Colorado Legislative Council Staff

Transcription

1 Colorado Legislative Council Staff Room 029 State Capitol, Denver, CO (303) FAX: TDD: MEMORANDUM March 12, 2001 TO: Members of the General Assembly FROM: The Economics Staff, (303) SUBJECT: Focus Colorado: Economic and Revenue, In this memorandum, we present the General Fund revenue forecast and overview, the cash funds forecast, projections of excess TABOR revenues, and the national and state economic forecast. We include two General Fund overviews: one with new and continuing capital construction projects and one with continuing capital construction projects only. The forecast is based on current federal and state tax laws. However, it should be noted that some features of the proposed federal tax law changes would have a negative impact on Colorado tax revenues. The forecast document is abbreviated from the usual publication length due to an early publication date. Summary We increased the General Fund revenue forecast for FY by $29.8 million. However, the forecast was reduced by $477.8 million, or 1.2 percent, during the remainder of the forecast period. Most of the reduction is attributable to the weak stock market and an anticipated slowing of capital gains realizations. The state budget is at further risk during the next two years if capital gains realizations are even lower than our forecast projects. The lower General Fund revenue forecast will potentially mean that the Senate Bill 97-1 diversion of a portion of sales and use tax revenues to the Highway Users Tax Fund (HUTF) will be reduced. If the Capital Development Committee s full prioritized list of new and continuing construction projects is funded, the diversion to the HUTF would need to be reduced by $97.3 million in FY If only continuing construction projections are funded, the diversion to the HUTF would need to be reduced by $37.1 million. Page 1

2 We increased the forecast of cash fund revenues for the first three years, but decreased the forecast in the following three years. The six-year projection of cash fund revenues was reduced by $16.2 million. Colorado will exceed its constitutional revenue limit in each year of the forecast period. The TABOR surplus for FY will be an estimated $900.7 million. The combination of a significantly higher TABOR growth limit, weak revenue growth, and the full impact of Amendment 23 and tax reductions will reduce the TABOR surplus for FY to only $240.9 million. Thus, only three of the 16 TABOR refund mechanisms with a trigger will be used in FY based on the low TABOR surplus. The average TABOR surplus during the six-year period will be $694 million. General Fund Revenue Table 1 shows the forecast of General Fund revenue. We increased the current year forecast by $29.8 million. Although revenues were tracking below the December 2000 forecast, further analysis indicated that part of the shortfall was attributable to taxpayers making lower estimated payments due to the large TABOR refund that they will receive as they file returns in Computerized tax programs incorporated the TABOR sales tax refund for the first time last year in calculating income taxes due. Consequently, income tax refunds will also be lower and will effectively counterbalance the shortfall in estimated payments. We increased the withholding tax accrual adjustment by a significant amount and increased the estimates for estate taxes and interest earnings by a total of $22.7 million. In addition, we reduced the sales tax forecast by $11.0 million. Other changes to the current year forecast were minor in comparison. Despite the current year increase in the forecast, we reduced the revenue forecast for FY and beyond. Although Colorado s economy will remain robust during the forecast period, the majority of the reduction in the forecast is attributable to the weak stock market and a reduced growth rate for capital gains realizations. We are still projecting positive increases in the realizations. We have previously noted that Colorado was at risk in the event of a significant market downturn. The relative importance of capital gains to Colorado income taxes tripled during the 1990s. Colorado s exposure to the downturn in the stock market may be even greater than we are projecting. A special study by a national economic forecasting firm indicated that capital gains realizations in Colorado could fall by 63 percent between 2000 and State revenues would be drastically lower than our forecast if that level of decline in capital gain realizations occurred. Relative to the December 2000 forecast, the growth rate in General Fund revenues projected in this forecast will be larger in five of the six years. However, our forecast for a smaller rate of growth in capital gains realizations will lead the General Fund revenue to only a 1.7 percent gain in FY , down from 4.0 percent in the December 2000 forecast. Page 2

