Pic­ture im­proves for state bud­get, but short­fall per­sists

Bump in oil prices gives rev­enue boost

The Denver Post - - DENVER & THE WEST - By Brian Ea­son

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.

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