The Governor's Office of State Planning and Budgeting (OSPB) announced today the state general fund revenue is projected to be $164.5 million higher in the next fiscal year than was forecast in December. However, the net increase to the general fund will be $149 million because of declining severance tax revenue.
The overall increase is mainly attributable to continued improvement in the job market and increased confidence among households and businesses. The sustained production of goods, both nationally and in Colorado, are building a better foundation for growth and loosened credit is providing businesses and households new money for investments and spending.
The governor's proposed budget includes approximately $188 million in cuts to K-12 and higher education and decreased revenue distribution to local governments. The budget also included a plan not to restore the senior homestead exemption.
"There are lots of reasons to be optimistic about the direction of Colorado's economy," Gov. John Hickenlooper said. "We look forward to working with the Joint Budget Committee to proportionally restore some of the difficult cuts we already proposed in the budget. That means taking care of our state's neediest seniors, supporting local governments and doing all we can to fund K-12 and higher education to their fullest potential."
OSPB projects FY 2012-13 General Fund revenue will grow at a rate higher than projected in December (3.0 percent compared with 1.1 percent). The 3.0 percent rate translates to $220.7 million in revenue growth in FY 2012-13.
OSPB upgraded the economic forecast for FY 2012-13 based on recent economic momentum. The office reports:
Improvement in the job market, a loosening of credit, continued increases in manufacturing and other production activities, and higher confidence should bolster growth more than forecast in December. However, while improvement has occurred in some sectors, reasons for concern remain. Persistently high unemployment is indicative of continued labor market problems, gas and food prices are rising again, and the housing market will continue to be an impediment to stronger growth. In addition, European conditions remain uncertain, and other major economies, including China, exhibit signs of slowing. Therefore, although the forecast improved, OSPB remains cautious, projecting modest growth in 2012 and 2013.
"These trends indicate that the economy is showing more positive activity which is integral to sustained growth," said Henry Sobanet, executive director of OSPB. "This is incremental good news, but risks still remain."