Tax revenue brightens state budget picture
State lawmakers heard some welcome news from government economists on Wednesday: While Colorado’s economy remains sluggish, state revenues are millions of dollars higher than predicted just three months ago.
Chief Legislative Economist Natalie Mullis and Henry Sobanet, director of the Office of State Planning and Budgeting, told the Joint Budget Committee they expect revenue to be at least $240 million higher than anticipated when the last revenue forecast was released in March.
That increased income to the state is largely because of higher-than-expected individual and corporate income taxes, and that means an increasing number of Colorado taxpayers and businesses are earning more money, the two said.
Still, the ever-cautious economists were quick to add that there continue to be warning signs elsewhere on the globe that could pose serious risks to the state and national economy.
“Our current outlook is tempered by the various risks to the recovery,” Sobanet said. “However, we can see a scenario where Colorado remains relatively insulated and, in that case, revenues could be higher than projected.”
In her report to the six-member JBC, Mullis warned of threats from the growing debt crisis in Europe, saying it already has taken a toll on the U.S. economy.
She said those European problems are causing U.S. companies to be more cautious in making new investments and creating jobs.
“Much of southern Europe is in recession, and northern European countries such as Germany and France are growing at very slow rates,” Mullis said in her report. “The world waits as Greece’s position in the European Union remains uncertain and Spain suffers from a financial crisis stemming from an overheated housing industry. The potential crumbling of the Eurozone has domestic banks cautious, keeping credit markets tight and placing a downward press on economic growth.”
Legislative leaders reacted to the news with caution, too.
“The forecast shows that family income growth remains sluggish and sales receipts continue to be lackluster,” said House Speaker Frank McNulty, R-Highlands Ranch.
“Colorado’s economy is doing better than the U.S. economy, but we are not out of the woods,” added House Minority Leader Mark Ferrandino, D-Denver. “We have to be very careful to protect our gains and pursue every opportunity to boost the state’s economy.”
Regardless of economies elsewhere in the world, the two economists said Colorado’s continues to do well and even outpaced the rest of the nation.
Though business lending is tight, the state’s manufacturing and real estate markets are improving. At the same time, the state’s agricultural industry is healthy and businesses are adding some jobs in the state, Mullis said.
She said that even the hard-hit Western Slope showed signs of recovery, particularly in consumer spending and an unemployment rate that’s steadily backing away from its high historic levels.
“The residential housing market is also beginning to see some growth in housing permit activity, although home foreclosures remain high and home prices remain depressed,” Mullis said in her report. “Despite some gains, the commercial construction market is slow and the number of drilling rigs operating in the region has declined as prices for natural gas remain at record lows.”