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Colorado economic forecast shows smaller budget deficit than anticipated

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Sara Wilson
(Colorado Newsline)

Colorado lawmakers will still need to cut a considerable amount of spending during next year’s budget making process, though probably less than the nearly $1 billion anticipated earlier this year.

The budget deficit could be around $672 million, the Legislative Council Staff and the Governor’s Office of State Planning and Budgeting told lawmakers during the quarterly economic forecast on Thursday morning.

“We are a little better off, or rather a little less worse off, than we were before,” said OSPB Director Mark Ferrandino. “We are still looking at a very difficult budget.”

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The number revision primarily comes from a change in the revenue cap set by the Taxpayer’s Bill of Rights, which is determined by population and inflation and dictates how much the government can spend before returning money to taxpayers. Economists predict that the state will collect less revenue subject to that cap, freeing up budget space.

The projected budget deficit, caused by factors including rising Medicaid costs and slowing inflation, will still make it a difficult year for the Joint Budget Committee as they wrestle with where to cut spending while preserving core state services.

“Due to TABOR, our state resources remain tight and we have our work cut out for us to balance this budget,” JBC Chair Senator Jeff Bridges, a Greenwood Village Democrat, said in a statement. “Everyone will have to work together, across party lines, to protect essential services for the people of Colorado and continue efforts to make our communities safer and housing more affordable

Governor Jared Polis will submit a revised budget request the first week of January ahead of when the Legislature reconvenes. His original request from November recommends a series of spending cuts and changes, including some Medicaid provider rate cuts that could become a primary point of tension between lawmakers and his office.

Thursday’s economic forecast did not account for Proposition 130, which requires lawmakers to spend $350 million for law enforcement recruitment and retention. The Legislature does not, however, have to implement that this year and find room for it in the budget.

The Legislative Council Staff’s TABOR surplus estimates for the current fiscal year went down by $14 million from September. They estimate a surplus of $356 million this fiscal year, $844 million next year, and $1.2 billion the year after that. It would trigger the six-tier sales tax refund and various property tax refunds next year.

Expected general fund revenue for the next two fiscal years were revised upward compared to the September forecast from both OSPB and LCS.

“Today’s forecast shows that Colorado’s economy remains strong, with excellent wage growth, slowing housing costs, and healthy reserves,” Polis said in a statement Thursday. “While this economic forecast shows potential challenges could emerge, Colorado’s budget environment remains tight, and the reality is that the legislature must make difficult decisions to deliver a balanced budget.”


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