Date: 12/19/2008
Final
Governor's Office of Planning and Budgeting Economic Forecast
COMMITTEE ON EXECUTIVE COMMITTEE OF THE LEGISLATIVE COUNCIL
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10:16 AM -- OSPB Budget Outlook
Todd Saliman and Peter Strecker presented the Governor's Office of State Planning and Budgeting (OSPB) December revenue forecast (Attachment B). He noted that unlike Legislative Council, OSPB does not forecast on assessed values. Mr. Saliman explained that over the next four fiscal years, the OSPB forecast does not project that there will be adequate revenue to increase spending by six percent in any of the fiscal years. He explained in fiscal years 2010-11 and 2011-12, OSPB is projecting the state to have large TABOR surpluses, because the Unemployment Insurance (UI) solvency tax will not expire, which results in extra revenue received by the state that are subject to TABOR limits. Mr. Saliman stated that OSPB projects a General Fund revenue growth of .4 percent, and that throughout the Referendum C timeout about $5 billion will be retained by the state, which is $1.4 billion less than OSPB previously forecasted. He noted that the TABOR refunds are nearly $ 200 million for fiscal year 2010-2011, and nearly $542 million for fiscal year 2011-12. Mr. Saliman explained that there are differences between the OSPB and Legislative Council Staff forecast.
10:20 AM
Representative Pommer about the implications of UI revenue and the 6 percent limit. Mr. Saliman explained that the solvency tax revenue will equal what will be required to be refunded to taxpayers.
10:22 AM
Representative Weissmmann asked if it would be possible to enterprise unemployment insurance. Mr. Saliman stated that it was a good question, but not one that OSPB could answer at this time. Senator Morse asked Mr. Saliman to discuss the 6 percent implication raised by Representative Pommer. Mr. Saliman explained that the Referendum C timeout rid the racheting effect for TABOR limit but not the 6 percent limit, and because of this the spending limit base will be permanently lowered. Senator Morse if it was an allocation issue as opposed to a limit. Mr. Saliman explained that the theory is correct but because of the revenue coming in, there is no money being allocated to Senate Bill 1 and House Bill 1310.
10:26 AM
Peter Strecker, OSPB, discussed the OSPB General Fund revenue estimates projected in Table 3, on page 11. Mr. Strecker explained that there are four components to income tax projections: paycheck withholdings, estimated payments, refunds, and cash returns. Withholdings and estimated payments are 2 current indicators on how strong Colorado's economy is doing, which are positive, and will prop up the budget in the current fiscal year. On corporate side, Mr. Strecker explained that OSPB projects a 6.6 percent drop in revenue, which will impact the current year. He directed committee members to Table 5 on page 19, which discussed the history and forecast for key Colorado economic variables, including current income, population and employment, construction variables, and prices and sales variables. He explained that OSPB will explore the differences in these numbers with LCS.
10:31 AM
Mr. Saliman discussed Table 1A on page 4, discussing the general fund appropriations estimates, which he noted varied widely from LCS. Representative Ferrandino asked if the state did not have the TABOR refund, would it be able to fill the six percent limit. Mr. Saliman explained yes and no, because in fiscal year 2010-11, it almost covers the 6 percent, while in fiscal year 2011-12, retaining the TABOR refund would cover the six percent limit with a small surplus. Representative Ferrandino also asked what money has been saved from the hiring freeze. Mr. Saliman said that the results from the savings would be available soon, but are only one time savings, and not a solution for solving the states long term budget issues.
10:35 AM
Mr. Saliman directed the members attention to Table 2 on page 10, which details TABOR Revenue and Referendum C Revenue Limits. He then discussed page 14, which contains their severance tax revenue outlook, which he noted is similar to LCS. However, Mr. Saliman noted that OSPB projects weaker FML revenues than LCS forecast, but that both estimates are reasonable. He also discussed transportation-related HUTF funds, which OSPB project to decline. Mr. Saliman states that OSPB projects an increase in jobs in current calendar year, but a decline in 2009. He also reviewed the change in housing permits.
10:38 AM
Senator Penry asked Mr. Saliman to explain differences between the Legislative Council and OSPB forecasts. Mr. Saliman explained that he just received the LCS forecast and need to review before discussing the differences, and that it is important to review and understand the differences because they affect budget decisions made by the legislature and the Governor. Mr. Herreid explained that he also needed time to review the OSPB forecast, and explained how the LCS changed its forecast, stating that it was primarily driven by the job loss projections. He further explained that a second piece that changed the LCS forecast is capital gains. Mr. Herreid noted that during the last recession capital gains was cut in half very quickly, and he believes that the same thing will likely happen again in this economic downturn. He explained that the sales tax is another factor, which is currently underperforming, and could be worse in the coming months.
10:44 AM
Senator Tapia said that it is very difficult for a non-accountant to understand the budget documents. Senator Tapia explained that he has become more comfortable of the LCS format, and that OSPB's format is different, making it difficult to compare. He requested that the two offices try to find a common format to assist members in understanding the differences in the forecasts.
10:46 AM
The committee adjourned.