Days before the $25.8 billion state budget takes effect, Colorado lawmakers are facing the possibility of spending cuts.
A budget deficit is projected for the year that starts July 1, ranging from $11 million to $268 million, according to two economic forecasts presented Monday.
And the budget year that ends June 30 may fall $48 million short of what is needed to cover costs and reserves, according to the legislative economic projections. The governor’s office is forecasting an $8 million surplus for the current year.
“It’s not good. It’s going to be a problem,” said state Sen. Pat Steadman, a Denver Democrat and veteran budget writer. “We are already going to start next year in the hole.”
But Sen. Kevin Grantham, a Cañon City Republican on the Joint Budget Committee, suggested the estimates for shortfalls are too disparate to cause immediate concern.
“When you see stuff like this, you take a deep breath and you just try to plan for the future,” he said. “There is no reason for us to set our hair on fire.”
The downward trends in sales and individual income tax revenue prompted chief legislative economist Natalie Mullis to suggest that economic indicators “could point to a slowdown” in the state economy, although she stopped short of suggesting an impending recession.
Once again, the declines in the oil and gas industry contributed to the situation. The governor’s budget office said employment in the industry contracted 25 percent through the end of 2015 and could shrink an additional 15 to 20 percent in 2016.
Still, Democratic Gov. John Hickenlooper’s office presented the more optimistic numbers, compared with the larger deficits projected by legislative economists.
“Colorado’s economy continues to perform solidly overall,” the governor’s forecast reports, “especially considering the persistent challenges faced by the oil and gas industry and the sluggish global economy.”
Both forecasts point to a rebound in fiscal year 2017-18, when the state is expected to exceed its revenue caps under TABOR, prompting estimated refunds to taxpayers between $163 million to $277 million. This year, the state is issuing $154 million in refunds to taxpayers.
It’s too early to know whether lawmakers will need to make midyear cuts, but lawmakers are not in unfamiliar territory.
Earlier this year, the legislature approved $100 million in spending reductions to bring the fiscal year 2015-2016 budget in line and reduced the required reserve to 5.6 percent from 6.5 percent to avoid deeper cuts.
