Tag: General Fund Revenues

Colorado’s General Fund Making a Recovery

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The Great Recession played havoc with the budgets of state governments. Colorado was no exception. In late December, the Colorado Legislative Council released its quarterly economic update that shows the impact the Great Recession has had on the revenue streams for the state government.

Sales Tax Revenue accounts for about one-fourth of the Gross General Fund. Sales Tax Revenue for the Fiscal Year (FY) 2013 is projected to exceed revenue for FY 2008 (not adjusted for inflation). [Note: The State Fiscal Year is July 1st through June 30th.]

It is projected that Net Individual Income Tax for the FY 2012 will exceed FY 2008 (not adjusted for inflation). This tax accounts for about two-thirds of Gross General Fund Revenue.

It is projected that General Fund Revenue for FY 2012 will be similar to FY 2008 (not adjusted for inflation). Total revenue was $7.743 billion in 2008. In 2012 it was 7.737 billion. In 2013 it is currently projected to be $8.026 billion. On an inflation adjusted basis, 2013 remains well below the 2008 total.

The Colorado State budget is much like the pocketbook of many Colorado residents. Over the past five years they have had to deal with wages that either declined or remained flat while experiencing expenses that escalated every year.

©Copyright 2011 by CBER.

Are We Better Off Than We Were Four Years Ago? – Colorado

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This election season has featured an abundance of discussion about where the state is better off now than we were four years ago. In some cases, we are better off today and in other cases we are not.  The following data provides a snapshot of key metrics that fit into both categories.

Colorado Population
People like to visit and live in Colorado. Continued population growth is projected on a long-term basis.
• Although Net Migration has slowed, Colorado’s population continues to grow at a steady pace.
Colorado Employment and Unemployment
Increased population growth points to long-term job gains and lower employment.
• During the 69 months between January 2007 and September 2012 Colorado only gained jobs in 34 months (seasonally adjusted data).
• In 2012, Colorado employment is well below employment of 2007 and 2008, but it is trending upwards.
• In 2012, jobs are being added at a faster rate than they were in 2008, but not 2007.
• The number of unemployed workers is more than twice as much in 2012 as it was in 2007. It is also greater than 2008.
• The unemployment rate in 2012 is twice the 2007 rate and much higher than in 2008.
• In 2012, the unemployment rate and the number of unemployed workers is trending downward, whereas, it was trending upward in 2008.

Colorado Employment by Sector
Segments of the economy are healthier than they were in 2008.
• Projected annual state employment for 2012 will be about 56,900 less than the total for 2008. The following sectors have greater 2012 employment than 2008: Private Education and Health Care, Higher Education, Tourism, K-12 Education, Corporate Headquarters (MCE), Federal Government, Employment Services, State Government, Extractive Industries, and Professional and Scientific and Technical Services.
Colorado Job Creation
Improved firm and job creation is necessary if the economy is to recover at a faster rate.
• Gross job losses and job gains for 2011 are less than 2008. Improvement in net job gains is more a result of decreased layoffs than actual job creation.

Income and Wages
Recent wage and income data is mixed.
• Per Capita Personal Income – The 2011 average is slightly below the value for 2008.
• Colorado Median Household Income – The 2011 median is below the value for 2008.
• Average Annual Wages – The 2011 average is above the value for 2008.

Colorado Output
Increased employment and wages will point to increased demand for goods and services. This in turn will push output upwards.
• Colorado Real GDP was greater than the U.S. for 2007 to 2011.
• The following sectors have shown steady growth since 1997 and 2011 output is greater than 2007 and 2008: Retail Trade; Professional, Scientific, and Technical Services; Health Care; Finance and Insurance; and Information.
• Real output for the Construction sector was greater in 2007 and 2008 than 2011 for both Colorado and the U.S.