3 Cash Funds Revenue Total cash fund revenue subject to the TABOR spending limit will increase 6.0 percent in FY , 2.8 percent in FY , and at a compound average annual rate of 4.6 percent between FY and FY We increased the forecast of cash fund revenues for the first three years, but decreased the forecast in the following three years. The six-year forecast of cash fund revenue was reduced by $16.2 million. While the state is in a position of having excess TABOR revenue, the higher cash fund revenue forecast for the first three years will cause the General Fund to retain less revenue in its year-end reserve each year than had been expected in December. This happens because the TABOR refund is recorded as a General Fund liability. Since higher-than-expected cash fund revenue increases the TABOR refund in the following year, more is needed from the General Fund for the TABOR refund. The contrary will be true in the latter years of the forecast: the General Fund will retain more revenue in its year-end reserve than previously expected. The following paragraphs describe our forecast of cash fund revenues, while Table 2 shows the forecast for each cash fund category. Transportation-related cash funds, which include the Highway Users Tax Fund (HUTF), the State Highway Fund (SHF), and several smaller funds, will increase 6.1 percent in FY , 3.0 percent in FY , and at an average annual rate of 3.8 percent between FY and FY The HUTF will increase 3.8 percent in FY , and at an average rate of 4.2 percent over the forecast period. The forecast for the HUTF was reduced from the December 2000 forecast by $6.4 million, primarily due to a downward revision in the forecast for motor fuel taxes. Motor fuel tax revenues are lower than expected due to the slowing economy. Additionally, higher gasoline prices are having a larger impact on gasoline usage than previously anticipated. However, the forecast for the State Highway Fund was increased $22 million over the December forecast as a result of increased receipts of matching funds from local governments for projects accelerated with the use of Transportation Revenue Anticipation Notes. Meanwhile, the Senate Bill 97-1 diversion is expected to be reduced by $97.3 million in FY The diversion is reduced when there are insufficient monies in the General Fund to fund a six percent growth rate in General Fund appropriations and the required four percent statutory reserve. Higher education cash fund revenue will increase 6.7 percent in FY Through the forecast period, growth in higher education revenues will taper from 6.3 percent in FY to 4.7 percent in FY The slowing trend is a result of a decreasing inflation rate from 4.0 percent in 2000 to 2.7 percent in 2004 that drives the annual tuition rate hike. It is also due to different tuition increases for residents versus nonresidents in FY The Joint Budget Committee has tentatively recommended that nonresident tuition rates increase by 5.0 percent, a percentage point over the 4.0 percent inflation used for resident tuition rates. Meanwhile, the number of resident full-timeequivalent students will increase at a compound annual average rate of 1.0 percent and nonresident enrollment will grow at a stronger pace of 2.1 percent per year. These rates reflect estimated trends of migration, national public college and university enrollment rates, and state population growth. Total unemployment insurance (UI) revenue will decrease 2.3 percent in FY and 2.2 percent in FY While taxable wages and interest earnings continue to grow at healthy rates, revenues will decline during this time period as a result of House Bill , which provides for a 20 percent tax credit on UI taxes during calendar years 2001 and This is expected to reduce UI tax revenue by a total of $43.8 million between FY and FY Total UI revenue will grow Page 3

4 at a compound average annual rate of 3.5 percent between FY and FY Continued strong gains in the wage level, combined with an increase in the number of claimants, will drive an average annual growth rate of 8.4 percent in benefit payments between FY and FY Meanwhile, the UI Fund Balance will grow at a compound average annual rate of 4.6 percent to $999.6 million in FY , and will remain statutorily solvent throughout the forecast period. Limited Gaming Cash Fund revenue, which includes gaming taxes and license fees, will grow 17.3 percent in FY , as income growth and tourism remain healthy, and larger casinos continue to replace smaller casinos. The trend will moderate throughout the forecast period, and gaming revenue will increase at an average annual rate of 13.5 percent between FY and FY Wildlife Cash Fund revenue will fall 2.1 percent in FY , a result of stagnant growth in demand for hunting and fishing licenses. Wildlife cash fund revenues will recover at a healthy rate for the remainder of the forecast period as a result of House Bill , which raised fees for nonresident hunting licenses, and indexed them to the Denver-Boulder-Greeley inflation rate thereafter. House Bill is expected to raise hunting license revenue by $30.2 million over the forecast period, despite an expected 36.6 percent reduction in the number of licenses sold. Finally, all other cash fund revenue will grow 7.8 percent in FY , and at a compound average annual growth rate of 3.7 percent between FY and FY Interest earnings to the Controlled Maintenance Trust Fund (CMTF) will show a volatile pattern during the next two years, a result of House Bill , which requires the principal balance of the CMTF ($243.9 million) to be transferred to the General Fund on July 1, On July 1, 2002, $276.4 million will be transferred from the General Fund to the CMTF. The Constitutional Revenue Limit TABOR The provisions of Article X, Section 20 of the Colorado Constitution (TABOR) require that revenue collected above the TABOR limit be refunded to taxpayers within one year after the fiscal year in which they were collected. TABOR limits annual growth in most state revenue to inflation plus the annual percentage change in population. Table 3 shows the projections of future TABOR surpluses based upon current law and the Legislative Council revenue, inflation, and population forecasts. While we expect the state to exceed its revenue limit in each year of the forecast period, the total amount of surplus TABOR revenue will be lower than previously anticipated due to reductions in the General Fund forecast. The TA- BOR surplus for FY is estimated to be $900.7 million. The surplus will decline to only $240.9 million in FY and then grow steadily to more than $1 billion in FY The average TABOR surplus will be $129.1 million less than previously anticipated. The low surplus in FY is mostly attributable to the near doubling of the allowable TA- BOR growth limit. Population growth was 6.0 percent in 2000, while the Denver-Boulder-Greeley inflation rate was 4.0 percent. The state s population did not actually increase 6.0 percent in The U.S. Census Bureau underestimated the state s population throughout the 1990s and the 2000 census accounted for the underestimates. Other factors contributing to the low TABOR surplus in FY Page 4

