Common Sense Policy Roundtable Releases New Report: “Is Colorado’s Budget Ready for a Recession?”

The COVID-19 pandemic brought the world’s economy to a screeching halt and Colorado has not been immune. Businesses across the state have been temporarily closed and the state has received a historic level of unemployment claims, resulting in declining tax revenues.

Now, the Common Sense Policy Roundtable just released its study, “Is Colorado’s Budget Ready for a Recession” analyzing how prepared the state is for a possible recession.

Among the study’s key findings:

• According to a recent Office of State Planning & Budgeting (OSPB) presentation, state revenue over the current and next budget could decline by $3.2 Billion based on current expectations. An official up-date to the state revenue forecast will be issued prior to the continuation of the legislative session.

• The current state general fund reserve amounts to roughly $1 Billion, just above the statutorily required rate of 7.25%.
• The long-term budget pressures presented by PERA (Public Employee Retirement Association) and any increase in Medicaid enrollment will also play a major factor in budget considerations.
• The economic fallout caused by COVID-19, has overshadowed the potential economic impacts from the rapid drop and volatility in oil and gas prices. That fallout translates to a significant cut oil and gas property tax revenues to local government.
• Recently passed revenue line items, including an increased general fund contribution to PERA ($225M annually) and the state funding of full-day kindergarten (Est $200 M annually) will add pressure to other state budget items such as transportation and higher education in order to make up for lost revenues.
• A majority of the estimated $2.5 Billion in federal stimulus will not able to cover losses in revenue, and will go directly to help state departments cover new costs related to the current crisis, such as expenses related to transitioning education from the classroom to online.
• A significant reduction in state revenue between $2 Billion to $3.2 Billion dollars over the next months. For additional perspective, this decline is equivalent to the total budgets for both Transportation and Human Services.

Access the full report here as well as an accompanying article.