Picture improves for state budget, but shortfall persists

Bump in oil prices gives revenue boost

Colorado’s budget shortfall this year won’t be as bad as feared, according the latest revenue projections. But even with the slightly brighter economic outlook, state and legislative economists expect the state to remain strapped for cash for the foreseeable future.

“This is a new reality for us,” said Natalie Mullis, chief economist for the Colorado Legislative Council, emphasizing that the state faces a “tough budget situation this year, tough budget situation for years to come.”

Staffers for the Legislative Council and Gov. John Hickenlooper on Tuesday presented their latest revenue forecasts to the Joint Budget Committee, with both reports showing an uptick in economic growth driven by growing consumer confidence and a bump in oil prices.

According to the governor’s office projections, the state now faces a $119 million shortfall this year, almost half of the $227 million gap they had expected to face in September.

The more conservative forecast from the Legislative Council puts the shortfall at $169 million; that, too, is a significant drop from the $330 million it had projected in September.

One encouraging sign for the economy: The nu mber of oil rigs has stabilized near 20 after dropping to a low of 15 in May, down from a high of nearly 80 in September 2014. Jobs data also show the mining industry stabilizing, the governor’s report said.

The rosier outlook gives budget writers some additional breathing room — though not much — as they head into a session that’s expected to be dominated once again by a fight over spending.

Hickenlooper last month proposed a 2018 budget that includes a roughly 4 percent increase in general fund spending, but it still falls about $500 million short of the state’s needs in areas including education, hospitals and road construction.

Lawmakers are already sparring over how to pay for roads and bracing for what will happen if the incoming Donald Trump presidential administration reduces federal contributions for Medicaid, the health insurance program for the poor that makes up a growing percentage of the state’s budget.

School funding represents another challenge.

Home values are rising at a much faster clip than those for nonresidential properties. But under the Colorado Constitution, the state can only ask homeowners to contribute to a certain portion of its property tax base.

The assessed value of residential property is supposed to make up 45 percent of the total assessed value in the state, with nonresidential properties making up 55 percent of the pie. Today, the market value of residential properties is 75 percent of the total. That means homes get assessed at a lower rate.

In 2017, which is a reassessment year, home values are expected to increase by 12.6 percent, compared to just 2.5 percent for nonresidential properties, according to the legislative council report.

That would mean property tax relief for homeowners, who would see their assessment rates drop to account for the slower growth of commercial and other properties. But it also means slower revenue growth for schools.

During Tuesday’s meeting, the JBC also was briefed on an uptick in incarcerations. After the state’s inmate population dropped by about 1,000 inmates to 19,619 last year, the prison system is on pace to add about 200 inmates this fiscal year.

Legislative Council officials said the increase was due in part to a state law enacted in 2015 that allowed district attorneys to pursue felony charges against repeat DUI offenders. In the first year, 1,133 felony DUI cases were filed, according to the report, a number that’s expected to grow in coming years.