Colorado’s economic recovery from the coronavirus crisis remains strong, though there have been recent speed bumps caused by the spread of the more contagious delta variant, and supply chain and labor shortage issues.
“We’re seeing some increasing headwinds,” Elizabeth Ramey, principal economist for Colorado’s nonpartisan Legislative Council, told state lawmakers on Tuesday.
But, Ramey said, Colorado’s economy has still been “growing at a pretty good clip,” propped up by consumer spending. Restaurant and hotel revenues, for example, are now exceeding their pre-pandemic levels for the first time.
The quarterly economic forecast provided by Legislative Council staff to state lawmakers on Tuesday mirrored the rosy picture painted by the Polis administration, which presented its own, similar forecast to the legislature.
“Today’s strong forecast shows Colorado is roaring back,” 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 Coloradans to get vaccinated to protect themselves, our economy, and jobs.”
Polis is up for reelection next year and Republicans have signaled they plan 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 compared to this year.
It wasn’t all good news, however.
Supply chain problems, exacerbated by the ongoing pandemic internationally, are expected to last into 2022, which is in turn expected to contribute to inflation.
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There are also unknowns around how diminishing federal coronavirus aid flowing into Colorado will affect the economy. Pandemic unemployment benefits ended on Sept. 6, reducing or eliminating aid for tens of thousands of Coloradans.
“Because federal fiscal stimulus has been so large, it’s difficult to gauge the underlying health of the economy,” said Kate Watkins, the chief economist for Colorado Legislative Council. “When those dollars expire, what happens? Is the economy able to stand on its own two feet? Or do we start to really see some cracks under the surface?”
The state’s unemployment rate is slightly higher than the national average — 5.9% compared to 5.2% — though Colorado had a higher labor force participation rate than the national average. Nonpartisan staff said 78.1% of Colorado jobs lost since the pandemic began have come back.
Jobs for higher-wage earners have recovered faster than positions for lower-wage workers.
The unemployment rate among Black and Hispanic workers in Colorado is higher than the rate 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 been highlighting throughout the state’s coronavirus recovery.
Nonpartisan staff said Colorado’s economy could fare even better than they expect 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 to be proud of, but we cannot let up,” state Sen. Dominick Moreno, a Commerce City Democrat who chairs the Joint Budget Committee, said in a written statement. “Far too many low-income Coloradans and small businesses are still struggling, and it’s imperative that we focus our attention on helping them. As we continue to work toward becoming more economically resilient and recovering 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’s Bill of Rights cap on government spending and growth, calculated through population growth and inflation.
Legislative Council staff believe revenue will surpass the cap by $1 billion in the current fiscal year, which began in July, and by $1.2 billion in the 2022-23 fiscal year and $1.4 billion in the 2023-24 fiscal year.
The Polis administration forecast revenue to grow even faster. It expects revenue to exceed the cap by $1.26 billion in the current fiscal year, $1.28 billion in the 2022-23 fiscal year and $1.47 billion in the 2023-24 fiscal year.
Polis on Tuesday was celebrating the potential for the TABOR excess to trigger an income tax reduction in the coming years. But Democratic state lawmakers have signaled they’d like to try to keep some of the excess.
Democrats plan to explore the following options to keep the money:
- Moving potentially hundreds of millions of dollars in fee revenue into enterprise funds, thereby making the money exempt from TABOR cap limits but restricting how the dollars can be spent
- Expanding existing tax credits — like the Child Tax Credit and the Earned Income Tax Credit — to reduce state revenue in a way that benefits lower-income families
- Putting a question on the 2022 ballot that would allow the state to keep the money
The difference of opinion on how to handle the excess TABOR revenue has been a point of contention for Polis and statehouse Democrats, who are in the majority in the House and Senate.
State Rep. Kim Ransom, a Douglas County Republican who sits on the JBC, said Tuesday that she was glad to see how much money will be refunded to taxpayers in the coming years.
Both the Polis administration and nonpartisan staff, however, warned that the TABOR excess could be erased by error in the forecast projections.
“The state is roaring back,” she said. “I love seeing the increased economy, the increased people working. I know that we still have some catching up to do, but I’m thrilled to see how much we’ve already done.”
The TABOR cap was exceeded in the last fiscal year, which ended in June, by $454 million, triggering an income tax cut to 4.5% from 4.55% and resulting in a sales tax refund payment, on average, of about $70 for individual taxpayers. Joint filers will receive $166 on average.