DENVER, CO – Democratic members of the Joint Budget Committee today released the following statements after the Legislative Council staff and the Office of State Planning and Budgeting delivered the September quarterly economic forecasts, both of which project higher General Fund revenue compared to earlier estimates in June but substantial uncertainty and budgeting challenges ahead.
“Today’s forecast has some good news for us, presenting a promising picture of an economy starting to recover from a huge economic hit,” said JBC Chair Daneya Esgar, D-Pueblo. “However, these promising indicators of recovery should be taken with a great deal of caution. The recovery continues to be sensitive to the pandemic, and the substantial increased need for critical services for Coloradans along with the need to restore one-time budget cuts made this year mean we’re not out of the woods yet. The Joint Budget Committee will continue to monitor this volatile economy and respond to the impacts of the pandemic over the coming months. It’s up to all of us to help continue Colorado’s economic recovery — being responsible with mask use, social distancing and other public health precautions can help our state bounce back.”
“The road to recovery was never going to be easy, but what’s more and more apparent is that not all Coloradans are recuperating equally. Low-wage workers have been disproportionately impacted by the pandemic and economic downturn. Without federal leadership, our economy is diverging into separate trajectories, with circumstances rapidly improving for select industries and the wealthiest among us, ” said JBC Vice-Chair Dominick Moreno, D-Commerce City. “We need to combat this trend by creating more equity in our tax code and advocating for additional federal relief. Despite the crowing we’ve heard over an inflated stock market, the crisis is as serious today as it was in March for laid-off workers and struggling businesses.”
“I’m proud of the work the Joint Budget Committee has done so far to stave off the worst effects of a historic budget crisis, but we’re not done yet,” said JBC Member Rep. Julie McCluskie, D-Dillon. “Today’s forecast shows us that while we’ve seen our economy start to recover more quickly than expected, we’ll have to continue our work to protect critical services that support Coloradans who are struggling during these difficult times. Restoring the $1 Billion in cuts made to public schools, colleges and universities must be a top priority. I remain committed to protecting high quality public education in our state. This year we used federal stimulus funds to boost support for small businesses, housing and utilities assistance, and mental health services; we hope that Congress will prioritize additional funds for states so we can continue working to meet the unique needs of Coloradans.”
“I am incredibly proud and hopeful for Colorado’s future. Unlike countless other states, we acted swiftly and decisively in response to the pandemic – protecting us from some of the most destructive consequences to our public health and economy. At the same time, it’s clear from this forecast that our fiscal future is still highly unpredictable in the wake of COVID-19. Some industries and sectors are rebounding strongly while others are still really struggling. So as we navigate the path forward, it’s important that we keep our lens wide and make sure no one is being left behind. But together, I’m confident we can prevent that from happening and build back an economy that works for everyone,” said JBC Member Sen. Rachel Zenzinger, D-Arvada.
The Legislative Council staff (LCS) September forecast estimates that revenues will increase by 10.3 percent in FY 2021-22 after falling 11.6% in FY 2020-21. Due in large part to the General Assembly’s efforts to close loopholes and curb tax breaks for corporations, General Fund revenues are now expected to be $893.8 million more in FY 2019-2020 and $542.1 million more in FY 2020-2021 than anticipated in the June revenue forecast, reflecting modest improvement in the state’s economic outlook. This upward revision is based on higher than expected collections in FY 2019-20 and increased economic expectations for 2020 and 2021.
The LCS estimate indicates there is downside risk to the forecast from a prolonged economic recovery or a double-dip recession due to the resurgence of COVID-19, uncertain business and consumer behaviors, and the potential for increases in unemployment; the LCS economists highlighted that the forecast contains significant uncertainty and that the pandemic will guide the economic recovery. There is upside risk to the estimate driven by a faster economic recovery, a potential COVID vaccine, and additional federal stimulus support.
The September forecast from the Governor’s Office of State Planning and Budgeting anticipates General Fund revenues will increase by 4.7 percent in FY 2021-22 after decreasing by an equal amount in FY 2020-21. OSPB’s September General Fund revenue forecast is up by $895.6 million for FY 2019-2020 relative to its June estimate due to higher than anticipated tax collections in July 2020 after the deferral of income tax filings from April to July. The OSPB General Fund forecast for FY 2020-21 is $1,532.8 million, or 14.6 percent higher than estimated in June.
It is important to highlight that the revenue forecasts do not account for the $2.8 billion in one-time spending reductions the JBC made to balance the FY 2020-21 budget, program caseload growth, and inflationary pressures being placed on essential state services as we continue to respond to COVID, nor the potential fiscal impacts of ballot questions being referred to voters in November. Additionally, there is uncertainty around the availability and flexibility of federal funds in the coming fiscal year.