Weekly Policy Update: December State Budget Forecast
By: Colorado BioScience Association Date: 01/07/2022
In December, the Governor’s Office of State Planning and Budgeting (OSPB), along with nonpartisan Legislative Council staff, presented strong budget forecasts which are a positive sign for the state’s economic recovery. They are equally important to CBSA’s policy priorities this upcoming legislative session. During the legislative session, the Joint Budget Committee (JBC) relies on the December forecast when it makes budgetary decisions and drafts the state budget.
One such budgetary decision that legislators will be making during the session will be to reauthorize the Advanced Industries Investment Tax Credit. CBSA is proud to lead the advocacy efforts on this legislation, since the tax credit supports our ecosystem’s critical needs for capital.
The AI Investment Tax Credit, since its inception over a decade ago, has benefitted 24 life sciences companies in our ecosystem that were able to access over $7 million in capital. The credit allows individuals who make qualifying investments to claim an income tax credit equal to 25% of their investment or 35% in a business that is located in a rural or economically distressed area, limited to $50,000 per investor.
And while the credit benefits all seven advanced industries in the state, bioscience accounts for 21% of total use. The credit is currently capped at $750,000 annually and after conversations with the bill sponsors, OEDIT, and the Governor’s Office, the cap will be $4 million resulting in a 433% increase. The four states with a similar concentration of advanced industries as Colorado have annual credit caps ranging from $2 million to $6 million. As outlined in a report by the Office of the State Auditor, an increase of the cap would lead to greater success and usage of the program. CBSA is proud to be working with bill sponsors, Rep. Shannon Bird, Rep. Mike Lynch, and two members of the JBC, Senators Chris Hansen and Bob Rankin.
Overall, both forecasts continued to show a strong economic recovery from the pandemic for the state, with revenue expected to significantly exceed the Taxpayer’s Bill of Rights (TABOR) refund cap.
Legislative Council staff members anticipate there will be about $2 billion in annual TABOR surplus revenue in each of the next three fiscal years for the state, which is well above the estimates in the $550 million to $900 million range provided during the last quarterly forecasts released in September.
Employment has been one area where the state has yet to fully recover with the state labor market seeing 86% of jobs lost during the pandemic recovered so far. Around 10,000 jobs are being regained each month, with Legislative Council staff expecting all jobs lost during the pandemic to be recovered by June of 2022. The recovery has been particularly beneficial to higher-income workers making over $60,000 a year with an increase in employment. Lower-income workers making less than $27,000 have experienced a significant decline in employment.
- The OSPB forecast anticipates that General Fund revenue will be $15.9 billion for FY 2020-21 and $16.4 billion for FY 2021-22 These figures were adjusted since the last forecast was given in September.
- If the forecasts hold, the General Assembly will have a budget excess reserve of $3.2 billion to spend or save. The Governor’s office budget calls for spending down the reserve to $183 million during FY 2022-23, with a $1.2 billion increase from FY 2021-22 appropriations and $1.8 billion in one-time funding transfers.
- The council staff forecast anticipates General Fund revenues to be $16 billion in FY 2020-21 and $16.3 billion in FY 2021-2022. These figures were adjusted since the last forecast was given in September.