Colorado Economy Continues Slow Recovery

DENVER (AP) - Colorado's economy is slowly recovering, state economists said Monday, telling lawmakers that sales tax revenue is coming in higher than expected despite rising food and gas prices.

The quarterly economic forecast marked the first time since December 2008 that lawmakers did not have to immediately look for cuts to keep the state budget balanced.

Still, the forecast was a mixed bag, with economists warning of tough times potentially ahead, in part because the housing market is still unstable and credit is tight for small and medium-sized businesses.

Economists from the governor's office projected general fund revenue for this fiscal year at $78 million more than what they predicted in March. A separate projection from Colorado Legislative Council economists put the projected increase at $67.6 million.

The state's total general fund revenue is a little more than $7 billion.

Both reports concluded the budget for the 2010-11 fiscal year is balanced, with the governor's economists estimating that revenue will be about $325 million above the required reserve level. Legislative Council's revenue estimate is nearly $311 million above the required reserve level. By law, that excess revenue will be used for public schools.

"Next year will still be difficult but maybe not as difficult as we had anticipated," said state Sen. Mary Hodge, chairwoman of the Joint Budget Committee.

Natalie Mullis, chief economists for Legislative Council, said the state economy is growing faster than its national counterpart in terms of nonfarm employment and consumer spending, which has been boosted by tourism, agriculture and the energy sector. The governor's office report said the increased sales tax collection occurred despite rising food and gas prices.

Mullis said economic growth is not happening at a fast enough rate to keep up with a growing demand for government services, including Medicaid, school enrollment and an increasing prison population.

"We're looking at a turtle's pace, instead of a snail's pace," she said.

The governor's economic report said general fund revenue is predicted to be flat for the 2011-12 fiscal year. The report said that a "heightened risk remains that economic conditions could worsen," partly because of the hazards the national debt poses to the global financial system.

Mullis also said home prices are continuing to fall and it could be three to five years before Colorado's housing market is stable again.

Unemployment is predicted to fall, but remain at historically high levels, going from an average of 8.5 percent in 2011 to about 7.3 percent by 2013, the Legislative Council report said.

- By Ivan Moreno, AP Writer

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