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Economic Forecast Key In Upcoming Colorado Budget

DENVER (AP) - With major implications for the state budget, Colorado economists will release a quarterly tax forecast Monday that will influence lawmakers' decisions on key issues of next year's budget.

The big pieces of the puzzle: Will the state have enough money to pay for a property tax break for seniors that's been foreshadowed to spark a big partisan fight? How will the often-slashed colleges and schools fare this go-around?

Lawmakers are hopeful that Monday's numbers will show enough improvement in the economy that they won't have to make as many painful cuts as they've made in the past. One lawmaker said numbers he's seen from the Colorado Department of Revenue show tax receipts increased anywhere from $50 million to $70 million higher than what state economists predicted in December. The actual projections could be lower or even higher.

But more money could also equal more problems in Colorado's split Legislature, where Republicans who control the House have indicated they won't budge on a senior property tax break totaling nearly $100 million. It's money that Democratic Gov. John Hickenlooper's economists have insisted the state can't pay.

Republican House Speaker Frank McNulty said he's optimistic "the revenue forecast will improve, if only modestly."

"If we do see increased revenues, I hope that we do our part to restore funding to K-12 education," he said. "It's been our priority, it continues to be our priority and something we care very much about."

But McNulty and fellow Republicans have also been adamant on their position to keep the senior property tax break, known as the homestead exemption, which lawmakers from both parties have eliminated in the past to balance the budget. The exemption is scheduled to return this year. Lawmakers need to pass a bill to eliminate it again.

McNulty points out that no Democrat has introduced a bill. But he's also made clear such a bill would fail in the House, where the budget debate starts this year.

Democratic House Leader Mark Ferrandino, who cited the extra $50 million or more in tax revenue, said his party's priorities are to eliminate or reduce cuts to K-12 education and higher education. He said he's willing to keep the senior property tax break if there's enough money.

The voter-approved tax break lets homeowners 65 years and older deduct 50 percent of the first $200,000 of property value on their taxes if they've lived in the same home for at least 10 years.

Ferrandino said that although McNulty has expressed that education and the homestead exemption are his priorities, Republicans will have to make tough choices is there's insufficient money for both.

"If those come in conflict, then it's really the question of where does the majority want to go," Ferrandino said.

The state's general fund is just above $7 billion. In past years, the biggest cuts have happened in K-12 and higher education. Hickenlooper previously said $89 million needed to be cut from K-12 schools to balance next year's budget. But after the December revenue forecast, he said the cut was unnecessary.

Higher education - which could but cut by $30 million next year - makes up about 9 percent of the budget and K-12 education is nearly 40 percent. Mandatory Medicaid spending is driving most of the new spending in the general fund as more people qualify for the entitlement in the aftermath of the Great Recession.

- By Ivan Moreno, AP Writer

(© Copyright 2012 The Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten or redistributed.)

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