JASON SCHROCK ECONOMIST COLORADO LEGISLATIVE COUNCIL DECEMBER 7, 2010 303-866-4720 The Economy and the State Budget: Tough Times.

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Presentation transcript:

JASON SCHROCK ECONOMIST COLORADO LEGISLATIVE COUNCIL DECEMBER 7, 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-ShapeU-ShapeW-Shape Strong Growth Slow GrowthDouble-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 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 General Fund Cash Funds Federal Funds Three Major Sources of Revenue

FY Total State Budget: $19.5 billion

FY 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 General Fund Budget Shortfall $7.0 billion Source: Joint Budget Committee, Legislative Council Staff, and Office of State Planning and Budgeting.

FY General Fund Budget Shortfall $7.0 billion Source: Joint Budget Committee and Legislative Council Staff.

FY General Fund Budget Request $7.0 billion Source: Joint Budget Committee and Legislative Council Staff.

FY 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 and ? FY 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 and ? FY 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)