CFI’s Forecast Five for March, 2016
By Chris Stiffler
CFI Economist
Five essential takeaways from the March 2016 state revenue forecasts.
1. Shrunken rebates.
TABOR rebates in 2016-17 will be smaller than previously thought. The latest legislative council projections say rebates in the 2017 tax year will now be $59.3 million, which is roughly $15 per taxpayer. Previous estimates put rebates at $192 million for 2016-17, or about $49 per taxpayer. Even so, it still means lawmakers will have to trim the budget even as the state issues rebates.
2. “Hairpin triggers.”
Because TABOR rebates will now be a significantly smaller amount, under Colorado’s complex budget rules, it triggers full transfers of about $250 million from the general fund to transportation needs. Previously, transfers had been half that. While this money will help fix highways, what it means is that it’s that much less money for schools, colleges and other priorities. But that’s how the crazy restrictions on our budget work, pitting roads against schools and other things everyone agrees we need.
3. A contest for the ages.
The revenue from Amazon could be really huge – or not. Estimates from Legislative Council show that in the 2016-17 fiscal year, the state would see $142.9 million in new sales tax revenue just from Amazon collecting it on Colorado purchases. However, the governor’s budget office predicts the amount from Amazon at just $22 million. That’s a big difference, but in any case, the money might not do anything to help offset cuts to schools and other services. That’s because current projections show the state would just be refunding the revenue.
4. “Negative per capita revenue growth.”
The state’s population continues to grow at a higher than average rate (1.9 percent), but because the global economy is slowing so much, added to the slowdown in the state’s oil and gas sectors, the revenue collected per resident is actually falling this year.
5. Falling inflation.
Oil prices at the end of 2015 dipped dramatically, causing the prices of consumer goods to grow only about half as much as they would have otherwise. But this 11th-hour change had a weird effect on the state. The TABOR cap is set according to population growth and the rate of inflation. With the rate of consumer inflation suddenly plunging at the end of 2015, it restrained the growth of the TABOR cap. Where inflation had grown at a rate of about 2.8 percent the last few years, it will be limited to 1.2 percent in 2016. But the state’s costs aren’t tied to consumer inflation. The things it buys, like highways, bridges, college buildings, teachers, health care and so on aren’t tied to consumer inflation. So even in years when the TABOR cap grows at a standard rate of consumer inflation, it heavily restrains the state’s ability to maintain the same levels of services from year to year. In a year with an unexpected drop in consumer inflation, the TABOR cap can cause a sudden crisis.
