Budget Academy 1. The Process and you 2. The Economy Whats coming - - PowerPoint PPT Presentation

Budget Academy

• 1. The Process and you
• 2. The Economy – What’s coming
• 3. Revenue - input
• 4. Spending – output
• 5. Tabor -Restraint
• 6. Policy Issues

Executive Committee State Auditor’s Office State Auditor – Dianne Ray Joint Budget Committee Director – John Ziegler 13 Budget Analysts 2 Administrative Staff Legislative Council Staff Director – Mike Mauer Legislative Legal Services Director – Dan Cartin

Legislative Staff Agencies

House Chief Clerk Marilyn Eddins Senate Secretary of the Senate Effie Ameen 2

JBC Budget Process

Briefings and Hearings Supplementals Figure Setting Appropriations Committees

3

4

Example of Documents Produced by JBC Staff

Summary of Budget Briefings Supplemental Package Budget Package and Long Bill Narrative Appropriations Report and Budget in Brief

Utilize JBC Staff Express Concerns to Your JBC Members Oversight Role of Committees

• f Reference

Participate in JBC Meetings

How Members Participate in the Budget Process

The sooner a member talks to their JBC members, the better! Don’t wait until the last minute.

5

BIG PROCESS CHART

U.S. and Colorado economies are in very good shape

• Overall, most U.S and Colorado economic

indicators remain strong

– Healthy levels of job creation – Robust consumer demand – Rising incomes – Solid business investment

Summary of Economic Forecast Expectations

• U.S and Colorado economies are expected to

accelerate this year

• Continue to expand in 2019 and 2020,

although at slower rates – Tightening labor markets – Rising inflation – Trade disputes

Both U.S. and Colorado labor markets are extremely tight

Source: U.S. Bureau of Labor Statistics. Underemployment rates for Colorado are shown as four-quarter averages, while data for the U.S. are monthly. Data are seasonally adjusted.

2% 4% 6% 8% 10% 12% 14% 16% 18% 2008 2010 2012 2014 2016 2018

U.S. 6.1% 3.9% 2.8%

Unemployment & Underemployment Rates

Underemployment (U6) 7.4% Colorado U.S. Colorado Unemployment (U3)

General Fund Revenue, Actual and Forecast

11

Source: OSPB September 2018 Forecast

$6.5 $5.5 $5.4 $5.7 $6.1 $6.9 $7.5 $7.7 $6.7 $6.4 $7.1 $7.7 $8.5 $9.0 $9.8 $10.0$10.3 $11.7 $12.4 $13.1 $0 $1 $2 $3 $4 $5 $6 $7 $8 $9 $10 $11 $12 $13 $14 $ in billions

Forecast

$4 $5 $6 $7 $8 $9 $10 $11 $12 $13 $14

Following double-digit growth in FY 2017-18, revenue growth is expected to moderate

Gross General Fund Revenue

Billions of Dollars

14.1% increase in FY 2017-18

• Wage gains and business profits
• Rebound in energy and manufacturing
• Federal tax policy distortions
• $113.3 million in one-time Tobacco

MSA payments

4.9% 4.7% 2.8%

Year-over-year growth

Source: Colorado Office of the State Controller and Legislative Council Staff September 2018 forecast.

Revenue Trends

Index FY 2000-01 = 100 Indices represent cumulative growth since FY 2001, over the last two business cycles.

• 50

100 150 200 250 300 350 400 450 500

Severance Taxes TABOR Growth*, 100% General Fund Revenue, 69%

Sources: Colorado State Controller’s Office and Legislative Council Staff. FY 2017 and FY 2018 figures are forecasts. *TABOR growth represents the cumulative growth from the population and inflation adjustments used to calculate each year’s limit. It does not represent growth in the TABOR limit, which differs because the TABOR limit was also adjusted for changes in enterprise status.

Next Year FY 2019-20 Budget Outlook

General Fund available above FY 2018-19 appropriations to spend, save, or return to taxpayers

$1.16 billion*

Source: Legislative Council Staff September 2018 forecast based on current law and FY 2018-19 appropriations.

*Reflects revenue expectations and transfers required under current law for FY 2019-20. Since a budget has not yet been set for FY 2019-20, this amount assumes FY 2018-19 appropriations and reserve requirements. Any changes to current law, including FY 2018-19 appropriations, will result in changes to this amount.

General Fund Budget Trends

Index FY 2000-01 = 100 Indices represent cumulative growth since FY 2001, or over the last two business cycles.

50 100 150 200 250 300 350 400

Medicaid Caseload, 256% Excludes newly eligible caseload under the Affordable Care Act*

State Share School Finance, 114%

General Fund Appropriations, 97% General Fund Revenue, 69% Health Care Policy & Financing General Fund Appropriations, 178% TABOR Growth**, 100%

Sources: Colorado State Controller’s Office, Joint Budget Committee Staff, and Legislative Council Staff. FY 2017 and FY 2018 figures are forecasts. *Excludes newly eligible caseload funded by the federal government pursuant to the Affordable Care Act, which added an additional 411,000 in FY 2015-16. **TABOR growth represents the cumulative growth from the population and inflation adjustments used to calculate each year’s limit. It does not represent growth in the TABOR limit, which differs because the TABOR limit was also adjusted for changes in enterprise status.

