Gov. John Hickenlooper today recommended that $89 million in proposed cuts to K-12 education be restored because a higher-than-expected revenue forecast shows more money will be available for the state's General Fund.
An amended budget request for the current and next fiscal years will also call for adding money to the State Education Fund (approximately $110 million); restoring proposed cuts to higher education financial aid programs (approximately $30 million); setting aside more money (approximately $8 million) for the existing Colorado Property Tax/Rent/Heat Rebate in 39-31-101, C.R.S., to help the neediest of seniors; and increasing local severance tax grants by $8 million, to $18 million.
"The cuts to K-12 education in next year's budget were the last and hardest to make," Hickenlooper said. "That's why we want those cuts to be the first restored. The state's neediest seniors should also benefit from the higher revenue forecast as we make more money available to help them pay property taxes. We are able to recommend all of this because the economy has shown welcome improvement in recent months."
The General Fund revenue forecast for the current budget year (FY 2011-12) is $231 million, or 3.2 percent, higher than the September forecast. The weakening in the economy that influenced the projections in September has reversed and there is more momentum in the economy than was previously evident.
The state's Office of State Planning and Budgeting (OSPB) reports:
* Job growth at the state level has particularly shown signs of sustained momentum.
* The job rebound has occurred across many industries and is reducing the state's unemployment rate.
* Claims for unemployment insurance continue to drop.
* The goods producing industries of manufacturing and oil and gas, which are highly beneficial to the state's economy, continue to grow.
"The overall economy is still expanding only modestly as it continues the difficult process of rebuilding from the credit and housing boom and bust," said Henry Sobanet, executive director of OSPB. "The state and national economies are highly connected to the rest of the world and dependent on credit. Thus, the European debt crisis and slowing in the global economy poses a downside risk to the forecast. Based on these factors, economic growth is expected to slow modestly in 2012. However, if European and global conditions improve, both economic and revenue growth would outperform this forecast."
OSPB projects General Fund revenue growth of 1.1 percent next fiscal year. This forecast takes a cautious approach to General Fund revenue in FY 2012-13 due to the slowing in the global economy, and especially the heightened risk of deterioration of the European financial situation. Further, the high amount of volatility in the stock market this fall caused investors to sell off assets which will reduce tax revenue from capital gains in FY 2012-13. In addition, certain tax policy changes under current law and accrual accounting changes will slow revenue growth in FY 2012-13 compared with FY 2011-12. Without these accrual and tax policy changes, FY 2012-13 revenue growth would be closer to the current fiscal year's growth rate of 4.1 percent.
The General Assembly will need to act on the Governor's requests. The final budget will be based on the March 2012 forecast update.