Friday, September 19, 2008

Ritter: 3rd Quarter Economic Forecast is Less Optimistic

Gov. Bill Ritter’s Office of State Planning and Budgeting released a third quarter economic and revenue forecast today, projecting a downturn in stat revenues.

According to the estimate, state general fund and cash fund revenues will rise, but by about $100 million less than anticipated in June. The governor's office now says that the state's coffers will grow by about $10.5 billion for FY 2008-2009. If accurate, this would be a 5.3 percent increase from FY 2007-2008.

“Colorado's economy continues to hang in there despite the instability at the national level,” Todd Saliman, director of Ritter’s Office of State Planning and Budgeting, said. “Our revenue forecast includes a downturn, but that downturn is moderated by strength in tourism, renewable energy, traditional energy and biosciences.”

The document says that Ritter's administration expects sales and other excise tax revenue to remain stable, with approximately four percent growth expected. Ritter predicts that severance taxes charged on natural gas extraction in the state will increase despite drops in the price of natural gas. The estimate for FY 2008-09 of $303.3 million represents a 78.4 percent increase ($133.2 million) over FY 2007-08 severance tax collections.

Colorado's ability to benefit from Referendum C is expected to decline, according to Ritter. The state is projected to retain $6.1 billion from fiscal 2005-06 through 2009-10. The $314.3 million decrease in this figure from last quarter is, according to Saliman's office, largely attributable to the compounding impact of a 0.7 percent increase in the Denver-Boulder-Greeley inflation estimate for 2008 (projected to equal 3.7 percent).

The inflation rate in the Denver metro area determines the TABOR limit and therefore the excess revenue collected under Referendum C.

The governor's economic forecast paints a rosy picture of the state's foreclosure situation, arguing that Colorado's real estate market is "substantially stronger" than the rest of the U.S.

"According to the Standard & Poors/Case-Shiller index, Denver’s real estate market is one of the strongest of any major metropolitan area of the country," says a press release issued by the governor's office. "In addition, real estate continues to be strong on the Western Slope in response to the continuing influx of oil and gas workers."

The forecast also maintains that Colorado is "experiencing lower unemployment, greater job growth, and slower inflation than the nation is overall."

Ritter predicts that Coloradans will see higher personal income growth and higher employment growth, accompanied by less inflation and a lower unemployment rate, relative to the rest of the nation this year.

The four-year forecast period covers the current fiscal year (2008-09) through fiscal year 2011-12.