5 are slower growth in state revenues, the ongoing impact of previous tax reductions enacted by the General Assembly, and the continuing impact of Amendment 23, which exempts a portion of state income taxes from the TABOR revenue limit. Only three of the 16 TABOR refund mechanisms that depend on a trigger mechanism for their implementation will be used in FY when the $240.9 million surplus from the previous year will be refunded. The three refunds include the Colorado earned income tax credit ($36.4 million), the business personal property tax credit ($83.3 million), and the individual development account tax credit ($5.0 million). Additionally, the sales tax refund will total $122 million. The average sales tax refund per taxpayer will be $43. In FY , the capital gains refund for Colorado assets sold between one and five years after purchase will be the only refund method not utilized. General Fund Overview We present two General Fund overviews in this section. Both overviews show the impact of House Bill Already passed by the legislature and signed by the Governor, a transfer of $243.9 million from the Controlled Maintenance Trust Fund to the General Fund will occur in FY The bill provides that a reverse transfer of $276.4 million will occur in FY Ostensibly, the transfer is to provide enough money in the General Fund so that the diversion of percent of sales and use tax revenues would occur during FY Previous projections showed that there would not be sufficient money in the General Fund to accomplish the transfer. When House Bill was passed, revenue projections showed that there would still be $24.0 million in the excess General Fund reserve at the end of FY Table 4 shows the General Fund overview based on the Capital Development Committee s total prioritized list of new and continuing construction projects. We expect that the year-end reserve for FY will be $440.2 million. The combination of reduced revenues and a larger TABOR refund in FY will cause the Senate Bill 97-1 trigger to reduce the diversion to the HUTF by $97.3 million that year. The trigger is enacted when there are insufficient revenues to fund General Fund appropriations at the maximum six percent growth rate and to fund the statutory four percent reserve requirement. A reduction in the diversion for FY will be narrowly averted as the excess General Fund reserve balance is estimated to be only $4.8 million. After FY , the excess reserve will have large balances and will grow to over $1 billion in FY Table 5 shows the General Fund overview based on only funding the continuation capital construction projects. The reduction in capital construction funding under this scenario totals $60.2 million in FY , $127.3 million in FY , and $44.5 million in FY Based on the capital spending reduction in FY , the diversion of a portion of sales and use taxes to the HUTF would need to be reduced by $37.1 million rather than $97.3 million. Additional new construction transfers could resume in FY as the projected excess reserve would be $129.0 million, although significant additional spending would potentially reduce the excess reserve to dangerously low levels for that year. The excess reserve would grow to $1.2 billion in FY Page 5

6 National Economy The national economy faltered in late 2000 and early Though inflation-adjusted gross domestic product (GDP) increased 5.0 percent in 2000, the pattern of growth was varied. Fourth-quarter GDP increased at a 1.1 percent rate, following a 2.2 percent gain in the third quarter. The manufacturing industry is in a recession. The National Association of Purchasing Managers index, a key barometer of the manufacturing industry s health, has been below 50 percent for seven consecutive months. When the index is below 50 percent, it indicates that the manufacturing sector is contracting. Additionally, when the index is below 43 percent, as it has been for the past two months, it suggests that the broad economy is shrinking. Consumer confidence has been sharply reduced over the past several months by the ongoing economic events. The Conference Board s measure of consumer confidence fell from in September 2000 to in February While consumers expectations about current economic conditions have not declined significantly, their expectations about future conditions have plummeted. Additionally, corporate profits have fallen in recent months and business investment is very weak. In response to the evidence of a faltering economy, the Federal Reserve Board reduced interest rates twice by a total of 100 basis points. The Fed said that it will cut interest rates again if the economy continues to show signs of weakness. The national economy will likely avoid recession, although the risks to the economy are high. The detailed national economic forecast can be found in Table 6. The following highlights summarize our national forecast. Inflation-adjusted GDP growth will slow dramatically in 2001, to 1.7 percent. This follows a 5.0 percent gain in 2000, the largest increase since The economy will expand by 3.3 percent in 2002 before moving on to even larger gains during the remainder of the forecast period. Falling consumer confidence will lead inflation-adjusted consumer spending to only a 2.8 percent gain this year, following 5.3 percent increases in the past two years. Consumer spending will rebound to a 3.4 percent increase in Weak demand and corporate profits will reduce business investment to a 3.6 percent gain in 2001, following five consecutive years of double-digit increases. The nation s unemployment rate averaged 4.0 percent in However, the dramatic slowing in the manufacturing sector and parts of the high tech economy will move the unemployment rate up to 4.9 percent in 2001 and 5.3 percent in Wage and salary employment growth will be weak during these two years as well, registering gains of 0.7 percent and 0.6 percent. Inflation was 3.4 percent in 2000, the biggest increase since Inflation will subside somewhat to 2.7 percent in 2001 and then fall below 2.0 percent for the following three years. The Federal Reserve Board will likely reduce interest rates twice more during Federal tax cuts in their current form will provide little stimulus to the economy this year Page 6