General Fund Budget for FY 17-18 Includes State Education Fund, $ in millions

5 K-12 Education $4,644.2 40% Health Care Policy and Financing $2,822.8 24% Human Services $867.0 7% Public Safety and Courts $1,405.6 12% Higher Education $894.9 8% HUTF Transfer $79.0 1% Capital Construction $109.2 1% Other $852.6 7%

$7 $8 $9 $10 $11 $12 $13 $14 $15 $16

TABOR Outlook

Source: Colorado Office of the State Controller and Legislative Council Staff September 2018 forecast.

Revenue Subject to TABOR

Dollars in Billions Referendum C Five-Year Timeout Period

Referendum C Cap TABOR Limit Base Expected TABOR Surpluses $16.2M $209.4M $174.8M

A TABOR Illustration

TABOR Limit TABOR Refund General Fund Cash Funds Income and Sales taxes Fees

18

Expected TABOR Refunds & General Fund Budget Impacts

TABOR surplus revenue is set aside in the year in which a surplus occurs to pay refunds in the following budget year

2017-18 2018-19 2019-20 2020-21

TABOR Surplus & Set Aside: Refunded in Fiscal Year: 2018-19

2019-20 2020-21

No Surplus

Source: Colorado Office of the State Controller and Legislative Council Staff September 2018 forecast. *This amount includes the $16.2 million FY 2017-18 surplus and $21.3 million in under-refunds from the FY 2014-15 surplus.

Dollars in Millions $37.5* $209.4 $174.8

TABOR refund mechanisms are triggered in the order below based on the size of a TABOR surplus

1) Up to the full reimbursement amount to local governments for the senior homestead and disabled veteran property tax exemptions.* 2) Subject to sufficient revenue, a temporary reduction in the individual income tax rate from 4.63% to 4.5% (would require at least a $400 million surplus). 3) Any left over is distributed via the six-tier sales tax refund

• mechanism. These refunds are paid when taxpayers file their

income taxes and are based on a taxpayer’s filing status and adjusted gross income.

*Pursuant to SB17-267, the TABOR refund is first allocated toward reimbursements to local governments for the senior homestead and disabled veteran property tax exemption. Local government reimbursement amounts are not affected.

Expected TABOR Refunds & General Fund Budget Impacts

TABOR surplus revenue is set aside in the year in which a surplus occurs to pay refunds in the following budget year

$147.0 $154.6

$62.4 $20.1 2017-18 2018-19 2019-20 2020-21

TABOR Surplus & Set Aside: Refunded in Fiscal Year: 2018-19

2019-20 2020-21

No Surplus Six-Tier Sales Tax Refunds Reimbursements for Property Tax Exemptions

Source: Colorado Office of the State Controller and Legislative Council Staff September 2018 forecast. *This amount includes the $16.2 million FY 2017-18 surplus and $21.3 million in under-refunds from the FY 2014-15 surplus.

$37.5* $209.4 $174.8 Dollars in Millions

Decision Items examples

DOC R-01 Staff Salaries DOC R-03A Capacity DOC R-04 Medical Costs DOC Capital requests HCPF R-01 Medical Premiums

Big Deal Issues

• School Finance
• Transportation
• Medicaid
• Prisons
• Marijuana
• Severance Taxes
• Gallagher

Public School Finance: FY 12 to FY 19, Target vs Funded Amounts by Source

24 $660 $522 $603 $769 $680 $523 $228 $560 $2,672 $2,852 $2,985 $3,181 $3,299 $3,592 $3,892 $3,982 $1,901 $1,923 $1,939 $1,983 $2,260 $2,258 $2,507 $2,543 $0 $1,000 $2,000 $3,000 $4,000 $5,000 $6,000 $7,000 $8,000 $9,000 FY 2011-12 FY 2012-13 FY 2013-14 FY 2014-15 FY 2015-16 FY 2016-17 FY 2017-18 FY 2018-19 Millions of Dollars State Ed Fund/Public School Fund General Fund Local Share

Funding Level without Budget Stabilization Factor

30% 40% 50% 60% 70% 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1992-93 1993-94 1994-95 1995-96 1996-97 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16

Local Share

Mostly Property Taxes

66% 34% 43% 57%

TABOR

• Am. 23

Mill Levy Freeze

Relative State and Local Shares of School Finance, 1983 to FY 2015-16

Note: Prior to 1993, K-12 funding was done on a calendar year basis.

26

50 100 150 200 250 300 350 400

Medicaid Caseload, 256% Excludes newly eligible caseload under the Affordable Care Act*

State Share School Finance, 114%

General Fund Appropriations, 97% General Fund Revenue, 69% Health Care Policy & Financing General Fund Appropriations, 178% TABOR Growth**, 100%

Medicaid Caseload Categories and Costs

27

15% Excise Tax Marijuana Tax Cash Fund State Public School Fund Public School (Permanent) Fund Local Governments that Allow Retail Sales General Fund

15.56% Retained

Medical Marijuana Retail Marijuana 2.9% Sales Tax 15% Special Sales Tax BEST Fund 90% 10%

First $40 million Anything

• ver

$40 million

12.59% 71.85%

30% 40% 50% 60% 70% 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1992-93 1993-94 1994-95 1995-96 1996-97 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16

State Share

General Fund and State Education Fund

Local Share

Mostly Property Taxes

66% 34% 43% 57%

TABOR

• Am. 23

Mill Levy Freeze

Relative State and Local Shares of School Finance, 1983 to FY 2015-16

Note: Prior to 1993, K-12 funding was done on a calendar year basis.

$100,000,000 $150,000,000 $200,000,000 $250,000,000 $300,000,000 $350,000,000

Colorado Gas Tax Revenue, Nominal and Inflation-Adjusted

31

Source: Colorado Department of Transportation

Actual Forecast