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March 15, 2024

JOINT RELEASE: Forecast Shows Strong Economy, Constrained State Budget

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 March quarterly economic forecasts:

“Colorado’s growth is an indicator of a strong economy, yet we are cautiously optimistic as we place the final touches on the budget,” said JBC Chair Rep. Shannon Bird, D-Westminster. “I’m excited that we are in a position to fulfill our promise to students and educators by eliminating the budget stabilization factor. This will put more money into Colorado classrooms further increasing teacher pay, reducing class sizes, and ensuring students have the resources they need to succeed. We will soon finalize a fiscally responsible and balanced budget that represents our values, sustains our economic growth, uplifts families and invests in critical services.”

“The March economic forecast represents the final set of data before we finalize this year’s budget,” JBC Vice Chair Sen. Rachel Zenzinger, D-Arvada, said. “Today’s cautiously optimistic outlook reaffirms our budget work thus far: to be bold in supporting critical services by fully funding schools and health care provider rates, but to be responsible and constrain spending so we remain well-prepared for the future. I’m pleased that despite a challenging fiscal landscape, we’re well-positioned to fulfill our obligations to schools and families, close gaps in workforce shortages, and fund critical behavioral and mental health services – all without overextending state resources.”

“This economic forecast shows steady economic growth and lays the foundation for us as we craft a budget that invests in Colorado’s families and workers," said Rep. Emily Sirota, D-Denver. “Even with our strong economy, Colorado’s unique fiscal constraints make it challenging to fund new investments. Our goal this year is to prioritize funding for our public schools and early childhood education, working families and the critical community-based services Coloradans rely upon to keep us safe, protect our health, and thrive.”

“Today’s economic forecast tells two stories,” Sen. Jeff Bridges, D-Arapahoe County, said. “The first story is that Colorado’s economy is strong. Unemployment rates remain low while the number of jobs and income levels are growing. However, the second story tells us that because of TABOR, our state resources remain tight and we must be cautious with this year’s fiscal commitments. I look forward to integrating today’s forecast into the final days of budget drafting to ensure we deliver for hardworking Coloradans and set our state up for success.” 

Colorado’s economy continues to grow, with an unemployment rate of 3.4 percent and total employment growth clocking in at around 2.5 percent in 2023, adding, in aggregate, 57,600 jobs over the past year. Year-over-year wage gains of 6.2 percent outpaced the average rate of inflation which grew by 3.9 percent.

The Legislative Council Staff (LCS) forecast anticipates General Fund revenues to be $17.6 billion in FY 2023-2024 and $18.7 billion in FY 2024-2025, a 5.9 percent increase year-over-year. For FY 2024-25, the TABOR surplus is expected to be $1.91 billion; however, budget limitations will continue to constrain investments in state services.

The Office of State Planning and Budgeting (OSPB) revised its General Fund revenue expectations up relative to the December forecast to $17.9 billion in FY 2023-24, while FY 2024-25 revenue was revised down to $18.1 billion. OSPB anticipates General Fund revenue will grow 5.8 percent to $19.1 billion in FY 2025-26, due to stable income and sales revenue growth.

The March forecast projects that the economy will realize a soft landing, with no recession anticipated in 2024, and Colorado is expected to modestly outperform the U.S. economy. However, the economy is still susceptible to a downturn if confronted with major shocks. 

Stronger than expected wage gains could boost sales and income tax collections above the amounts projected in this forecast, which anticipates a continued, slowing economic expansion. Some risk factors that could improve the forecast include a faster resolution to inflationary pressures and more accommodative monetary policy. Some risk factors that could negatively impact the forecast include potential tightening of household finances that could hurt consumption and high borrowing costs that could discourage investment.

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