7 because the reductions to a great extent are scheduled for implementation later in the forecast period. The risks to this forecast are stronger than in previous forecasts. Energy prices have been relatively stable during the past two months, but could surge again. Supplies remain tight and any supply disruption would cause energy prices to spike up again. If this happens, the likelihood of general price inflation increases. The stock markets remain in a tenuous position. Corporate earnings remain weak and could be knocked down further by increased energy prices, higher inflation, increased wage demands, and even weaker stock markets. Consumer spending could falter further with additional stock market weakening and resulting consumer confidence declines to recession levels. Colorado Economy The state s economy enjoyed another banner year in Employment increased 3.9 percent as the number of jobs increased by 82,900. Colorado s average unemployment rate was a record-low 2.7 percent, while reaching a low of 2.2 percent in May Colorado employers would have hired even more workers if not for the tight supply of available workers. Wage and salary income increased an estimated 10.9 percent and consumer spending increased an estimated 11.5 percent. Housing construction reached the highest level in nearly 30 years and homeowners enjoyed continuing price appreciation. While nonresidential construction dipped 12.4 percent in 2000, the level of construction was the second highest on record. However, the local inflation rate increased from 2.9 percent in 1999 to 4.0 percent in 2000 and was the largest increase since The Colorado economy will be affected only slightly by the national economic slowdown in Colorado s job growth over the past 40 years has largely mirrored that of the nation but does track above the nation. The state will be constrained by the scarcity of available workers and a higher cost of living relative to other states. The detailed Colorado economic forecast can be found in Table 7. The following highlights summarize our state forecast. Nonfarm employment will increase 3.1 percent in 2001, following gains of 3.9 percent in 2000 and 3.6 percent in Job growth will slow slightly in 2002 and beyond. The unemployment rate will move up slowly from the record-low 2.7 percent in 2000, reaching 3.2 percent in 2001 and 3.4 percent in Colorado s manufacturing sector will drop 1,300 jobs in 2001 and 4,700 jobs in 2002 after a small gain in The construction sector, which has been leading job growth in recent years, will slow to 2.3 percent and 2.2 percent gains in 2001 and Continuing job cutbacks in the transportation and public utilities sector in 2001 will reduce the recent robust gains. The finance, insurance, and real estate sector suffered in 2000 along with the weak stock market and will have a relatively weak year in 2001 before resuming a solid growth path in Job growth in service industries will slow only slightly from recent years. Personal income will increase 7.9 percent in 2001, following an estimated 9.7 percent gain in 2000, the largest increase since Personal income growth will gradually taper Page 7

8 off through the rest of the forecast period, approximating the 7.3 percent average increase since Wage and salary income, which accounts for approximately 60 percent of personal income, will increase 8.4 percent in 2001 and 7.8 percent in Statewide population growth and the inflation rate for the Denver-Boulder-Greeley area are key economic variables because they determine the allowable growth rate for state TABOR revenues. Colorado s population increased at an average annual rate of 2.7 percent between 1990 and We estimate that population will increase by 2.2 percent in 2001, 2.1 percent in 2002, and 2.0 percent in Inflation hit 4.0 percent in 2000, the largest increase since Inflation will be more moderate during the forecast period, falling to 3.5 percent in 2001 and 3.1 percent in Inflation will be below 3.0 percent from 2003 through Construction has been the biggest factor in Colorado s boom of recent years, similar to the boom of the early 1980s. However, the state does not currently have the excess capacity in the residential and most nonresidential sectors that eventually led to a collapse of the construction industry in the 1980s. Because of our close balancing of supply and demand for housing and nonresidential building, the modest slowdown predicted for the Colorado economy will not unduly influence the construction industry. Housing permits will decline by 1.3 percent in 2001 and 1.1 percent in 2002, remaining at overall high levels. Nonresidential building will experience modest gains during the forecast period. Page 8

