June Rev. Forecast & Implications for State Budget
INTERIM COMMISSION TO STUDY FISCAL STABILITY
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02:45 PM -- June Revenue Forecast and Implications for the State Budget
Ms. Mullis and Mr. Herreid, Legislative Council Staff, began their discussion on the LCS June 2009 Economic and Revenue Forecast. Senator Heath explained the legislature will be making difficult choices in the future.
Ms. Mullis summarized the extent of the recession and its affect on the state in terms of financial instability, jobs lost, high unemployment rates, and the underemployed. She pointed out that retail trade and consumer spending have fallen, resulting in a substantial decrease in General Fund revenues.
Ms. Mullis emphasized the slow recovery of the economy, possibly not beginning until 2010 and that employment may not recover until 2012. Ms. Mullis presented the General Fund Budget Summary chart that shows the cumulative shortfall over the forecast period. Ms. Mullis explained in detail the shortfall by the end of FY 2008-09 and methods used to balance the budget, which included borrowing funds from FY 2009-10. She further explained that while general fund revenue is expected to increase in FY 2009-10, there were many one-time additions to revenue from legislation which will not be available in FY 2010-11and beyond. Ms. Mullis added that caseloads in state programs are expected to increase, which is not included in the budget shortfall.
The commission asked questions regarding external factors and the effects they have on the forecast. Mr. Coors asked how the federal stimulus would affect the forecast. Ms. Mullis explained the federal stimulus would help with Medicaid costs over three fiscal years and pointed to page three in the forecast document which shows the progression over the forecast period.
Ms. Lynne asked about the discrepancies between the LCS forecast and the Governor's forecast. Ms. Mullis explained the optimism in the Governor's forecast versus LCS's more pessimistic recovery.
Ms. Cook posed an inflation-related question. Ms. Mullis explained the difference between the Consumer Price Index used for Colorado versus the nation. She explained that inflation will affect wages and other components of the revenue forecast, which have already been considered within the forecast.
Mr. Herreid added information regarding school finance and how required increases in it would affect the budget shortfall. He stated that an increase from the General Fund is going to be required due to the increase in K-12 education caseload. The commission asked about the out-years of the forecast and commented on the school finance requirement. The commission also asked about inflation implications in the out-years and how that will affect the budget. Ms. Mullis explained that if inflation increases, the hope is also that wages and income will grow accordingly.
Senator Heath commended the panel and the efforts put into all the presentations today. Senator Brophy commented on the importance of the information presented and how the general knowledge will play into the commission's overall charge.
The commission recessed.