Colorado’s economy continues to look rosy, but state economists still are concerned that market forces nationally and internationally could spark a new recession.
In their quarterly economic forecasts to the Colorado Legislature’s Joint Budget Committee on Friday, state economists said revenues for the last fiscal year, which ended June 30, exceeded revenue caps by nearly $430 million.
That surplus revenue will trigger a mandatory refund under the Taxpayer’s Bill of Rights for tax filers next year, the first $154 million of which would go to fund the state’s homestead property tax exemption for seniors and disabled veterans.
That refund also is to trigger a temporary reduction in the state’s income tax rate, from 4.63% to 4.5%. For now, however, that reduction will only be applied to taxes paid in 2019.
Those same forecasters for the Legislative Council, the Legislature’s nonpartisan research and staffing arm, and the governor’s Office of State Planning and Budgeting also are predicting excess TABOR revenues over the next three fiscal years, which could total as much as $1.7 billion.
Whether that money will be refunded to taxpayers depends on whether voters approve Proposition CC on this year’s November ballot, which calls for retaining all future TABOR surplus money and evenly dividing it between K-12, higher education and transportation. That measure doesn’t include excess TABOR revenue that is to be refunded in Coloradans’ 2019 tax returns.
Overall, the economists are predicting that the state could have as much as $833 million more to save or spend in the current fiscal year before reaching that revenue cap.
Still, economists say that while those numbers look good, they fear the nation’s longest economic expansion in history could soon come to an end, in part because of uncertainty in how President Donald Trump’s trade wars could impact agriculture and business.
“We’ve seen investors and consumers alike with increased perceptions of risks in the economy,” said Lauren Larson, director of the Office of State Planning and Budgeting.
“We have come off a period of fairly robust economic growth, but we’ve seen a slowdown over the last six months or so,” added Kate Watkins, chief economist for the Legislature. “That’s certainly something that gives us pause, but it’s also something that we did expect.”
While the economists are predicting a slowdown, they stopped short of saying the economy would enter a period of contraction.
Both offices point to trade issues with other nations that are leading to higher costs for businesses and consumers. That in turn is causing many companies to curtail adding jobs or investing in new markets.
The economists did add that Colorado’s overall economy is less reliant on exports, and as a result, less exposed to a downturn.
“Colorado is one of the least exposed to the international economy of the states,” said Luke Teater, deputy planning and budget director. “In one ranking, we are the 49th most export-dependent economy in the nation. That’s not to say this is good news and we can ignore the trade concerns or global concerns, but it does show that we’re less exposed to that than many other places.”
The economists said that Colorado’s economy outside of the Front Range continues to remain positive, showing lower unemployment rates and steady, albeit smaller, job growth.
Unemployment figures released Friday by the Colorado Department of Labor and Employment improved to 3.2% for Grand Junction and Mesa County in August, down from 3.5% in July and a full percentage point from a year ago.
Revenue from the state’s severance tax, collected from oil and natural gas producers and other mineral extractions, is expected to decline during the current fiscal year to about $114 million, but rise again by nearly 85% to $210 million during the 2020-21 fiscal year.
The decline is because of lower oil and natural gas prices and higher-than-expected ad valorem tax credits that producers are allowed to deduct because of their property tax burdens, the economists said.
Severance tax revenues are used to fund parks and wildlife, and go as direct disbursements to local governments to offset impacts from energy extraction.