9 Table 1 Colorado General Fund, Accrual Basis Revenue s by Tax Category ($ in millions) Category FY Percent Change FY Percent Change FY Percent Change FY Percent Change FY Percent Change FY Percent Change FY Percent Change Sales $1,744.8 /A 11.6 $1,818.1 /A 4.2 $1,900.7 /A 4.5 $2,039.7 /A 7.3 $2,184.5 /A 7.1 $2,332.5 /A 6.8 2,488.5 /A 6.7 Sales Tax Overrefund from TABOR (18.8) (35.5) (49.4) (28.5) (5.8) (8.0) (15.2) Use /A /A /A /A /A /A /A 5.2 Cigarette Tobacco Products Liquor TOTAL EXCISE $1, $2, $2, $2, $2, $2, $2, Net Individual Income $3, $3, $4, $4, $5, $5, $5, Net Corporate Income TOTAL INCOME TAXES $4, $4, $4, $4, $5, $5, $6, Less: Portion directed to the State Education Fund /B (160.4) NA (339.1) (371.0) 9.4 (400.2) 7.9 (429.4) 7.3 (459.3) 7.0 INCOME TAXES TO GENERAL FUND $4, $4, $4, $4, $4, $5, $5, Estate $ $ $ $ $ $ Insurance Pari-Mutuel Interest Income Court Receipts Gaming 28.8 /C /C /C /C /C /C /C 12.1 Medicaid (Intergovt. Transfer) Other Income TOTAL OTHER $ $ $ $ $ $ $ GROSS GENERAL FUND $6, $6, $6, $7, $7, $8, $8, REBATES & EXPENDITURES: Cigarette Rebate $ $ $ $ $ $ $ Old-Age Pension Fund Aged Property Tax & Heating Credit Fire/Police Pensions TOTAL REBATES & EXPENDITURES $ $ $ $ $ $ $ Totals may not sum due to rounding. NA: Not Applicable. /A Sales and use taxes diverted to the Highway Users Trust Fund can be found in Tables 4 and 5. /B In November 2000, Colorado voters approved Amendment 23 that deposits an amount equal to 0.33 percent of Colorado taxable income into the State Education Fund. These revenues are exempt from the TABOR revenue limit. /C Limited gaming receipts are reported net of revenues that are credited to the Local Government Limited Gaming Impact Fund (LGLGIF). In addition, the receipts are net of transfers to the State Highway Fund and to the Municipal Limited Gaming Impact Fund (MLGIF). In FY , the MLGIF will be merged into the LGLGIF. Page 9

10 Table 2 Cash Fund Revenue s by Category, Millions of Dollars Actual FY FY FY FY FY FY FY FY to FY CAAGR * Transportation-Related /A $766.1 $812.9 $837.1 $870.8 $897.2 $926.3 $ % % Change 6.5% 6.1% 3.0% 4.0% 3.0% 3.2% 3.5% Higher Education $655.9 $699.7 $743.6 $781.9 $819.4 $857.3 $ % % Change 3.0% 6.7% 6.3% 5.1% 4.8% 4.6% 4.7% Unemployment Insurance /B $225.5 $220.3 $215.5 $233.2 $255.3 $266.0 $ % % Change 1.9% -2.3% -2.2% 8.2% 9.5% 4.2% 4.1% Limited Gaming Fund $80.0 $93.8 $108.0 $123.2 $138.6 $154.3 $ % % Change 1.2% 17.3% 15.1% 14.1% 12.5% 11.3% 11.0% Wildlife Cash Fund $59.4 $58.1 $61.8 $63.4 $65.2 $67.1 $ % % Change -10.3% -2.1% 6.2% 2.6% 2.9% 2.9% 3.0% Capital Construction - Interest $37.1 $34.2 $27.4 $23.9 $22.3 $20.7 $ % % Change -33.1% -8.0% -19.8% -12.7% -6.7% -7.2% -6.6% Insurance-Related $50.2 $53.2 $56.3 $59.1 $61.8 $64.8 $ % % Change 3.2% 6.2% 5.8% 5.0% 4.5% 4.9% 5.0% Regulatory Agencies $47.1 $52.1 $53.1 $54.6 $56.2 $57.7 $ % % Change 1.8% 10.5% 2.1% 2.8% 2.8% 2.8% 2.7% Severance Tax /C $41.7 $53.9 $49.8 $51.6 $52.6 $56.0 $ % % Change 24.4% 29.4% -7.7% 3.6% 2.0% 6.5% -1.0% Employment Support Fund /B $21.4 $17.3 $18.4 $19.3 $20.3 $21.3 $ % % Change 61.2% -19.2% 6.7% 5.0% 4.9% 5.0% 5.1% Petroleum Storage Tank Fund $17.4 $23.9 $18.8 $19.5 $20.2 $10.5 $ % % Change 4.6% 37.5% -21.4% 3.6% 3.7% -48.2% 3.7% Controlled Maintenance Trust Fund - Interest** /D $18.0 $19.1 $0.7 $19.5 $19.4 $19.4 $ % % Change 0.4% 6.1% -96.2% -0.2% -0.3% 0.1% Other Cash Funds $225.9 $240.8 $255.1 $269.4 $284.1 $300.4 $ % % Change 1.7% 6.6% 5.9% 5.6% 5.5% 5.7% 5.7% Total Cash Fund Revenues $2,245.5 $2,379.3 $2,445.7 $2,589.4 $2,712.6 $2,821.8 $2, % Subject to the TABOR Limit 3.2% 6.0% 2.8% 5.9% 4.8% 4.0% 4.4% Totals may not sum due to rounding. * CAAGR: Compound Annual Average Growth Rate. ** These figures reflect only revenue in the funds subject to TABOR, rather than total revenues credited to the funds, much of w hich has already been counted for the purposes of TABOR. For e x- ample, the FY $232.4 million General Fund transfer to the Capital Construction Fund has already been counted in General Fund revenues for the purposes of the TABOR limit, and ther e- fore is not included in this table as TABOR revenues. /A This includes the Highway Users Tax Fund, the State Highway Fund, and other transportation -related funds. /B This incorporates the effects of House Bill , which provides a 20 percent tax credit on unemployment insurance taxes d uring Calendar Years 2001 and /C This figure includes both the state and local shares of severance tax revenue and interest earnings before distribution. /D House Bill requires that the principal balance of the Controlled Maintenance Trust Fund, or an estimated $243.9 mill ion, be transferred to the General Fund on July 1, On July 1, 2002, $276.4 million will be transferred from the General F und to the Controlled Maintenance Trust Fund. Page 10

