State gains $1 billion in revenue
Legislative economists painted a rosy picture of the state’s economy Thursday, but warned that things still aren’t where they should be.
The state has seen its employment numbers reach pre-recession levels with 2.4 million jobs, but there’s still too much uncertainty in the national and international economies to declare that the recovery is in full swing.
Regardless, the state’s economy is improving and revenue is up by more than $1 billion over the past year, the economists told the Joint Budget Committee.
“We have seen the economy firm up better than we expected in the face of a federal fiscal drag over the last few months, and because of that we did increase our revenue forecast to the general fund,” said Natalie Mullis, chief economist for the Colorado Legislative Council.
“Even though it feels like the economy is strong and moving forward, it’s still quite fragile. It’s still very much like an adolescent, it’s not fully mature. It’s still dependent on a very large money supply expansion from the Federal Reserve.”
On Wednesday, Federal Reserve Chairman Ben Bernanke announced that he planned to keep interest rates low by continuing the Fed’s stimulus program of buying bonds, but only for a few more months — an announcement that caused a massive sell-off on most stock markets.
As a result, Mullis predicted that the recovery from the Great Recession will continue to come slowly and the state’s unemployment rate will level off, or go up slightly, before going down again.
She predicted that the state’s current 6.8 percent unemployment rate will tick up a bit later this year, but reduce to levels below that by next year.
Mullis said that will happen, in large part, because more people who aren’t actively seeking jobs will begin to do so again.
“That’s going to keep the unemployment rate high even as the economy continues to recover,” she said.
Although its forecast was a bit more conservative, economists in the Office of State Planning and Budgeting agreed with Mullis’ assessment, adding that uneven growth across the nation is preventing the state’s economy from growing as it should.
“The national economy ... still hasn’t found a firm footing,” said planning and budgeting’s chief economist Jason Schrock. “Colorado continues to have a more solid foundation, enabling it to have sustained economic momentum. Indeed, it’s among the best performing in the nation.”
In her report to the Joint Budget Committee, Mullis said the 10-county western region, which includes Mesa, Montrose, Delta and Garfield counties, finally are starting to see signs of recovery, the last region in the state to do so.
She said the region’s economy stalled last year thanks to a weak natural gas sector, but has seen improving signs so far this year, particularly in lower unemployment rates and higher activity in new housing permits and nonresidential construction.
For the state’s budget, things couldn’t look rosier, at least for the next fiscal year, which begins July 1, the economists said.
Even though that fiscal year hasn’t yet started, the budget already is flush with $1.1 billion, most of which automatically will go into the state’s school education fund, with about $30 million going toward water projects.
While most members of the Joint Budget Committee were encouraged by the economists’ reports, one was more pessimistic.
“Both of the economic forecasts released today by OSPB and Legislative Council, while positive in the short-term, give us reasons for concern about the underlying fundamentals of our state’s economy,” said Sen. Kent Lambert, R-Colorado Springs. “While general fund revenue has grown and added to our reserves, much of the 2013 year-end surplus was derived from one-time events and is not a predictor of healthy expansion into 2014 and beyond.”