DENVER (AP) — Colorado's tax receipts continue to be higher than expected, with improvements in the housing market and personal income, but uncertainty over fiscal cliff negotiations is preventing stronger growth, state economists said Thursday.
Revenue is estimated to be $159.6 million higher for the current fiscal year that ends in September than predicted three months ago, Gov. John Hickenlooper's economists told lawmakers in a quarterly briefing on the state's outlook. The additional money will carry over to next year and be invested in a savings account for schools.
The governor's economists and legislative staff, which delivered a similar forecast, told lawmakers that consumer spending continues despite the fiscal cliff debate. Economists said uncertainty over what could happen if there's no agreement, triggering across the board cuts and tax increases, is preventing a stronger recovery in Colorado.
"When there's higher levels of uncertainty, businesses hold back, which is what we're seeing here," said Jason Schrock, the chief economist in the governor's office.
Natalie Mullis, the Colorado Legislature's chief economist, said if the fiscal cliff is not averted, consumers will begin to feel the impact when the payroll tax cut expires in January.
"As long as Congress and the president continue to deliberate about these policies, the economy in Colorado and the nation will grow significantly below potential," Mullis said. "Businesses will continue to be tentative, and consumers will follow suit, once they see their wages fall because of the payroll tax cut."
Economists said tax receipts next year could slow, changing the state's revenue outlook if the fiscal cliff cuts and tax raises happen. If Congress goes over the fiscal cliff, Colorado stands to lose at least $67.9 million to various programs, including $34.1 million to education, according to a memo from legislative staff.
For now, the latest figures continue a trend of growth in quarterly state forecasts this year. The state's general fund revenue for the current fiscal year that began in July is now projected to be $8.1 billion, compared with just under $8 billion predicted in September. The general fund now exceeds, albeit barely, the pre-Great Recession peak of $7.7 billion in 2007.
Henry Sobanet, Hickenlooper's budget director, told lawmakers that barring an "unforeseen shock," Colorado is "really on the cusp of a sustained expansion."
Sobanet said the state is "well positioned to endure a hiccup in the economy," in part because of money set aside in recent years. But he said that because of the many potential changes to national tax policy — and how businesses respond — the next quarterly forecast in March will guide the budget that lawmakers vote on in the spring.
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