11 Table 3 TABOR Revenue Limit and Emergency Reserve FY FY FY FY FY FY FY TABOR Revenues: General Fund $6,257.5 /A $6,470.8 /A $6,583.7 /A $7,155.7 /A $7,724.8 /A $8,267.0 /A $8,819.5 /A Cash Funds 2, , , , , , ,945.2 Total TABOR Revenues $8,503.0 $8,850.1 $9,029.4 $9,745.1 $10,437.4 $11,088.8 $11,764.7 LIMIT: Allowable TABOR Growth Rate 4.4% 5.1% 10.0% 5.7% 5.2% 4.8% 4.6% Inflation 2.4% 2.9% 4.0% 3.5% 3.1% 2.8% 2.7% Population Growth 2.0% 2.2% 6.0% 2.2% 2.1% 2.0% 1.9% Allowable TABOR Limit $7,563.7 $7,949.5 $8,788.5 /B $9,289.5 $9,772.5 $10,241.6 $10,712.7 Revenues Above / (Below) TABOR Limit $941.1 $900.7 $240.9 $455.6 $664.8 $847.2 $1,051.9 EMERGENCY RESERVE: TABOR Emergency Reserve /C $226.9 $238.5 $263.7 $278.7 $293.2 $307.2 $321.4 Reserved Amount (CMTF Principal) /D $243.9 $243.9 $0.0 $276.4 $276.4 $276.4 $276.4 Totals may not sum due to rounding. Note: TABOR broadly defines spending such that expenditures are equal to revenues. The statutory 6 percent limit applies to th e General Fund appropriations only. Thus, the two concepts are not directly comparable. /A These figures differ from the General Fund revenues reported in other tables because they net out revenues that are already in the Cash Funds to avoid double counting. For instance, the General Fund gaming revenues, unexpended prior-year Medicaid expenditures that are booked in "other revenue," and transfers of unclaimed property are netted out. These figures also include the net amount of sales and use tax, after the over-refund of excess TABOR revenues. Senate Bill 97-1 diverts approximately ten percent of the gross sales and use tax revenues to the Highway Users Tax Fund. /B In November 2000, Colorado voters approved Referendum A allowing the state revenue limit to increase by $44.1 million in FY to reimburse local governments for reduced property taxes paid by seniors. The additional amount is reflected in the al lowable TABOR limit. /C In years where the projected revenues exceed the amount allowed by the Constitution, the reserve is calculated based on the limit, rather than on projected receipts. Given that the state will only retain the maximum allowed by the Constitution, it need only reserve three percent of such amount. /D The principal of the CMTF may be used as full or partial satisfaction of the constitutional emergency reserve requirement for Cash and General Funds. Thus, the principal of the CMTF is reported as the reserved amount. Other state funds will be designa ted in the 2001 Long Bill as the state s emergency reserve. For FY only, the principal balance in the CMTF will be tran sferred to the General Fund. Page 11