Colorado and Inflation
Overall inflation has been minimal; however, inflation in key areas has been noticeable.
• Overall inflation has been minimal since the beginning of the Great Recession. Apparel and Housing are the only sectors that have grown at a lower rate than All Items for Coloradans.
Construction and Housing
There is improvement in the Construction and Housing markets.
• The number of permits in 2012 is greater than 2008, although they are well below the levels shown in the 2000s.  Most importantly, permits are slowly trending upwards.
• 2012 Colorado housing prices are approaching 2008 levels.
• Home ownership rates in 2011 are below the rates in 2008. More importantly, they are trending downwards.

General Fund and Retail Trade Sales
Gross General Fund Revenue is trending upwards because of stronger job gains (income taxes) and retail trade sales (sales taxes).
• Retail Sales are improving. Projected Sales Tax Revenue for the fiscal year ending June 2013 will exceed revenue for FYE 2008 (not adjusted for inflation). This tax accounts for about one-fourth of Gross General Fund Revenue.
• Projected Net Individual Income Tax for the fiscal year ending June 2012 will exceed FYE 2008 (not adjusted for inflation). This tax accounts for about two-thirds of Gross General Fund Revenue.
• Projected General Fund Revenue for the fiscal year ending June 2012 will match FYE 2008 (not adjusted for inflation).

For more detailed analysis of the state of the economy compared to four years ago, visit https://cber.co or click here.

 

©Copyright 2011 by CBER.

Great Recession Continues to Play Havoc with State Finances

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The Great Recession has taken its toll on state and local governments. Three years after the end of the Great Recession state and local governments continue to face significant fiscal challenges. In mid-July The State Budget Crisis Task Force released a report headed up by Richard Ravitch and Paul Volcker that examined the challenges to financial stability for California, Illinois, New Jersey, New York, Texas, and Virginia. Just over 36% of the country’s population lives in these six states.

There are a number of variables (policies, economic structure, demographics, etc.) that differentiate the states; however, the report identified six fiscal threats common to each:
• Medicaid spending growth is reducing funds for other needs.
• Federal deficit reduction will result in lower funds for state coffers.
• Underfunded retirement accounts are a risk for future budgets
• Eroding tax bases and volatile tax revenues jeopardize state finances.
• Local government fiscal challenges may impact state budgets.
• State budget laws and practices hinder fiscal stability.

To show the seriousness of the problem the report evaluated changes in tax revenues generated from the peak-to-trough, the trough to 2011, and peak-to-2011. The changes in percentages are adjusted for inflation; however, they are not adjusted for policy changes. In some cases policy changes have been made that have or will positively impact revenues.

The change from peak-to-trough follows:
• U.S.  -12.0%
• California -14.9%
• Illinois  -18.7%
• New Jersey -17.2%
• New York    -4.3%
• Texas  -15.4%
• Virginia -15.9%

The change for the recovery, or trough-to-2011, follows:
• U.S.  +  5.7%
• California +11.9%
• Illinois  +12.9%
• New Jersey +  2.7%
• New York +  4.3%
• Texas  +  7.4%
• Virginia +  3.9%

The change from peak- to-2011, follows:
• U.S.  –  7.0%
• California –  4.8%
• Illinois  –  8.2%
• New Jersey -15.0%
• New York –  0.2%
• Texas  –  9.2%
• Virginia -12.6%

Colorado was not included in the report; however, the challenges faced by the state are similar. Data from the Colorado Legislative Council’s quarterly reports (June) show the following levels in the state’s gross general fund, expressed in billions:
• FY ending June 2008  $7.7
• FY ending June 2009 $6.7
• FY ending June 2010 $6.5
• FY ending June 2011 $7.1
• FY ending June 2012 $7.6
• FY ending June 2013 $7.8
• FY ending June 2014 $8.2

The Colorado data is not inflation adjusted. On an inflation-adjusted basis the level of the state General Fund will not return to the FY 2008 level until FY 2013 or 2014. The Colorado State Demography Office projects that the state population will increase from 4.9 to 5.4 million people for that period. In other words the state will add half a million people and have the same level of funding as five or six years ago.

It is truly a challenging time to be working in the public sector.

Links to the State Budget Crisis site and the Colorado Legislative Council site are:

 

 

©Copyright 2011 by CBER.