Colorado’s economic recovery from the coronavirus crisis remains strong, although there have recently been speed bumps caused by the spread of the more contagious delta variant, and supply chain issues and labor shortages artwork.
“We are seeing growing headwinds,” Elizabeth Ramey, senior economist for the nonpartisan Colorado Legislative Council, told state lawmakers on Tuesday.
But, Ramey said, Colorado’s economy has still been “growing at a good pace,” buoyed by consumer spending. Restaurant and hotel revenues, for example, are now above pre-pandemic levels for the first time.
The quarterly economic forecast provided by Legislative Council staff to state lawmakers on Tuesday reflected the rosy picture painted by the Polis administration, which presented its own similar forecast to the legislature.
“Today’s strong forecast shows Colorado coming back strong,” Gov. Jared Polis said in a written statement. “We are seeing a strong recovery in 2021 as more Coloradans get vaccinated and return to work. But our economic success is tied to our public health, so we continue to encourage Coloradodans to get vaccinated to protect themselves, our economy and our jobs.
Polis is up for re-election next year, and Republicans have announced plans to make the state of Colorado’s economy a key angle of attack.
If the forecast holds, Legislative Council staff believe lawmakers will have $3.3 billion more to spend next year than this year.
It wasn’t all good news, however.
Supply chain issues, exacerbated by the ongoing pandemic internationally, are expected to last through 2022, which in turn is expected to contribute to inflation.
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There are also unknowns about how the shrinking federal coronavirus aid pouring into Colorado will affect the economy. Pandemic unemployment benefits ended Sept. 6, reducing or eliminating assistance to tens of thousands of Coloradans.
“Because the federal fiscal stimulus has been so large, it’s difficult to assess the underlying health of the economy,” said Kate Watkins, chief economist for the Colorado Legislative Council. “When those dollars expire, what happens? Is the economy capable of standing on its own two feet? Or are we really starting to see cracks below the surface? »
The state’s unemployment rate is slightly higher than the national average – 5.9% compared to 5.2% – although Colorado has a labor force participation rate above the national average. Nonpartisan staff said 78.1% of jobs lost in Colorado since the pandemic began have returned.
High-wage jobs have recovered faster than low-wage jobs.
The unemployment rate for black and Hispanic workers in Colorado is higher than for white workers. The rate is also higher among less educated workers.
The disparities continue trends that nonpartisan staff and the governor’s office have highlighted throughout the state’s coronavirus recovery.
Nonpartisan staff said Colorado’s economy could fare even better than they expected if Congress passes proposed legislation totaling trillions of dollars.
“Today’s forecast is promising news for our state, and the progress we’ve made to bounce back is something we can be proud of, but we can’t give up,” said Sen. Dominick Moreno, a Democrat from Commerce City who chairs the Joint Budget Committee. , said in a written statement. “Far too many low-income and small-business Coloradans are still struggling, and it is imperative that we focus our attention on helping them. As we continue to work to become more resilient economically and recover from the effects of the pandemic, we remain committed to ensuring that no Coloradan is left behind.
Nonpartisan legislative staff and the governor’s office continue to expect revenue to exceed the state’s Taxpayer Bill of Rights cap on government spending and growth, calculated based on population growth. and inflation.
Legislative Council staff estimate that revenue will exceed the cap by $1 billion in the current fiscal year, which began in July, and by $1.2 billion in fiscal year 2022-23 and $1.4 billion in fiscal year 2023-24.
The Polis administration expects revenues to grow even faster. It expects revenue to exceed the cap by $1.26 billion in the current fiscal year, $1.28 billion in fiscal 2022-23 and $1.47 billion dollars in fiscal year 2023-24.
Polis was celebrating on Tuesday the possibility that the TABOR surplus will trigger an income tax cut in coming years. But Democratic state lawmakers have signaled they would like to try to keep some of the surplus.
Democrats plan to explore the following options for keeping the money:
- Moving potentially hundreds of millions of dollars in fee revenue into corporate funds, making the money exempt from TABOR caps but limiting how the dollars can be spent
- Expand existing tax credits — like the Child Tax Credit and the Earned Income Tax Credit — to reduce state revenue in a way that benefits low-income families
- Ask about the 2022 ballot that would allow the state to keep the money
The difference of opinion over how to handle excess TABOR revenue has been a point of contention for Polis and State House Democrats, who have the majority in the House and Senate.
State Representative Kim Ransom, a Douglas County Republican who sits on the JBC, said Tuesday she was happy to see how much money will be returned to taxpayers in the coming years.
The Polis administration and nonpartisan staff, however, warned that excess TABOR could be wiped out by an error in forward projections.
“The state is coming back strong,” she said. “I like to see the economy growing, more people working. I know we still have some catching up to do, but I’m excited to see how much we’ve already done.
The TABOR ceiling was breached in the last fiscal year, which ended in June, by $454 million, triggering a reduction in income tax from 4.5% to 4.5% and resulting in a payment sales tax refunds, on average, about $70 for individual taxpayers. Co-registrants will receive an average of $166.