calls for allocations as follows:
- Transportation: $150 million
- K-12 Education: $100 million to the State Education Fund
- Water Infrastructure: $15 million
- State Buildings: $15 million for controlled maintenance or capital renewal
- Affordable Housing: $10 million
- Broadband: $10 million
The General Fund revenue forecast for FY 2017-18 is higher by $309.3 million, or 2.8 percent relative to the December forecast. The forecast for FY 2018-19 is higher by $207.3 million, or 1.8 percent. The recent enactment of federal tax law changes under the 2017 Tax Cuts and Jobs Act, which is expected to increase Colorado tax revenue, has contributed significantly to these upward revisions. The estimated impacts of the federal law were excluded from the December forecast until they could be more refined.
Under the Governor’s budget request, the General Fund reserve is projected to be $492.0 million above the required statutory reserve amount of 6.5 percent of appropriations in FY 2017-18. The Governor’s budget request raises the reserve requirement to 8.0 percent in FY 2018-19. Under this forecast and the Governor’s budget request, the General Fund reserve is projected to be $548.1 million above the higher required reserve amount in FY 2018-19. This is net of the proposed transfers to transportation ($248.2 million) and the Capital Construction Fund (additional $35.6 million above the November 1, 2017 budget request).
Colorado’s economy is on solid footing with strong employment growth and expectations of an ongoing expansion. New business formation continues to grow, while Colorado oil production is at record levels. Stabilizing farmland values and increases in energy prices and production have recently supported Colorado’s rural areas. Looking forward, higher costs of living and tighter labor market conditions are expected to constrain further growth through the forecast period.
Under current law and this forecast, TABOR revenue is projected to be below the cap by $74.9 million in FY 2017-18 and $276.8 million in FY 2018-19. TABOR revenue is expected to remain below the cap by $206.5 million in FY 2019-20.
Click here for the full Revenue and Economic Forecast from the Governor’s Office of State Planning and Budgeting.