Officials from the Legislative Council and Office of State Planning and Budgeting briefed Joint Budget Committee members and other lawmakers Friday on quarterly revenue forecasts.
The upshot: The General Fund budget for the current fiscal year is balanced, so there’s no need to make any additional cuts there, though there is still a projected shortfall for the 2010-11 budget of up to $320.6 million and a shortfall in 2011-12 of up to $579.4 million.
Still, for the current fiscal year, that’s a $230 million improvement over the December forecast.
“We got this wrong in December,” Colorado Legislative Council Chief Economist Natalie Mullis told lawmakers. “Our expectation for corporate profits were too low then. Since then, corporate profits have done better than expected because companies were flexible and cut costs quickly.”
In fact, corporate income taxes have exceeded December projections by $47 million and individual income tax revenue is up by $112 million.
“That’s a lot of money, and it’s really wonderful to get that much extra money, but it’s really only a small change in our overall revenue forecast,” Mullis said.
Economist Fiona Sigalla told lawmakers that while the recession may have ended, the recovery in Colorado is fragile. Positives include the state’s well-educated workforce and energy and high tech industries, both of which position Colorado to reap rewards as the economy expands.
But the state’s weak real estate market, high debt levels and large number of vulnerable banks, particularly small banks, remain worrisome, Sigalla said.
“While we have an economy poised to be a leader nationally, problem loans and unprofitable banks will be a drain on our economy,” she said. “We may lag the country in this recovery.”
The forecasts are the last before the legislature acts on the 2010-11 state budget bill. The JBC has finished much of the work on that measure and it’s expected to be introduced in the House shortly, once adjustments have been made to reflect the latest revenue estimates.
Revenue forecasts have been dropping for the last several quarters, forcing both Gov. Bill Ritter and the 2009 and 2010 legislatures to repeatedly make cuts and fund transfers to keep state spending in balance.
The latest numbers are not expected to have a major impact on education spending, for which significant cutting plans already are in place.
Earlier this session, lawmakers trimmed $110 million from state aid for K-12 schools and declined to cover another $20 million that schools otherwise would have received for enrollment growth.
The 2010-11 school finance proposal (House Bill 10-1369), introduced Wednesday, would cut state support to schools in 2010-11 to $5.4 billion, $260 million less than actual state support in the current 2009-10 budget.
The $260 million may or may not be the cut schools eventually receive, depending on other things that may happen before the legislature adjourns in May, such as other adjustments in the main budget bill. Some observers expect the cut could climb to at least $280 million. A Joint Budget Committee staff analysis has warned lawmakers might need to plan for a cut of $500 million.
Compared to actual 2009-10 spending, the cut is in the neighborhood of 6 percent. When compared to what full funding would have been under the terms of Amendment 23, the reduction is more than 8 percent.
Ritter’s 2010-11 higher education plan, which has largely been accepted by the JBC, calls for a cut of about $60 million in state and federal stimulus support. But overall college revenues, about $1.9 billion, would be about the same as this year if the proposed overall 9 percent undergraduate tuition increase for residents is implemented. The higher education system is expected to face more serious budget problems starting in 2011-12.
Jane Urschel, Deputy Executive Director of the Colorado Association of School Boards, said that the latest economic forecasts – while not the disaster they might have been – do little to quell worry about the future of Colorado schools.
She called the proposed school finance bill “a wake for the demise of Amendment 23,” the constitutional amendment Colorado voters approved in 2000 that locks in increases in state spending on k-12 education to at least the rate of inflation.
“There were Education Committee members who were weeping,” Urschel said, “because we are no longer going to fund Amendment 23, not for the next couple of years at any rate.
“The recovery indicated here won’t be anything but slow,” she added. “I just think what it means for K-12 is that there’s still a lot of trouble for us ahead, funding-wise, particularly in the year 2011-12.”
Do your homework
Read the memorandum released by the Office and State Planning and Budgeting regarding the March 2010 Revenue Forecast.
Read the March Economic and Revenue Forecast from the Colorado Legislative Council Staff.
See our Archive of EdNews stories about budget issues.
Check out our Budget Cuts Info Center