DENVER– The Governor’s Office of State Planning and Budgeting presented a cautious forecast of Colorado’s economic future Wednesday. Though state tax revenue generated $7.6 billion in the General Fund – a modest $239.5 million higher than predicted in the March report – but the economy is expected to grow at a slower rate and could be negatively impacted by the financial crisis in Europe.
The OSPB reported to the Legislature Joint Budget Committee that the state general fund revenue was 3.2 percent higher than March projections for this past fiscal year FY2011-12, and that rolled into next year’s revenue will boost the FY 2012-2013 revenue projection to 1.3 percent increase, or $95.8 million.
“Colorado is seeing growth in a variety of industries and is on the right path forward. But we still have a long way to go to fully recover from the recession,” said Gov. John Hickenlooper.
“While we are cautiously optimistic that Colorado’s economy isn’t getting worse, the recent slowdown in our recovery is discouraging,” said House Speaker Frank McNulty. “The forecast shows that family income growth remains sluggish and sales receipts continue to be lackluster.”
Hickenlooper said he’s resolved to “remain laser-focused on making Coloradothe most pro-business state in the nation. McNulty said that “federal government and bureaucratic red tape continue to hinder our state’s economic recovery and hurt Colorado families and small businesses.”
The governor’s Chief Economist Henry Sobanet’s concerns about global impact of Europe’s economic debt crisis mirrored Federal Reserve Chairman Ben Bernanke’s comments during a press conference Wednesday. Unknown is whether recession-plagued Greece will withdraw from the 17-country zone that uses the Euro, and the outcome of the escalating debt crisis in Spain.
If the European financial crisis intensifies, it would negatively impact economic recovery in the United States because of reduced exports and overseas sales as well as intertwined financial investments. In addition, it would have a ripple effect and setback the global economy.
Sobanet’s outlook was similar to a report by Natalie Mullis, chief economist for the Legislature.
The word “fragile” was repeatedly used to describe the state’s economic future. The OSPB report stated that it’s very difficult to forecast the state’s economic future in this lingering recession. Small changes in projected revenue growth could result in large swings in the amount of money available for the state’s General Fund.
“If growth were to increase or decrease by just three percentage points in FY 2012-13 from the current projected growth rate, General Fund revenue would be approximately $230 million higher or lower,” warned the OSPB.
JBC Chair Rep. Cheri Gerou (R-Evergreen) said, “The most recent forecasts show that House Republican efforts to rein in uncontrolled government spending and push for fiscally responsible policy decisions are making a difference, but there is no reason for lawmakers to go on a spending spree.”
“I’m proud to see the hard work of the Legislature and the Governor pay off,” said Sen. Mary Hodge (D-Brighton), vice chair of the JBC. “Though the economic outlook remains uncertain mostly due to the situation in Europe, the economy is continuing to grow.”
Hodge cited strength and growth in Colorado manufacturing, banking and housing sectors as “reasons to be optimistic. But JBC member Sen.Kent Lambert (R-Colorado Springs) questioned that rosy picture, and noted that foreclosures remain high and new building permits for single family homes are still low.