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The dome of the Colorado Capitol on July 26, 2019. (Jesse Paul, The Colorado Sun)

The dark clouds shadowing Colorado’s fiscal situation are giving way to a brighter economic outlook, according to a pair of forecasts presented Friday to state lawmakers.

The arrival of a COVID-19 vaccine, an increase in job creation and a higher online sales are boosting the state’s economy, but it’s not universal. The latest numbers show certain sectors in Colorado, particularly the restaurants industry and tourism, and low-wage workers are getting left behind.

“We have this upward trajectory for many industries and households and a downward or flat trajectory for others,” said Kate Watkins, the chief legislative economist at the Joint Budget Committee hearing. “Higher income individuals have recovered very quickly whereas lower income individuals have not.”

The bifurcated recovery creates challenges for Colorado lawmakers. The improving economic outlook is driving projected revenues higher and easing state budget pressures.

In a reversal from earlier forecasts, Colorado’s budget is now expected to take a dive for only one year before rebounding to pre-pandemic levels in fiscal year 2021-22, which starts July 1. The unexpectedly quick recovery means lawmakers potentially have a surplus as high as $3.8 billion for the coming fiscal year, according to new legislative projections.

The governor’s forecast shows $500 million more in available revenue than he included in his budget proposal in November. “This is surprisingly good and welcome economic news for Colorado, given that the entire world is in the grip of a deadly virus and the United States is experiencing an all-time high in hospitalizations and deaths,” Gov. Jared Polis said in a statement.

Gov. Jared Polis speaks to reporters at a news conference on Tuesday, Oct. 13, 2020. (Jesse Paul, The Colorado Sun)

The question moving forward is how to allocate the one-time extra money. The Democratic governor is pushing his plan for a $1.3 billion stimulus that includes future spending on infrastructure projects and the stimulus checks sent earlier this month to more than 400,000 people on unemployment. He also wants to restore most spending cuts and put more money into reserves.

Colorado lawmakers approved the initial items on the governor’s list during a special session earlier this month and remain open to the broader approach. But at the same time, they are concerned about the economic picture down the road. 

“There is room for some stimulus spending considerations,” said state Sen. Dominick Moreno, a Democrat and the chairman of the Joint Budget Committee. “The General Assembly will have to be cautious about not spending too much given the instability we’re still seeing in the economy.”

The declines for the current year are projected between 5.6% and 3%, according to the respective December economic forecasts from the legislature and the Polis administration. 

Colorado lawmakers prepared for the slide earlier this year by making major budget cuts and decreasing the state reserve fund to its lowest point in a decade

But they went deeper than needed, and now the state expects $1.8 billion in additional revenue from the fiscal year that ended June 30 and a similar amount for the current fiscal year. The one-time money can be spent or saved.

The $3.8 billion in extra revenue available for the 2021-22 budget that lawmakers are writing now doesn’t include increases in demand for government support or inflationary pressures on the cost of goods and services. So in reality, lawmakers still will need to make difficult decisions on where the money goes.

The uneven impacts of the economic recovery are further complicating Colorado’s path forward.

A “for lease” sign is pictured on a vacant storefront next to a sign promoting social distancing in Arvada on Dec. 16, 2020. (Andy Colwell, Special to The Colorado Sun)

State Rep. Kim Ransom, a Republican budget writer from Douglas County, expressed concern  about what many people are experiencing on the ground. “I love seeing the recovery that you are forecasting,” she told the governor’s budget director. “But when you drive around, sometimes the closed doors anecdotally seem to contradict what we are seeing on these papers.”

Sen. Chris Hansen, a Democratic budget committee member from Denver, suggested lawmakers will need to take more action to address the situation. “I think household finances are strong for some but very much in peril for many others,” he said. 

“I highlight this because … this committee — and therefore the General Assembly — is going to really have to grasp this nettle because we’ve got this divergence that seems more pronounced than in other downturns.”

John Frank is a former Colorado Sun staff writer. He left the publication in January 2021.