March 4, 2016

Highly significant March revenue forecasts from the Governor and General Assembly due in a couple of weeks

The State of Colorado budgets annually (July 1 through June 30) based upon revenue expectations arrived at through in-depth research of past tax revenue collections and state government's best economic predictions. In order to monitor and, if necessary, adjust upwards or downwards state tax revenue collection during the year, both the governor's Office of State Planning and Budgeting (OSPB) and the Colorado General Assembly's Legislative Council staffs monitor tax collections on a quarterly basis (September, December, March, and June). Each quarter, these two offices issue a "revenue forecast" for the upcoming quarter which can and often does cause the legislature and the governor to change their respective views of how much funding is available for the next year's budget which must be passed prior to the legislature's adjournment in early to mid-May. This fiscal year saw the December 2015 revenue forecasts adjust revenue expectations slightly downward from September's forecast - in large part due to declining tax collections from Colorado oil production which, according to the Colorado Fiscal Institute, makes up approximately 11 percent of Colorado's economy.

As a matter of annual practice and because of the December forecast's lowering of revenue expectations for Colorado state tax collections, dollar amounts for state government's proposed annual budget for 2016-17 (referred to as the "Long Bill") and the funding amendments for the School Finance Act will not be set until the March 2016 revenue forecasts are announced around March 20. The proposed Long Bill is then sent to the legislature by the six-member Joint Budget Committee (JBC). These six legislators (three state senators and three state representatives) are selected by their colleagues in the House and Senate respectively with two from the majority party and one from the minority party. Because the House is controlled 34-31 by Democrats and the Senate is controlled 18-17 by Republicans, the JBC make-up is three Republicans and three Democrats. 

Another key 2016-17 Colorado K-12 budget factor will be what, if any, legislative action is taken on Governor John Hickenlooper's proposal to move revenue collected through the Hospital Provider Fee (passed in 2009) from state government's general fund, which is affected by TABOR revenue limits, to its own enterprise fund, which is not. If successful, this action would keep state general fund revenues below the level of allowed annual TABOR revenue growth. Otherwise, more than $159 million in taxpayer refunds would be triggered causing cuts to K-12 funding at a time of growing school district costs and higher overall state enrollment. The prevailing political wisdom at the State Capitol has been that the Democratic-controlled House would pass this change while the Republican Senate President opposes it and has questioned its constitutionality under TABOR. However, Colorado's Republican attorney general, Cynthia Coffman, just this past week issued a formal opinion stating the move of the Hospital Provider Fee from the state general fund to its own enterprise fund was constitutional. It is not yet known if this opinion will persuade Senate President Bill Cadman (R-Colorado Springs) to send the bill to a committee that has a chance of advancing it to the Senate floor. If it reaches the Senate floor, at least one Republican, Senator Larry Crowder (R-Alamosa), has stated that he will support it. Stay tuned.