Colorado’s economy rebounding, but shortfalls persist, analysts say
The state’s economy has shown “solid” signs of bouncing back in recent months, but full recovery could take at least another year, state economists told lawmakers Monday.
The state’s private sector added jobs in June and July, marking the first employment growth in Colorado since businesses began shedding workers in April 2009, Natalie Mullis, chief economist for the Legislative Council, told members of the Joint Budget Committee on Monday.
Additionally, initial claims for unemployment benefits have declined, retail spending has increased and the oil and gas drilling rig count in the state continues to rise, she said.
Still, Mullis said state revenue will be about $1.1 billion below what it should be to cover caseload growth and inflation for the 2011-12 fiscal year, which begins July 1.
At the same time, she said if revenue projections remain flat over the next few months, the state will have a budget shortfall for the remainder of the current fiscal year of about $110 million, twice as much as what Gov. Bill Ritter had anticipated last month when he made about $50 million in additional budget adjustments, which included dipping deeper into severance tax revenue to pay for other state programs.
Ritter said that while the revenue forecast from Mullis and his own Office of State Planning and Budgeting wasn’t good news, they at least show that the economy has improved, albeit slightly.
“As challenging as today’s forecasts are, the fact remains that the economy is better off today than it was a year ago,” Ritter said in a statement. “We are seeing positive signs — consumer spending is growing, new claims for unemployment insurance are down and people are reducing their debt levels — and we are well positioned for sustainable growth in the months ahead.”
Todd Saliman, the governor’s budget director, said in his forecast that the budget shortfall would have been millions of dollars worse had it not been for the Legislature’s temporary suspension of several sales tax credits, which Republicans criticized as placing too heavy a burden on businesses and consumers.
Those credits, including such things as assessing sales taxes on candy, soda, online purchases and computer software, are expected to increase revenue to the state by about $183 million this year and another $94 million next year.
Had they not been approved, the state would be looking at having to trim another $440 million on top of the $4.4 billion in budget cuts the Legislature has approved over the past two years.
GOP legislators said the shortfall should serve as a wake-up call for all lawmakers about what state programs should fund, focusing more on core programs, and phasing out nonessential ones. Republicans, however, didn’t specify what programs were unnecessary.
“It’s clear things aren’t going well here in Colorado, and that’s a shame,” said Senate Assistant Minority Leader Greg Brophy, R-Wray, said in a statement. “Per-capita income in Colorado has gone from eighth-best in the nation clear down to 35th. (The Democrats’) policies are making matters worse.”
Locally, Mullis said the Western region continues to reel from a bust in the energy industry, but that industry was showing some signs of improvement. Garfield County had the second highest growth in drilling activity in the state, up 9 percent this month compared to September 2009.
While drilling permits are up, though, “it is not spurring growth in the labor market, which remains one of the weakest in the state,” she said of the Western Slope, adding that it’s not expected to drive job creating anytime in the near term.
Mullis did offer some good signs for the region, though. She said residential construction permits in Mesa County were up 4.4 percent so far this year after four years of double-digit declines.
She also said commercial construction was doing even better, up nearly 87 percent after two years in decline in Mesa County and up 314 percent in Montrose County after posting negative numbers for the past three years.
Additionally, though retail sales in the region were down 2.6 percent so far this year, it was far better than last year’s 19.1 percent drop, she said.