Colorado Likely Faces Another Half-Billion Deficit
DENVER (AP) – Colorado lawmakers will likely have to cut another $400 million to $500 million next year as the state continues trying to dig out of the economic downturn, the governor’s economic team said Tuesday.
The state’s general fund revenue is up by less than 1 percent this year compared with last year and it’s not keeping up with increased demand for services such as health care, education and public safety, according to the quarterly economic forecast from Gov. John Hickenlooper’s office.
“We expect a constrained budget, difficult budget, similar to the last one if this revenue forecast holds,” Henry Sobanet, the state’s budget director, told lawmakers from the Joint Budget Committee.
Colorado lawmakers adopted a budget this spring to close a shortfall that hovered near a half-billion dollars. It included more than $200 million in cuts to schools.
Meanwhile, a separate forecast from legislative economists warned that the “chances of a recession are rising” nationally as households and business continue to be unsure about the weak economy.
Colorado’s general fund revenue will grow by about $57.8 million in the current year, an increase of 0.8 percent from last year, the governor’s office said. Next year, the governor’s economists said revenue is projected to increase 3 percent, or $212 million.
But the state is still dealing with huge revenue drops from recent years. From 2008 to now, the state’s general revenue, which currently stands at a little more than $7 billion, has decreased by about $603 million, the governor’s office said. Decreased revenue combined with higher demands for services “has laid bare a difficult and persistent structural gap” in the state’s budget, the governor’s economists said.
During the downturn, Medicaid enrollment grew by about 56.4 percent, or more than 220,000, according to the governor’s office. An additional 45,000 children also enrolled in the state’s education system during that time.
Despite Colorado’s revenue challenges, lawmakers are not being forced to immediately look for cuts to keep the current state budget balanced after a quarterly economic forecast. The June forecast marked the first time since December 2008 that lawmakers weren’t forced to make immediate cuts.
“The economy is obviously stabilizing,” Sobanet said.
The separate forecast from the nonpartisan Legislative Council office pointed to some highlights in the state economy, saying that the Eastern Plains, the San Luis Valley in the south, and the northern part of the state have seen a boost in consumer spending because of higher agriculture prices. Northern Colorado is also experiencing an oil industry boom, in part because of increasing oil prices, the legislative economists said.
In contrast, the Western Slope economy is in recession due to low natural gas prices and because energy companies are pulling back on operating rigs in the area, according to the legislative economists.
Natalie Mullis, chief economist for Legislative Council, told lawmakers that overall, the state economy has slowed along with the national economy and that consumer spending lost momentum in the summer. She said the state’s labor market has also slowed and Colorado lost 1,800 jobs in August after about 18 months of gains.
Mullis said there’s an increased chance of a national recession, but her office’s is forecasting a slow expansion. Whether the state and the country fall into another recession or continue to see slow growth will depend on the reaction from households and businesses worried about the recent downgrade of U.S. debt, political debates over the federal debt ceiling, and the European debt crisis, she said.
“Many things spooked them over the summer,” Mullis said.
– By Ivan Moreno, AP Writer
(Copyright 2011 by The Associated Press. All Rights Reserved.)