DENVER — Friday, June 19, 2015 — The Governor’s Office of State Planning and Budgeting (OSPB) announced today state general fund revenue is projected to be $48.2 million higher in the current fiscal year than was forecast in March.
However, $15 million of this increase is from SB 15-255 which credits up to the first $20 million in severance taxes collected in May and June of this year to the General Fund. The forecast for FY 2015-16 is essentially unchanged from the previous forecast.
“Colorado’s economy continued to grow through the first part of 2015,” according to the report. “Housing costs continue to rise as a result of the strong economic expansion, especially in urban areas along the northern Front Range. There are more signs of higher wage growth and the strongest overall job growth in 2014 came from the state’s middle-wage paying industries. Further, there are signs that the expansion is more fully reaching other areas of the state outside the northern Front Range as some regions have had recent stronger job gains and home price appreciation.”
After a strong gain of 9.3 percent in FY 2014-15 from the state’s solid economic expansion, General Fund revenue growth will moderate in FY 2015-16 with a 4.5 percent increase. The slower growth is due in part to the contraction in the oil and gas industry as well as slower growth in capital gains income.
Under this forecast, the State’s General Fund reserve is projected to be $35.6 million above its required amount for FY 2014-15. For FY 2015-16, the reserve is projected to be $69.0 million below its required amount. This shortfall is mostly due to projections for full transfers to transportation and capital construction under SB 09-228 that were not projected in March.
TABOR revenue is projected to exceed the Referendum C cap by $190.4 million in FY 2014-15, $76.2 million in FY 2015-16, and $385.2 million in FY 2016-17, meaning that a refund to taxpayers will occur for each of those years under this forecast, unless voters allow the State to retain the revenue.
The projected TABOR refunds in FY 2015-16 are below the level that would trigger a reduction in the SB 09-228 transfers to transportation and capital construction. However, as a result of the expected size of the TABOR refunds in FY 2016-17, SB 09-228 transfers are projected to be eliminated.
Under this forecast and current law, in FY 2014-15, revenue above the Referendum C cap will be refunded through the State Earned Income Tax Credit to qualified taxpayers and the sales tax refund to all taxpayers. The sales tax refund is projected to average $33 per taxpayer. In FY 2015-16, revenue above the Referendum C cap will be refunded through the sales tax refund. In FY 2016-17, the refund will occur through a temporary income tax rate reduction and the sales tax refund.
The forecast for cash fund revenue subject to TABOR in FY 2014-15 is $75 million, or 2.7 percent, lower than projections from the March forecast, mostly due to lower-than-expected severance tax collections. However, a portion of the difference is due to the diversion of up to $20 million of severance taxes to the General Fund under SB 15-255. The cash fund revenue forecast for FY 2015-16 is $36.9 million, or 1.3 percent, lower compared with projections in March.
Cash fund revenue will decline 0.1 percent in FY 2015-16 as an expected large decrease in severance tax revenue will offset growth in revenue from most of the other major categories of cash funds that year, most notably the Hospital Provider Fee. However, projections for Hospital Provider Fee revenue are likely to increase further with the September forecast.
Click here for the full forecast report from the Governor’s Office of State Planning and Budgeting.