Colorado lawmakers got some bad news and good news on Monday from state economists who said the state’s economy is expected to grow at a slower pace. But they also said that on the upside, the Colorado budget picture is not getting worse and is improving slightly, by about $16 million.
However, economists say they’re making projections in a very uncertain economic environment.
“We don’t have good inputs. The work I’m presenting is excellent work based on what’s available to us,” said Greg Sobetski, the chief economist with Colorado’s Legislative Council. He told members of the legislature’s Joint Budget Committee they should be aware there's a risk that the state could be in a much better position than what economists show or a much worse situation.
“You have to pick a number, you have to balance to something, but you should know that there are real consequences that aren't even anticipated here based on the risks that we're showing you,” he said.
The state is still expected to cut about $1 billion from the state budget, and the budget committee has not yet made final decisions on some of the big items they need to cut to pass a balanced budget. They also haven’t decided what total number would qualify as “balanced.” That decision is expected on Tuesday.
“It's a difficult forecast with limited data and lots of risks,” said the JBC chair, Democratic Sen. Jeff Bridges.
The budget committee decided not to make any major decisions on Monday and to wait to get a final budget figure from the committee’s non-partisan staff.
The Governor's office also submitted an economic forecast that showed a weakening economy and lots of uncertainty based on changes at the federal level and what may happen with tax policy and tariffs.
“What we see is the tariffs on one day it's off the next day, it's on the next day, it's a different one, it's doubling, it's cut in half. That uncertainty, people just start to get worried and pull back because they don't know what's going to happen,” said Mark Ferrandino, budget director for Gov. Jared Polis.
Even in a weakening economy, state economists say there’s not always a direct link between the economy and state budget limitations. Forecasters say one reason Colorado has more money to spend under the latest forecast, even with a worsening economic outlook, is that the interest earned from cash funds is dropping. Those funds are earmarked for certain things but count toward the overall cap on how much money the state is allowed to spend each year under the Taxpayer’s Bill of Rights.
Forecasters also say there’s a lot of uncertainty on how international policy may impact state finances, and said there could be an upside if there is a faster resolution to global conflict.
“It could also boost our economic outlook,” said state economist David Hansen.
Democratic legislative leaders say one of the biggest drivers of the state’s shortfall is increased Medicaid costs mainly due to an aging population and increased need for services. That category alone makes up nearly 60 percent of the budget gap the state must close.
