Colorado could finish the current budget year nearly $150 million in the black and the shortfall next year could be nearly $1 billion less than previously estimated, economic forecasters said Friday.
But in delivering the first report of improving state revenues since 2008, Gov. Bill Ritter urged caution.
“It’s the best forecast we’ve seen in almost two years, and it indicates that our strategies are working and the economy is slowly beginning to stabilize,” Ritter said. “However, one improved forecast does not stability make.”
Ritter said he’s not reversing any of the cuts in the current fiscal year that ends in June, or in the 2010-11 year. And despite urging from Republicans, he said he won’t restore any of the business tax exemptions and credits lawmakers recently cut, which are expected to bring the state more than $100 million by 2010-11.
“The economy remains volatile, and we need to continue to be responsible stewards of taxpayer dollars and hold the line on the fair, balanced and responsible decisions we’ve been making since 2008, when the recession took hold in Colorado.”
Corporate and individual income-tax collections in the past several months were higher than expected, Natalie Mullis, the state’s chief economist, told lawmakers during a presentation Friday.
The result is that after balancing the current year’s $7 billion general fund budget, the state is $35.1 million ahead, she said.
And if several budget-balancing bills that are still in the legislative pipeline pass, the state will be $147.7 million ahead in the current year.
“We are beginning a recovery, but it’s very, very slow,” Mullis said
Next year still volatile
Mullis and other economists warned that the state’s budget is precariously balanced, and things could turn south quickly. The state collects much of its revenue in the last months of the fiscal year, which ends in June, and the revenue forecast due that month could show a volatile downturn.
Meanwhile, improving revenues and a variety of budget- balancing developments, including the potential for hundreds of millions of dollars in federal aid to help shore up the state’s Medicaid program, are helping the 2010-11 budget. Economists had predicted at least a $1.3 billion shortfall, but Mullis said the deficit could be reduced to as low as $212 million depending on whether some budget-balancing actions are permanent.
Yet Mullis strongly cautioned that the numbers don’t take into account increases in caseloads for Medicaid, prisons or other mandatory costs the state faces.
“While it looks a whole lot better than it did, there is still a shortfall,” Mullis said.
Cuts have included reductions to public schools, higher education, Medicaid providers, prisons and services for the developmentally disabled and mentally ill.
Economists also warned Friday a larger shortfall looms in the 2011-12 fiscal year, when the state’s federal stimulus funding runs out.
“Roll back . . . tax hikes”
Still, Democrats said Friday’s forecast showed good news.
“The economic forecast tells us that the state’s budget situation has stabilized, which is a sign that Colorado’s economy is slowly recovering,” Senate President Brandon Shaffer, D-Longmont, said in a statement. “Families and small businesses should be and have been our No. 1 priority.”
Republicans cheered the news also, arguing that it meant Ritter and Democrats could now reverse legislation they passed this year repealing the tax exemptions. Business groups said the legislation would cost jobs.
“The hard-working men and women of this state have paid enough in taxes to balance our budget this year without these tax increases,” Senate Minority Leader Josh Penry, R-Grand Junction, said in a statement.
“Let’s roll back the Denver Democrats’ tax hikes this year, so that we don’t kill the goose that’s laying the golden revenue egg.”
Ritter not budging
Ritter called repeal of the tax exemption bills “very irresponsible” and also said it would not be wise to reverse a $260 million cut to public schools, a 6 percent reduction.
He said the state has to look down the road at the shortfall expected in the 2011-12 fiscal year.
“It might feel good today to change that cut — the $260 million cut to K-12,” Ritter said, “but that decision will have to be made again, and the same kind of dramatic impact is going to have to be something that will have to be considered again if we don’t do it today for the ’11-12 budget.”
Tim Hoover: 303-954-1626 or thoover@denverpost.com
