State Revenue to Grow More Slowly, But TABOR Looms
By Marlana Wallace
Colorado’s tax revenue is expected to grow at a slower pace in the fiscal year 2013-14, after increasing faster than anticipated during fiscal year 2012-2013, according to Focus Colorado: Economic and Revenue Forecast by the Colorado Legislative Council staff. Even so, revenue is soon likely to grow fast enough to trigger TABOR rebates and certain tax credits, ultimately reducing the resources Colorado has for investments in schools, roads, and other public services vital to a strong economy.
The September revenue forecast gives Coloradans information on fiscal year 2012-13 (which just concluded in June), FY2013-14 (which covers the current budget) and FY2014-15 (which encompasses the budget lawmakers will debate during the upcoming legislative session). It’s key points include:
- FY2012 -13 ended with a $1.1 billion surplus. That money will be transferred to the State Education Fund, which is dedicated to K-12 school spending.
- Much of that $1.1 billion was one-time money, resulting from income tax changes at the federal level. The boost will not provide the long-term stable funding that Colorado’s schools need to meet their growing challenges.
- General Fund revenue – which primarily consists of income and sales taxes used to fund core services like education, health care and corrections — grew by 10.6 percent in FY2012-13. In coming years, General Fund revenue is expected to grow more slowly, likely increasing by 6.5 percent in FY2013-14 and 6.8 percent in FY2014-15.
- Revenue estimates for FY2013-14 and FY2014-15 were revised upward from the amount forecast in June, by $209.5 million and $244.7 million, respectively.
- The General Assembly will likely have just under $1.6 billion, or 18.5 percent, more to spend in FY2014-15 than the amount budgeted for FY 2013-14.
- As the Colorado economy continues to recover, some important transfers of General Fund dollars may be triggered in the next few years under the state’s complex budget laws.
Once General Revenue increases by 6 percent, a number of temporarily suspended tax credits will go into effect, thereby reducing revenue. These tax credits include: the instream flow income tax credit, the sales and use tax exemption for clean rooms, the child care contribution income tax credit, the historic property preservation income tax credit, and the clean technology medical device sales tax refund.
Colorado is also moving closer to experiencing sufficient revenue growth to trigger TABOR rebates to taxpayers. Once revenue growth exceeds a limit called the “Referendum C Cap,” TABOR rebates will be issued, when fully funded. Revenue subject to TABOR is expected to be $154 million, $52 million, and $43 million below the Referendum C Cap in FYs 2013-14, 2014-15, and 2015-16, respectively. Colorado has not had TABOR rebates since 2001.
