The Governor’s Office of State Planning and Budgeting (OSPB) released its quarterly economic forecast this morning and according to the forecast, the outlook is good. This appears to run counter to what other states are predicting, but then again, recent history has shown that Colorado has generally lagged behind national downturns.
“Colorado’s economy is strong and will continue to grow in the months ahead. Our administration is saving people money on everyday items, sending $750 to individuals and $1,500 to joint filers to help provide immediate economic relief, as well as providing property tax relief,” said Governor Jared Polis as the forecast was released.
“I am committed to investing in education, saving people money on healthcare, and continuing to ensure Colorado is affordable for all, and one of the best places to start or run a business,” he added. “This new projection includes the welcome news that Coloradans will get even more back in tax refunds when they file next year in April,”
“Despite global economic challenges, Colorado’s economy has continued to show resilience and strength, with the number of jobs in Colorado now exceeding pre-pandemic levels by more than 55,000 and our unemployment rate remaining below the national average,” said the Joint Budget Committee (JBC ) Vice Chair Sen. Chris Hansen, D-Denver.
“Colorado’s economy continues to grow and outpace the nation with high numbers of job openings, despite the pressures from global inflation and rising federal reserve interest rates that have increased costs for families,” said JBC Chair Julie McCluskie, D-Dillon. “… The general fund forecast remains very solid with high levels of reserves that will protect the state from downside risks to the forecast – exciting news that could allow us to once again maintain strong funding for K-12 education and put more resources into classrooms to prepare our students for success.”
Colorado continues to have a tight labor market, with significantly more job openings than before the pandemic. The state has now exceeded pre-pandemic job numbers by more than 55,000, 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.
“Our state’s economic outlook remains resilient, with above average wage growth and a high labor force participation rate helping to offset persistent inflation,” said JBC member Sen. Rachel Zenzinger, D-Arvada. “We created a budget that delivers for Colorado families by investing in our schools and developing our workforce, lowering the cost of housing and health care, and saving taxpayers money, and the results are paying off as Colorado continues to outperform its peers despite the global economy headwinds.”
Nationally, pandemic-induced inflation continues to persist as an economic concern and the country is rebounding from the first half of the year.
As a state, Colorado has continued to outpace other states showing a strong economic performance. The state has a 3.4 percent unemployment rate, and it is second in the country for job participation rate.
This year, Governor Polis announced the “100 ways the Polis Administration is saving Coloradans money” initiative. It includes:
- Saving Coloradans $700 million through property tax relief for small businesses, farmers, and ranchers,
- Cutting the cost of a Colorado State Parks Pass by more than half through the Keep Colorado Wild Pass starting in 2023,
- Lowered vehicle registration costs,
- Providing free transit and bus fares across Colorado this past summer and next summer.
The OSPB economic forecast projected General Fund revenue in FY 2021-22 to have grown 23.7 percent, to $17.7 billion, as income and excise revenues grow at 20 percent or more.
The projection for FY2022-23 is $130.8 million lower than the June forecast, as reduced withholdings and estimated payment income revenue expectations more than offset increased sales tax revenue. This results in revenues falling by 7.2 percent in FY2022-23, before growing again by 1.7 percent in FY2023-24.
The downward revision in FY2023-24 of $551.1 million is due to reduced expectations in future individual withholdings and estimated payments as consumer and labor demand begin to fall. In FY2024-25, revenues are expected to grow more quickly, at 5.6 percent.
Once again, Colorado’s TABOR legislation adds to the uncertainty of the state’s cash fund projections. With a banner revenue year in FY2021-22, cash fund revenue subject to TABOR increased by 20.0 percent to $2.69 billion. Instead of holding that funding for a coming rainy day, Colorado residents have gotten refunds.
But in FY2022-23 inflation’s impact may cause residents and tourists to tighten their belts and their budgets, revenue is expected to fall 3.6 percent, followed by a 0.5 percent increase in FY 2023-24 and 4.0 percent growth in FY2024-25.
See the full forecast here.