DENVER—Tax collection statistics show Colorado’s retail sales dropped 7.5 percent in November, and economists say it’s a sign of things to come.
“The first quarter of 2009 will still be pretty ugly,” said Patty Silverstein, president of Development Research Partners in Littleton. The second quarter won’t be much better, but Silverstein expects to see things improving by the end of the year.
Silverstein forecasts flat retail growth in 2009 but only because the pace of inflation has slowed, not because consumers will spend as much as they did in 2008.
October retail sales in Colorado were down 6.7 percent after Wall Street dominos started falling in September with the collapse of the investment bank Lehman Brothers.
“A lot of companies out there are doing pre-emptive layoffs because they are scared things are going to get worse,” Silverstein said. “The question is, how do you convince those that do still have the jobs and the wherewithal, to go out there and spend money?”
When consumers spend less money, it affects the state’s income.
“A decline in sales results in less revenue for the state,” said Democratic state Rep. Mark Ferrandino. “It’s part of the reason we’re seeing a $600 million deficit this year.”
Retail sales tax accounts for roughly 30 percent of the state’s income—second only to individual income tax, which composes 65 percent.
State budget analysts accurately predicted the retail sales decline. Sales tax revenue based on sales made in November was $149.4 million—just half a percent lower than estimates, the Rocky Mountain News reported.
“We’re going to have to tighten the government’s belt,” Ferrandino said.
Lawmakers have three ways of balancing the budget: cutting programs, using cash funds and dipping into the $300 million statutory reserve fund.
Law requires the state to keep 4 percent of its budget in a reserve fund to help shore up the general fund and keep essential services running, Ferrandino said. Legislators must pass a bill to gain access to the reserve money. The state dipped into the reserve fund from 2001 to 2003 during the last economic downturn.
Gov. Bill Ritter’s office will present a balanced budget plan to the General Assembly’s Joint Budget Committee on Friday.
National retail sales dropped 2.1 percent in November and 2.7 percent in December. While national figures are limited to transactions between consumers and businesses, Colorado’s state retail sales figures take into account business-to-business transactions as well, Silverstein said.
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Information from: Rocky Mountain News,
