Colorado’s economy forecast to slow, but not enter recession

Inflation and monetary policy tightening at the federal level are expected to chill Colorado’s economy in the coming months, according to quarterly economic and fiscal revenue forecasts from nonpartisan staff and the governor’s office presented to the Budget Committee on Tuesday. joint of the legislature.

But both forecasts also predicted that Colorado will avoid a recession despite national chatter about the US economy entering a major crisis.

“We see about a 1 in 3 chance of there being a recession in the next 18 months based on what we are currently looking at in the economy,” said Bryce Cook, chief economist at the Office of Planning and of the governor’s state budgeting.

The big payoff: State legislators should have more money to fund government services in future years, as revenues continue to exceed the Taxpayer Bill of Rights cap on government growth and spending, which is calculated based on population growth and inflation. When the TABOR cap is exceeded, Coloradans receive tax breaks and, if the excess is large enough, which is expected to be for the foreseeable future, refund checks.

“The economies of the United States and Colorado continue to grow, despite new and elevated risks to the economic recovery,” said David Hansen, senior economist with the nonpartisan Colorado Legislative Council.

Hansen said the unemployment rate is expected to average 3.5% in 2022 — which is the rate in May — and drop to an average of 3.2% in 2023.

Colorado tax revenue forecast presented to the Legislature Joint Budget Committee by nonpartisan staff of the Legislative Council. (Screenshot)

Greg Sobetski, chief economist for the nonpartisan Colorado Legislative Council, acknowledged there are “many downside risks” but said job vacancies are one of the reasons he and its staff do not foresee a recession at this time. Companies could remove a vacancy without necessarily affecting employment figures, he said.

“We believe there is room for monetary policy to tighten without causing the unemployment rate to rise,” he said, referring to the Federal Reserve’s decision to raise interest rates. ‘interest.

The Office of State Planning and Budgeting in Gov. Jared Polis’ office agrees.

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“A deep or prolonged recession is not currently expected,” the OSPB wrote in its presentation to the JBC, which forecast inflation would decline next year.

State Sen. Bob Rankin, a Republican from Carbondale who sits on the JBC, thinks the two forecasts he heard on Tuesday underestimate the likelihood of a recession.

“I don’t feel good about it,” he said. “We need to look at several different models for different levels of recession because we need to know what they might be.”

Rep. Julie McCluskie, Dillon’s Democrat and chair of the JBC, said she was cautiously optimistic.

“If I’ve learned anything from the pandemic and our recovery, it’s that it’s hard to predict what’s next,” she said. “So I think we have to be prepared, but hopefully we’re not going to see a recession. Fingers crossed.”

Polis said in a written statement on Tuesday that he was encouraged by the forecast.

“Colorado’s economy continues to recover faster and stronger and ahead of other states as new high-paying jobs are added every week and Colorado’s unemployment rate continues to fall,” the Democrat said.

The Colorado Legislative Council said the state’s economy also performed better than expected in the final months of the 2021-22 fiscal year, which ends June 30. As a result, the nonpartisan office expects Colorado taxpayers to get TABOR refund checks of $750 per individual filer. and $1,500 for co-registrants starting in late August. (People filing after June 30 will have to wait several more months to receive their refund checks.)

Democrats, who earlier this year changed the TABOR refund mechanism as part of an election-year effort to speed up TABOR refunds and try to make them fairer, initially said the checks would be $400 for single filers and $800 for joint filers.

Why such a large increase? Economists say the state collected about $1 billion more in tax revenue beyond the TABOR cap than expected in the last quarterly economic forecast in March.

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Rankin also said Tuesday that he fears the TABOR cap and inflation will collide as lawmakers try to deal with the rising cost of government services. He is a fan of TABOR, but says it was not an intention to operate in an environment where inflation is so high because the TABOR cap is calculated from past years’ inflation rates.

“The theory of TABOR is to allow you to continue funding the government you have now,” he said. “That’s the intention.”

Rankin wants to investigate if there is a way to use the current inflation rate to calculate the TABOR ceiling.

“The rate of inflation we use to raise the TABOR ceiling should match our current problem, not a year ago, two years ago,” he said.

The next economic forecast is scheduled for September.

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