Western Slope recovery lags despite gas uptick

Although Colorado is showing a weak recovery from the recession, the Western Slope’s economic forecast is bleak, state economists told lawmakers Monday.

The real estate and banking industries continue to drag the state’s economy down, said Natalie Mullis, chief economist for the Colorado Legislature.

At the same time, the state’s energy industry has slowly expanded over the past year, but not enough to offset that drag, she said.

“Small- and medium-sized businesses are struggling with low demand and they’re struggling with the difficulties that the real estate and construction sectors are having,” she told the Joint Budget Committee in detailing her quarterly revenue forecast. “The banking sector is particularly important because no one is lending to small- and medium-sized businesses, so they really don’t have access to credit.”

Mullis repeated a warning she’s given before, that until those credit issues are resolved, the state and nation will continue to see a slow recovery.

Mullis and legislative economist Kate Watkins said the energy sector has shown some improvement in recent months,  partly because the price of natural gas has gone up from $3.50 per thousand cubic feet last year to about $4.55 per thousand cubic feet this year. Natural gas prices nationwide have remained relatively low because of large reserves discovered on the East Coast, Watkins said.

State revenue from severance taxes is expected to nearly quadruple from $51.3 million this fiscal year, which ends June 30, to more than $188 million next fiscal year, Watkins said.

Regardless of that anticipated increase, and an increase in the number of active wells in Colorado, the forecasters said the Western Slope continues to lag behind the rest of the state in terms of jobs, consumer spending and the real estate market.

That’s partly because single-family housing construction permits have risen only slightly so far this year, some employers are still laying off workers and foreclosures continue to be high in the region, Mullis said.

Despite the bad news, Mullis said there is some good news on the horizon. Personal income, which has declined by nearly 4 percent over the past two years,  is expected to rise 2.5 percent by the end of 2010 and another 3.1 percent next year.

Meanwhile, the poor economy has stalled personal and business income tax revenue to the state to the tune of about $118 million, meaning the Legislature’s 2010–11 budget is no longer balanced.

As a result, Gov. Bill Ritter will be forced to trim up to $75 million more out of the budget, which already has seen a revenue shortfall of more than $3.5 billion since the recession began.

Ritter said he plans to announce those additional cuts in August.

Republican lawmakers criticized Democrats who control the Legislature, saying their actions to increase revenue through eliminating sales tax exemptions and increasing fees have slowed the state’s recovery efforts.

“Ritter and the Democrats have been taxing, feeing, fining and penalizing Coloradans every way they can to increase state revenues,” said Sen. Brophy, R-Wray. “It’s no wonder the Democrats’ bad economic policies have caused real economic harm in Colorado.”

But Rep. Mark Ferrandino, D-Denver, a Joint Budget Commitee member, said lawmakers cut programs to the bone and used all those budget-saving measures to create a cushion in the state’s reserve fund.

Without it, the governor would be faced with another $120 million cut in programs.

“Colorado’s budget experts ... praised the Democratic-led Legislature for passing a balanced and responsible budget, keeping us in the black,” Ferrandino said. “That cushion means we don’t have to slash vital services in the current fiscal year in response to a depressed forecast.”

Mullis said the state may have to enact even deeper cuts if Congress doesn’t approve extending Medicaid assistance through the rest of the year. If that doesn’t happen, Colorado would be forced to cut the budget another $245 million. A bill to extend that assistance through June 2011 has been stalled in Congress because of a Republican filibuster.


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