12 Table 4 General Fund Overview with New and Continuing Capital Construction Projects ($ in millions) FY FY FY FY FY FY FY Beginning Reserve $678.5 $800.9 $440.2 $226.7 $245.3 $632.1 $1,001.3 Gross General Fund 6, , , , , , ,901.7 Senate Bill 97-1 Diversion to the HUTF /A (188.8) /A (198.6) /A (115.8) /A (228.4) /A (244.3) /A (260.5) /A (277.7) /A Transfer from the Controlled Maintenance Trust Fund /F Total Funds Available $6,793.2 $7,125.1 $7,203.4 $7,214.3 $7,792.0 $8,713.8 $9,625.3 EXPENDITURES: General Fund Appropriations $5,009.3 /B $5,341.3 /C, E $5,666.8 /E $6,011.8 /E $6,377.5 /E $6,760.2 $7,165.8 Medicaid Overexpenditure 22.5 NA NA NA NA NA NA Rebates and Expenditures Reimbursement for Senior Property Tax Cut Capital and Prison Construction (To Fund Priorities) Transfer for Highway Construction Transfer to the Controlled Maintenance Trust Fund /F K-12 Settlement Funding included in GF appropriations NA TABOR Refund Accounting Adjustments (17.0) NA NA NA NA NA NA Total Obligations $5,992.3 $6,684.9 $6,976.7 $6,969.1 $7,159.9 $7,712.5 $8,306.4 YEAR-END GENERAL FUND RESERVE: $800.9 $440.2 $226.7 $245.3 $632.1 $1,001.3 $1,319.0 STATUTORY RESERVE: 4.0% OF APPROPRIATIONS MONIES IN EXCESS OF STATUTORY RESERVE $600.5 $226.5 ($0.0) $4.8 $377.0 $730.9 $1,032.3 RESERVE AS A % OF APPROPRIATIONS 16.0% 8.2% 4.0% 4.1% 9.9% 14.8% 18.4% TABOR RESERVE REQUIREMENT: General & Cash Fund Emergency Reserve Requirement $226.9 $238.5 $263.7 $278.7 $293.2 $307.2 $321.4 Reserved Amount (CMTF Principal) /D /D 0.0 /D /D /D /D /D Money in Excess of Emergency Reserve (263.7) (2.3) (16.8) (30.8) (45.0) Appropriations Growth $309.6 /B $309.5 /C $325.5 $345.0 $365.7 $382.7 $405.6 Appropriations Growth Rate 6.56% /B 6.15% /C 6.09% 6.09% 6.08% 6.00% 6.00% Addendum: Amount Directed to State Education Fund ($160.4) ($339.1) ($371.0) ($400.2) ($429.4) ($459.3) NA: Not Applicable. Totals may not sum due to rounding. /A In FY , 10 percent of sales and use taxes was diverted to the Highway Users Tax Fund (HUTF). An effective rate of percent of gross sales and use taxes are diverted to the HUTF in FY The diversion increases to percent thereafter. /B Includes $3.8 million in appropriations that are exempt from the statutory appropriations limit as a result of final court o rders or federal mandates. In addition, $22.5 million for Medicaid overexpenditures are e x- empt from the statutory limit, but are included in the base for calculation of the FY limit. /C Includes $2.6 million in appropriations that are exempt from the statutory appropriations limit as a result of final court o rders or federal mandates. /D The principal of the CMTF may be used as full or partial satisfaction of the constitutional emergency reserve requirement. Thus, the principal of the CMTF is reported as the reserved amount. For FY only, other funds will be designated to satisfy the reserve requirement. /E The General Fund appropriations line is increased by $5 million in FY through FY for K-12 settlement funding attributable to Senate Bill /F House Bill transfers the principal balance of the CMTF to the General Fund on July 1, 2001, and transfers $276.4 mil lion from the General Fund to the CMTF on July 1, Page 12

13 Table 5 General Fund Overview with Continuing Capital Construction Projects Only ($ in millions) FY FY FY FY FY FY FY Beginning Reserve $678.5 $800.9 $440.2 $226.7 $369.5 $800.6 $1,170.0 Gross General Fund 6, , , , , , ,901.7 Senate Bill 97-1 Diversion to the HUTF /A (188.8) /A (198.6) /A (176.0) /A (228.4) /A (244.3) /A (260.5) /A (277.7) /A Transfer from the Controlled Maintenance Trust Fund /F Total Funds Available $6,793.2 $7,125.1 $7,143.2 $7,214.3 $7,916.0 $8,882.3 $9,794.0 EXPENDITURES: General Fund Appropriations $5,009.3 /B $5,341.3 /C, E $5,666.8 $6,011.8 /E $6,377.5 /E $6,760.2 $7,165.8 Medicaid Overexpenditure 22.5 NA NA NA NA NA NA Rebates and Expenditures Reimbursement for Senior Property Tax Cut Capital and Prison Construction (To Fund Priorities) Transfer for Highway Construction Transfer to the Controlled Maintenance Trust Fund /F K-12 Settlement Funding included in GF appropriations NA TABOR Refund Accounting Adjustments (17.0) NA NA NA NA NA NA Total Obligations $5,992.3 $6,684.9 $6,916.5 $6,844.9 $7,115.4 $7,712.4 $8,306.4 YEAR-END GENERAL FUND RESERVE: $800.9 $440.2 $226.7 $369.5 $800.6 $1,170.0 $1,487.7 STATUTORY RESERVE: 4.0% OF APPROPRIATIONS MONIES IN EXCESS OF STATUTORY RESERVE $600.5 $226.5 ($0.0) $129.0 $545.5 $899.6 $1,201.0 RESERVE AS A % OF APPROPRIATIONS 16.0% 8.2% 4.0% 6.1% 12.6% 17.3% 20.8% TABOR RESERVE REQUIREMENT: General & Cash Fund Emergency Reserve Requirement $226.9 $238.5 $263.7 $278.7 $293.2 $307.2 $321.4 Reserved Amount (CMTF Principal) /D /D 0.0 /D /D /D /D /D Money in Excess of Emergency Reserve (263.7) (2.3) (16.8) (30.8) (45.0) Appropriations Growth $309.6 /B $309.5 /C $325.5 $345.0 $365.7 $382.7 $405.6 Appropriations Growth Rate 6.56% /B 6.15% /C 6.09% 6.09% 6.08% 6.00% 6.00% Addendum: Amount Directed to State Education Fund ($160.4) ($339.1) ($371.0) ($400.2) ($429.4) ($459.3) NA: Not Applicable. Totals may not sum due to rounding. /A In FY , 10 percent of sales and use taxes was diverted to the Highway Users Tax Fund (HUTF). An effective rate of percent of gross sales and use taxes are diverted to the HUTF in FY The diversion increases to percent thereafter. /B Includes $3.8 million in appropriations that are exempt from the statutory appropriations limit as a result of final court o rders or federal mandates. In addition, $22.5 million for Medicaid overexpenditures are e x- empt from the statutory limit, but are included in the base for calculation of the FY limit. /C Includes $2.6 million in appropriations that are exempt from the statutory appropriations limit as a result of final court o rders or federal mandates. /D The principal of the CMTF may be used as full or partial satisfaction of the constitutional emergency reserve requirement. Thus, the principal of the CMTF is reported as the reserved amount. For FY only, other funds will be designated to satisfy the reserve requirement. /E The General Fund appropriations line is increased by $5 million in FY through FY for K-12 settlement funding attributable to Senate Bill /F House Bill transfers the principal balance of the CMTF to the General Fund on July 1, 2001, and transfers $276.4 mil lion from the General Fund to the CMTF on July 1, Page 13

