DENVER — The Colorado Legislature will have nearly $1.3 billion more to spend in the next fiscal year than it did this year, legislative economists told lawmakers Monday.
But legislators should look at that extra cash as one-time money only, a surplus that isn't likely to continue for very long, the governor's economists told the Legislature's Joint Budget Committee, which drafts the state's annual spending plan.
That's because that money is primarily a result of the federal tax cuts, and it causes the state to immediately hit the revenue limits set under the Taxpayer's Bill of Rights, the economists said.
"Right now, we're in the late stages of an economic expansion, and the risk of recession exists," said Kate Watkins, chief legislative economist. "Growth is quite strong, and the most difficult thing about a forecast is forecasting that inflection point, when the good turns to not so good. Right now, all signs point to positive growth, but that's in the near term. That could turn on a dime."
As a result of that large surplus, the state's revenue is expected to exceed the TABOR revenue cap by about $8.4 million next year.
With that cautionary note in mind, Gov. John Hickenlooper immediately called for increasing his budget request for supplemental transportation spending from $248 million to $500 million. At the same time, he wants to triple to $300 million the additional money his initial budget request last fall called for dedicating to K-12 education.
"With these allocations, which should be viewed as one-time in nature, this leaves an additional $96 million for other pressing legislative issues that are under discussion," Hickenlooper said in a letter delivered to the six-member JBC before it heard the revenue forecast Monday afternoon.
That letter also called for increasing the state's reserve fund, something Hickenlooper has been pushing over the past few years, from 6.5 percent to 8 percent, bringing that savings account to more than $548 million.
Senate President Kevin Grantham, R-Cañon City, said the forecast shows that the state can afford his caucus' plan to issue up to $3.5 billion in transportation bonds to fund major road projects around the state.
"We are encouraged, midway through this session, to see Governor Hickenlooper making it clear that transportation funding is a priority for his administration," Grantham said. "Unfortunately, we've yet to hear anything from Statehouse Democrats except the old mantra that we can't fix Colorado's roads without a tax hike, which is an excuse for inaction that (Monday's) fiscal forecast just demolished."
Henry Sobanet, director of the governor's Office of State Planning and Budgeting, warned the JBC to be wary of entering into any more long-term fiscal obligations. He said the state already is expected to see an increase in those obligations over the next few years, primarily from transportation and capital construction bond payments called for under a law passed last year dealing with the hospital provider fee and some road and bridge projects.
This is a "chance to allocate one-time money to transportation and the state education fund, and leave some additional monies for the priorities that have been debated about during this session," such as increased employer contributions to the Colorado Public Employees Retirement Association, Sobanet said.
While the JBC receives a revenue forecast each quarter, the March forecast is considered the most important because it's used as the basis for the budget for the next fiscal year, which begins July 1.
Beyond the state's budget, the economists said the state of the economy continues to boom, though the federal tax cuts could cause it to "overheat."
"The passage of the (federal tax cuts) boosted business investment in recent months that will promote future productivity gains," Watkins said in her revenue forecast report. "However, this near-term boost may have pulled economic activity forward at the cost of steadier and more consistent growth over the longer term."
One area of the economy's improvement that could benefit the Western Slope is a recent uptick in the oil and gas drilling activity elsewhere in the state and around the region. Legislative economist Greg Sobetski said that will translate to an increase in severance taxes, at least over the next couple of years.
Severance taxes from oil and gas production in the last fiscal year added up to a paltry $4 million. That figure is expected to swell to $62.2 million by the end of the current year, June 30, and then nearly double next year, Sobetski said.