For months, state Department of Revenue accountants have been tracking revenues that reflect the state’s fiscal recovery since voters approved Referendum C last November. An audit released in recent weeks indicates that $300 million more was collected in the fiscal year that ended last June 30 than had been predicted in 2005.
Henry Sobanet, Gov. Bill Owens’ budget director, estimates that the state would take in about $1.1 billion above the level that it would have been allowed to keep under the restrictive provisions of the Taxpayer’s Bill of Rights. (Referendum C lifted the TABOR ceilings for five years, avoiding massive budget cuts.) When the legislature finished writing the new budget this spring, it was anticipating only $815.1 million in additional revenue. Sobanet credited strong gains in capital gains, corporate taxes and severance taxes on oil and gas for the surge.
The extra funds do not mean next year’s legislature will have money available for new programs, however.
The money has already been allocated to projects in the current year’s budget under terms of a 2002 law that, as it applies this year, automatically channels two-thirds of any extra revenue to transportation and the remaining third for other capital construction needs.
The state Transportation Commission is already studying how to allocate its $200 million share of the extra funds. Much of that sum must go to badly needed maintenance on existing highways. Anything left over may be earmarked for some of the capital projects that would have been funded by Referendum D if voters hadn’t defeated that 2005 proposal to issue long-term bonds for highway and transit needs.
The $100 million allocated to non-transportation needs will be used to finish projects already in the pipeline, not earmarked for new spending, Sobanet said.
The robust revenue collections have renewed speculation about how much Referendum C will raise in total over its five-year run – and what to do with that money. Sobanet is sticking to a $3.9 billion five-year estimate, fearing revenues may dip if another recession hits the state in a year or two, as some economists have predicted. Other projections are more optimistic.
Like Sobanet, we prefer to wait until the cash is in the till before worrying about how it can be stretched to satisfy state needs.
But if revenue growth does stay strong, we’d recommend putting part of the extra cash in a “rainy day fund” to protect Colorado’s fiscal position against the inevitable time when the economy does again turn sour.
