With coronavirus vaccinations accelerating and the approval of the $ 1.9 trillion federal relief package, Colorado’s economy continues to perform significantly better than the state’s economists expected upon the arrival of COVID-19 last year.
This is according to two financial forecasts presented to state lawmakers Friday by a nonpartisan legislative staff and a governor. Jared Police Office.
The legislature will now have to decide what to do with the windfall tax dividend, which is expected to provide lawmakers with an additional $ 5.3 billion to spend in the next fiscal year, which begins in July, compared to what was budgeted for the current fiscal year.
“It looks like the worst of the recession is behind us,” said Greg Sobetsky, an economist at the Colorado General Assembly, on Friday as he presented the tax revenue projections to lawmakers.
Some senior lawmakers have already called for the money to be put into a one-time stimulus package, aimed at pushing Colorado out of the coronavirus crisis. Polis’ budget director Lauren Larson suggested Friday that the extra money be split between stimulus spending and earmarked to pay off the state’s long-term deficit, which is expected to grow.
“Colorado was one of the first states to successfully reopen in a safe manner, and these new data show that we are heading towards a strong economic recovery,” Police said in a written statement on Friday. “The Coloradans persevered during the dark days, and now we’re starting to see the sun. This larger-than-expected amount of one-time money due to better-than-expected economic growth allows us to make important investments.”
The outlook is so rosy that lawmakers may even be forced to return the money to Colorados in the coming years due to government growth restrictions imposed by the Taxpayer Rights Act. State Senator Dominic Moreno, a Democrat for the City of Commerce and chair of the Legislature’s Joint Budget Committee, said, “Things have changed very quickly.”
COVID-19 in Colorado
The latest from the Colorado virus outbreak:
- Direct Blog: The latest in closings, restrictions, and other major updates.
- a map: Cases and deaths in Colorado.
- Tests: Here’s where to find the community testing site. The state now encourages anyone showing symptoms to get tested.
- Vaccine Hotline: Get updated information.
- a story: The governor said all Colorado residents will receive the coronavirus vaccine by mid-April
“It really comes down to: Now are we going to be in a place where we press TABOR’s lid?” Moreno said.
Economists have attributed declining coronavirus cases, increased vaccination rates, and billions of dollars in money from the US federal bailout – equivalent to nearly a tenth of Colorado’s gross domestic product – for the projected growth.
However, despite the more optimistic outlooks expected, lower-wage jobs, particularly in the retail and tourism sectors, which have been shrinking, have been slow to return. While the proportion of high-income workers has increased slightly since February 2020, the number of middle-income workers has decreased by 10% and by 30.3% for low-wage workers during the same period.
“We expect different speeds of recovery for different parts of the economy, and this is usually the case during any economic recovery. But I think these differences are exacerbated this time by the extraordinary nature of a pandemic recession,” Sobetsky said.
Here are four graphs presented to state lawmakers on Friday that explain the economic situation and outlook:
The tax revenue forecast improves every quarter
When COVID-19 first arrived in Colorado, state budget makers were expecting a dismal revenue stream for the 2021-22 fiscal year, which begins in July. But all quarterly tax revenue projections since June 2020 have painted an increasingly positive economic picture.
In June 2020, state lawmakers were only expecting an additional $ 1.34 billion to be spent in the next fiscal year compared to the current year. That number is now $ 5.29 billion – and it could rise further.
It is important to note that the reason there is so much money available to spend in the next fiscal year versus the current fiscal year is that lawmakers have cut the budget in anticipation of the pandemic.
Moreno said government budget makers will soon know how much money that has not actually been allocated to state ministries and programs is available for their allocation.
“I think the main part that the committee should be aware of is to what extent we have committed to it through the budget preparation process,” he said. “We’ll get that answer on Tuesday, when we get an overview of the fund.”
a lot of money?
Government tax revenues are expected to rise sharply in the coming years as they could hurt the government cap on growth and spending imposed by TABOR.
When the cap – set by inflation in addition to population growth – is exceeded, the legislator is forced to find ways to return the money to Coloradoans or ask voters if the General Assembly can keep it.
Kate Watkins, chief economist in the legislature, said there is a “strong possibility” the cap could be exceeded in the 2021-22 fiscal year.
“We can exceed the ceiling by hundreds of millions of dollars,” she said.
Not everyone goes well
The widening economic inequality of the coronavirus pandemic is also reflected in the disproportionate recovery.
“As our finances for the country improve, many people in our communities are still unemployed and struggling to meet basic needs,” said Representative Julie McCluskey, a Democratic member from Dillon and vice president of JBC, in a written statement.
While high-income workers were largely able to work remotely and boosted their personal savings, lower-wage workers and those in retail, hospitality, food services and tourism continued to be heavily affected by the lockdown measures and have seen jobs return at a slower pace. Rate. As the country lifted restrictions on business capacity and other lockdown measures, these jobs are expected to return.
Across the state’s economy, 57% of April 2020 jobs were restored by January.
Read more business stories from The Colorado Sun.
Economic recovery trackerFounded by Harvard University, Brown University and the Bill and Melinda Gates Foundation, it found that in Colorado, the proportion of high-income workers (people who earn more than $ 60,000 a year) has increased slightly since February 2020. But the proportion of middle-income workers has decreased. (Those who earn $ 27,000 to $ 60,000 a year) are 10% and 30.3% for low-paid workers (those who earn less than $ 27,000 a year) during the same time frame.
Lawmakers also hope that the federal coronavirus relief package, which includes relief from extended unemployment, housing assistance and an unprecedented expansion of tax credit for children with families, will help bolster families who have borne the brunt of the pandemic’s impact.
“I think there is a conversation about what we can do statewide to also help with this dynamic,” Moreno said. “I am not sure what these solutions are. But I know we must commit to making sure the recovery is fair for all income groups.”
The Unemployment Trust remains in disrepair
Lawmakers have known the state for months that the unemployment trust fund will be in the red due to the pandemic. It had $ 412 million in July and is expected to end the fiscal year with a deficit of about $ 950 million.
Currently, Colorado is borrowing money from the federal government to make up the difference. The improved economic outlook means that the hole will not be as bad as expected.
But it’s still about a billion dollars bad.
The companies will have to pay an additional solvency fee to help bring the trust back into the black market. Legislators could decide to help the fund by directing taxpayer money into the fund, although this is not currently discussed.
“It didn’t happen during the last recession and we have a path to solvency over the next five to six years,” the senator said. Chris Hansen, Denver Democrat and state budget writer. “So (it is not clear) whether there is a need.”