14 Table 6 National Economic Indicators, (Dollar amounts in billions) Gross Domestic Product (GDP) $8,314.4 $8,790.2 $9,299.2 $9,962.7 $10,334.7 $10,846.6 $11,505.0 $12,156.9 $12,846.2 percent change 6.4% 5.7% 5.8% 7.1% 3.7% 5.0% 6.1% 5.7% 5.7% Inflation-adjusted GDP $8,159.0 $8,515.6 $8,875.7 $9,318.6 $9,477.0 $9,789.8 $10,220.5 $10,619.1 $11,012.0 percent change 4.4% 4.4% 4.2% 5.0% 1.7% 3.3% 4.4% 3.9% 3.7% Nonagricultural Employment (millions) percent change 2.6% 2.6% 2.4% 2.0% 0.7% 0.6% 1.6% 1.6% 1.6% Unemployment Rate 4.9% 4.5% 4.2% 4.0% 4.9% 5.3% 5.1% 4.9% 4.4% Personal Income $6,937.0 $7,391.0 $7,789.6 $8,281.0 $8,670.2 $9,095.0 $9,631.7 $10,171.0 $10,750.8 percent change 6.0% 6.5% 5.4% 6.3% 4.7% 4.9% 5.9% 5.6% 5.7% Inflation (Consumer Price Index) 2.3% 1.6% 2.2% 3.4% 2.7% 1.8% 1.7% 1.8% 2.1% Prime Rate 8.4% 8.4% 8.0% 9.2% 8.1% 7.8% 8.3% 8.9% 9.0% Page 14

15 Table 7 Colorado Economic Indicators, (Calendar Years) Population (thousands), July 1 3, , , , , , , , , ,773.2 percent change 2.0% 2.1% 2.0% 2.2% 6.0% /A 2.2% 2.1% 2.0% 1.9% 1.9% Nonagricultural Employment (thousands) 1, , , , , , , , , ,552.6 percent change 3.6% 4.2% 3.9% 3.6% 3.9% 3.1% 2.9% 2.8% 2.8% 2.8% Unemployment Rate 4.2% 3.3% 3.8% 2.9% 2.7% 3.2% 3.4% 3.5% 3.6% 3.6% Personal Income (millions) $100,012 $108,763 $118,514 $127,955 $140,367 * $151,456 $162,663 $174,538 $186,755 $200,015 percent change 7.6% 8.7% 9.0% 8.0% 9.7% 7.9% 7.4% 7.3% 7.0% 7.1% Wage and Salary Income (millions) $57,205 $62,524 $69,604 $76,347 $84,669 * $91,781 $98,940 $106,261 $114,019 $122,228 percent change 8.2% 9.3% 11.3% 9.7% 10.9% 8.4% 7.8% 7.4% 7.3% 7.2% Retail Trade Sales (millions) $42,631 $45,146 $48,131 $52,209 $58,213 * $62,695 $67,335 $72,183 $77,308 $82,642 percent change 6.7% 5.9% 6.6% 8.5% 11.5% 7.7% 7.4% 7.2% 7.1% 6.9% Home Permits (thousands) percent change 6.5% 3.3% 16.5% -0.4% 9.0% -1.3% -1.1% 1.4% 0.0% 1.7% Nonresidential Building (millions) $2,367 $2,986 $2,617 $3,544 $3,105 $3,207 $3,317 $3,502 $3,705 $3,917 percent change 28.6% 26.2% -12.4% 35.4% -12.4% 3.3% 3.4% 5.6% 5.8% 5.7% Denver-Boulder-Greeley Inflation Rate 3.5% 3.3% 2.4% 2.9% 4.0% 3.5% 3.1% 2.8% 2.7% 2.9% /A Colorado's population on April 1, 2000, was 4,301,261 according to the U.S. Bureau of the Census. The 6.0% change in the po pulation reflects the change from the July 1999 estimate to April 1, 2000, and is used for calculation of the state's TABOR revenue limit. * Page 15