The Governor's Office of State Planning and Budgeting (OSPB) has released its quarterly economic and revenue forecast.
The June forecast for General Fund revenue is similar to the March revenue forecast. Revenue is projected to increase at a rate of 13.1 percent in FY 2017-18 due to the pick up in economic growth, a rebound in corporate income tax receipts, robust investment income gains, a one-time tobacco settlement payment, and the December 2017 federal tax changes. General Fund revenue is projected to increase at a more modest 4.1 percent rate in FY 2018-19 due primarily to slower income tax revenue growth.
"The entrepreneurs, executives, and indeed the entire workforce in our state have helped make Colorado one of the strongest, if not THE strongest, economy in the country," said Governor John Hickenlooper. "While it's great to see potential revenue growth, we need to remain vigilant and cautious to safeguard the inevitable future downturn."
The FY 2017-18 forecast of recurring General Fund revenue sources is lower by $80.3 million, or 0.7 percent. However, due to the receipt of a one-time $110.7 million settlement payment with tobacco companies related to the terms of the Tobacco Master Settlement Agreement, the overall General Fund revenue forecast for FY 2017-18 is higher by $30.3 million, or 0.3 percent. The forecast for FY 2018-19 is higher by $131.9 million, or 1.1 percent.
The General Fund reserve is projected to be $536.7 million above the required statutory reserve amount of 6.5 percent of appropriations in FY 2017-18. During the 2018 legislative session, the reserve requirement was increased to 7.25 percent beginning in FY 2018-19. The General Fund reserve is projected to be $130.6 million above the higher required reserve amount under this forecast and FY 2018-19's budgeted expenditures. These expenditures include the transfer of $495 million General Fund money for transportation infrastructure pursuant to SB 18-001.
Colorado's economy continues to experience solid growth with expectations of ongoing expansion. Business confidence remains positive, while oil production remains near record levels. Colorado employment growth has accelerated moderately, highlighted by increases in the labor force participation rate and average hourly wages. Economic growth has been widespread across most industries. However, continued tight labor markets and rising home prices are expected to constrain growth throughout the forecast period.
Under current law and this forecast, TABOR revenue is projected to be below the State's revenue cap by $63.1 million in FY 2017-18 and $27.8 million in FY 2018-19. TABOR revenue is expected to exceed the cap by $10.8 million in FY 2019-20. The refund of the FY 2019-20 excess revenue will occur through senior homestead and disabled veterans property tax exemption expenditures in FY 2020-21.