Date: 12/20/2010
Final
Revenue Forecasts and TABOR Outlook
COMMITTEE ON LEGISLATIVE COUNCIL
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10:02 AM -- Revenue Forecasts and TABOR Outlook
Natalie Mullis, Chief Economist, Legislative Council Staff, reviewed the agenda for the forecast meeting (Attachment A) and distributed the December 2010 forecast to the committee (Attachment B). She explained that the meeting would conclude with the presentation of the Office of State Planning and Budgeting (OSPB) forecast.
10:04 AM
Fiona Sigalla, Legislative Council Staff, explained that the Colorado economy continues to recover but that recovery will remain below trend. She noted that corporate profits have reached record levels, but the state of the economy is discouraging companies from spending and hiring. She noted the fiscal policies undertaken at the federal level to assist with the sluggish economy. She also stated that private employment has slowly been rising since May, but it has not been sufficient to keep the unemployment rate from rising, which is at its highest since 1983. Ms. Sigalla stated that high commodity prices are stimulating the agriculture and energy industries. She explained that there has been an increase in drilling rigs and permits in Colorado, which are positive signs for those industries. She noted that there are problems that the economy must work through before the economy can improve: lowering debt levels, dealing with negative equity in home ownership, and weak residential and nonresidential real estate markets. She noted the pressure this places on the financial services industry, which is struggling to deal with these issues. She shared that Colorado banks have 60 percent of assets in real estate, compared to 50 percent nationally. Ms. Sigalla continued her presentation, noting the effect the economy has had on bank lending. She stated that recovery tends to be slow as debt levels are lowered. She anticipated that the economy will be slow for the next two years. Ms. Sigalla and Ms. Mullis responded to questions about the presentation from Representative Gerou and Representative Balmer.
10:14 AM
Senator Lambert asked that the economist staff provide him with the research used to reach the conclusions in the forecast about how high commodity prices are stimulative and not inflationary. He expressed concern about unemployment and shared information about the current economic conditions in Colorado Springs. He requested information on how much the labor force has shrunk since the recession. Senator Heath commented on the state of the manufacturing industry in the forecast. Ms. Sigalla responded to his question, noting that despite the slow job growth in the manufacturing sector, the output of the industry is strong.
10:20 AM
Ms. Mullis discussed the general revenue forecast with the committee. She reviewed Table 1 of the revenue forecast. She explained the reasons for the reduction in the General Fund outlook. Senator White asked Ms. Mullis about the effect of the federal health care bill and if there will be enhanced revenue to the state as a result of that legislation. Ms. Mullis responded that if it affects taxable income, then it would affect Colorado.
10:24 AM
Representative Ferrandino asked Ms. Mullis to explain the change in the General Fund outlook from September to December. Ms. Mullis responded that many one-time sources of money are expiring and that the total shortfall is about $1 billion. She stated that the size of the shortfall depends on what the legislature decides to fund and at what levels of funding. She referred the committee to page 7 of the forecast. She also discussed the effect of Senate Bill 09-228 regarding transfers. Senator Morse responded to her comments regarding SB 09-228, noting the triggers in the legislation and that the tax credits are evaluated year by year, and the credit can be carried forward until the year that funds are available.