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Lawmakers preparing to trim state services

Lackluster economy forces tough decisions in Denver

DENVER – State lawmakers are bracing for budget cuts in the upcoming fiscal year after learning Tuesday of lackluster revenue growth.

The forecast presented to the Joint Budget Committee highlighted a shortfall this fiscal year, which would impact spending as Gov. John Hickenlooper prepares the fiscal year 2017-2018 budget proposal that he will unveil in November.

The current $25.8 billion budget, which runs through June 2017, is between $227 million and $330 million below what’s needed to fund the budget and a 6.5 percent reserve, depending on which forecast lawmakers look at. The governor’s office projected the lower deficit, while legislative staff predicted the higher shortfall.

Lawmakers were surprised to learn in May that the state owed refunds to the oil and gas industry, stemming from a Colorado Supreme Court decision that found the state owed tens of millions of dollars after it incorrectly disallowed a deduction related to transportation, manufacturing and processing costs. The obligation has contributed to the shortfall.

The state’s economy is growing at only a moderate pace, while the oil and gas industry continues to contract, which is also contributing to the discouraging news.

General fund revenue – which is used to pay for state services – is expected to grow by about 5.7 percent in the upcoming budget. But it won’t be enough to fund obligations, say legislative economists.

Henry Sobanet, the governor’s budget director, estimated that available revenues for the 2017-18 fiscal year would be $117 million higher than in the current fiscal year, but that it would not meet obligations.

The state has nearly $740 million in new obligations for the upcoming fiscal year, but it only has $582 million in expected additional dollars, explained legislative staff members.

“That gives you an idea of what the budget situation is,” said Natalie Mullis, chief economist for the Legislature, bracing for shock from the JBC panel.

“Wow, members, we’ve got some challenges ahead of us,” responded Rep. Millie Hamner, D-Dillon, chairwoman of the JBC.

Projections are more dismal than presented to lawmakers during the June forecast. Economists also signaled that a recession could be coming.

Lawmakers, however, were encouraged to learn that they budgeted properly for the fiscal year that ended in July, without having to dip into reserves, and ending with $9.5 million to spare.

Another bit of positive news was that the governor would not have to make immediate budget cuts, which is triggered when the state falls below half its reserve.

But when asked about potential cuts coming in the upcoming budget, Sobanet responded, “We are evaluating program needs in the departments.”


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