CBSA monitors budget forecasts to assess how the economy, overall employment, and state revenue forecasts could impact CBSA’s State Policy Priorities and our Policy + Advocacy strategy for the upcoming legislative session. While current forecasts from the Governor’s Office of State Planning and Budgeting (OSPB) and nonpartisan Legislative Council (LCS) project continued economic expansion in Colorado, they also indicate inflation could limit growth and TABOR surpluses could constrain the state budget. In September 2022, OSPB and LCS staff, presented budget forecasts during their quarterly presentations to the Joint Budget Committee (JBC).

Key Takeaways:

• Overall, the forecast for this quarter stayed the same from the prior forecast in June.

• The OSPB forecast is more pessimistic compared to the LCS report due to differences in tax collection projections.
  • For example, the LCS forecast projects General Fund revenues in FY 2022-23 to will be $17.95 billion compared to the OSPB forecast of $16.4 billion.
  • In FY 2023-24, the LCS forecast projects General Fund revenues will be $18.06 billion compared to the OSPB forecast of $16.7 billion.

• It is important to note that both forecasts still show continued economic expansion in Colorado, with positive consumer spending and a strong labor market.

• The forecasts differ in how much future reductions in tax collections will limit revenue growth. Both forecasts also show inflation continuing to be a big factor on limiting growth.

• Finally, both forecasts are projecting large TABOR surpluses in each year for the entirety of the forecasted period. 

• Overall, while there is a positive outlook in the labor market and there is slight growth in the economy, but the risk of recession within the forecast period has risen since the June forecast.

Economic Forecast

There is projected general fund growth of 1.4% for 2022, which is reported largely due to a strong 2021. However, increased interest rates mean there is a greater risk of a near-term recession.

Colorado Employment

Colorado has exceeded pre-pandemic employment levels by 55,400 jobs. Although tighter federal monetary policy, including the increased interest rates is expected to slow down labor demand.

Revenue Forecast

Despite slower growth in General Fund revenue collections, General Fund revenue is still projected to be far above the TABOR cap. The reports anticipate TABOR refunds in future years. The FY 2021-22 number was the largest TABOR refund in state history at $3.73 billion. Based on these TABOR surpluses, the budget is not restrained by revenue and is instead restrained by the TABOR cap. Risks to the General Fund projections will be absorbed by the TABOR surpluses and additional Cash Fund revenue will spill over into larger TABOR refunds paid out of the General Fund.

In summary, while the state’s economy is seeing growth, if a recession occurs, the TABOR surpluses can absorb up to a 17 percent decline in revenue without affecting the state’s budget. However, if we do see a bigger recession, then we can anticipate that the budget would be impacted, and it will likely be extremely constrained in the next session. 

Links to Reports and Presentations

Legislative Council Staff (LCS):

• Legislative Council Staff – Presentation
• Legislative Council Staff – Full Report 

Governor’s Office – Office of State Planning and Budgeting (OSPB):

• Office of State Planning and Budgeting – Presentation
• Office of State Planning and Budgeting – Full Report
• Office of State Planning and Budgeting – Supplemental 

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Thank you to Colorado Legislative Strategies for their detailed analysis on the September state budget forecast.