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December 20, 2022

JOINT RELEASE: Colorado’s Economy is Strong, But Budget Outlook Remains Constrained

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 December economic forecasts.

“Despite national headwinds, Colorado’s strong economy continues to grow and gain jobs, with the state’s unemployment rate well below the national average,” said JBC Vice Chair Shannon Bird, D-Westminster. “As we look at the road ahead, it’s clear that our costs will soon exceed what we are able to spend each year, so we’ll look to make smart investments that strengthen our economy, prioritize education, reduce crime and protect critical services. I’m excited to work with my colleagues to pass a balanced budget that sustainably increases funding for public schools, helps build an economy where everyone has a fair shot, and moves Colorado forward.”

“Today’s forecast is a reminder that while Colorado’s economic outlook remains strong, we are facing fiscal challenges that will test our limits and put enormous pressure on the state budget,” said JBC Chair Rachel Zenzinger, D-Arvada. “We’ve fought hard for the gains we’ve made in recent years on education, housing, health care, and more. Now, we must work to protect those critical investments while fulfilling our funding commitments and keeping our budget on a sound and sensible path so that Colorado remains strong for generations to come.”

“While our economic outlook is bright, our state’s fiscal constraints and persistent inflation mean that we could soon face a daunting funding shortfall that jeopardizes the services that Coloradans depend on,” said JBC Member Emily Sirota, D-Denver. “We’ve made tremendous progress to boost funding for public schools, increase economic assistance to Colorado families, invest in infrastructure and transit, and direct resources to make housing more affordable. This year, we will continue our efforts to lower costs for Coloradans and deliver the services that everyone in our state needs.”

“Colorado’s economy continues to do better than the rest of the country, but because TABOR limits are tied to the cost of washing machines instead of wages we could face a dangerous budget shortfall," said JBC Member Jeff Bridges, D-Greenwood Village. "As a state we spend more on people than anything else. If we can't keep pace with real wage growth we'll have to cut critical state services that people depend on, from education to transportation to state parks. The budget is a moral document that reflects what we value as a state, and we could face some hard choices in the months ahead. Thankfully the folks I serve with on JBC from both chambers and both sides of the aisle are exactly the kind of good and intelligent people you want making those tough decisions."

Colorado continues to have a tight labor market, with significantly more job openings than before the pandemic, and the unemployment rate ticked down to 3.5 percent, below the national average of 3.7 percent. While wage gains in Colorado are outperforming the national average, pressure from increased prices are impacting household wealth. The state has now exceeded pre-pandemic job numbers with far more job openings than before the pandemic, and the majority of sectors have recovered the jobs lost during the pandemic. While inflation remains high, it is projected to decline next year with energy and transportation costs already easing in the state.

The Legislative Council staff (LCS) forecast anticipates General Fund revenues to be $16.87 billion in FY 2022-2023 and $17.35 billion in FY 2023-2024 – a $707 million decrease for FY 2022-2023 and a $559 million decrease for FY 2023-2024 as compared with the earlier September revenue forecast. The forecast anticipates General Fund revenues to be $18.195 billion for FY 2024-2025.

The Office of State Planning and Budgeting (OSPB) anticipates that General Fund revenue will be $16.8 billion for FY 2022-2023, which OSPB revised upward by $412.2 million relative to its September estimate. For FY 2023-2024, OSPB projects General Fund revenue will be close to $16.5 billion, which OSPB revised downward by $225 million relative to its September estimate. For FY 2023-2024, OSPB estimates that General Fund revenue will be $17.6 billion. LCS anticipates that budget writers will only have $1.32 billion to address caseload increases, inflationary pressures and spend or save this year.

The forecast anticipates continued growth despite escalating risks of a near-term recession. Evolving monetary policy, the war in Ukraine and a housing market correction are upside risks to the forecasts. A sustained drop in energy prices, resolution to the war and a stabilized supply chain are upside risks.  

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