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JASON SCHROCKECONOMISTCOLORADO LEGISLATIVE COUNCILDECEMBER 7, 2010
The Economy and the State Budget: Tough Times to Continue
The Fall is Over
NBER: Recession Ended June 2009
….but how long will it take to GET BACK UP?
NBER = National Bureau of Economic Research.
The Shape of Things to Come
The “Shape” of Recovery
V-Shape U-Shape W-Shape
Strong Growth Slow Growth Double-Dip
The Debt-Fueled Boom Busted…Leaving us with a Mountain of Debt
Businesses
Households
Financial Sector
Colorado Nonfarm Employment
Sources: History, U.S. Bureau of Labor Statistics. Forecast, Legislative Council Staff September 2010.
Seasonally Adjusted
Business is Doing Better
Source: Bureau of Economic Analysis. Profits and income are with inventory valuation and capital consumption adjustments.
Production of Goods is Expanding (but Needs to Continue) Indices of Manufacturing Activity
Source: Institute for Supply Management. Source: Federal Reserve. Index 2007 = 100
Expanding
Contracting
State Retail Sales, Actual and Forecast
Source: Colorado Department of Revenue and Legislative Council Staff September 2010 Forecast
Property Tax Assessed Values
Actual $92.6 Billion
Source: Legislative Council Staff December 2009 Forecast; Colorado Division of Property Taxation.
State Budget
Three Major Sources of Revenue
FY 2010-11 Total State Budget: $19.5 billion
FY 2010-11 General Fund Budget
$7.0 billion
Source: Joint Budget Committee.
State Budget Challenges and Shortfalls
Declining and Weak Revenue, Combined with “Expenditure Pressures” are Straining the State Budget
General Fund Revenue Outlook
Source: History, Colorado State Controllers Office. Forecast, Legislative Council Staff September 2010 Forecast.
Measures Used to Address Shortfalls
• Transfer of Money from other Funds to General Fund• Increase Revenue (e.g., suspend sales tax vendor fee,
eliminate/reduce tax exemptions and credits, etc)• Federal Money• Refinance Programs using more Cash Funds;
Increase Fees for Services• Salary/Hiring Freeze• Permanent and One time Cuts to Programs• Use of Reserves
FY 2010-11 General Fund Budget Shortfall
$7.0 billion
Source: Joint Budget Committee, Legislative Council Staff, and Office of State Planning and Budgeting.
FY 2011-12 General Fund Budget Shortfall
$7.0 billion
Source: Joint Budget Committee and Legislative Council Staff.
FY 2011-12 General Fund Budget Request
$7.0 billion
Source: Joint Budget Committee and Legislative Council Staff.
FY 2011-12 General Fund Budget Request
$7.0 billion
Source: Joint Budget Committee and Legislative Council Staff.
State’s Oil and Gas Industry is Growing Again
Source: Baker Hughes.
Guess the Chart
Severance Tax Collections ($000)
FML Revenue to Colorado ($000)
Source: Legislative Council Staff September 2010 Forecast.
Transfers of Severance Tax Revenue to General Fund ($121 Million)
Transfers of FML Revenue to General Fund ($77 Million)
More Transfers for FYs 2010-11 and 2011-12?
FY 2010-11 Budget Balancing Plan $118.8 Million in Cash Fund Transfers to General Fund (requires legislature to pass)
Includes $103.8 Million Severance/FML Revenue Transfers $5 Million from Local Government Severance Tax Fund $70 Million from Mineral Impact Fund (FML Revenue) $10 Million from Perpetual Base Account (Severance Tax,
Water Projects) $8.4 Million from Higher Ed Maintenance and Reserve
Acct. $10.4 Million Local Government Permanent Fund
More Transfers for FYs 2010-11 and 2011-12?
FY 2011-12 Governor’s Budget Request Includes $120.2 Million in Cash Fund Transfers to General Fund (requires legislature to pass)
Includes $57 Million in Severance/FML Revenue Transfers $27 Million from Local Government Severance Tax
Fund $15 Million from Mineral Impact Fund (FML Revenue) $15 Million from Perpetual Base Account (Severance
Tax, Water Projects)
