Colorados Revenue and Expenditures: A View to 2030 COLORADO - PowerPoint PPT Presentation

The Effects of Aging on Colorado’s Revenue and Expenditures: A View to 2030 COLORADO FUTURES CENTER REPORT TO SAPGA OCTOBER, 2016

The 65 and Over Cohort Growing as a SHARE of the Total Population Percentage of Households by Cohort 40% 35% 30% 25% 20% 15% 10% 5% 0% 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 18-24 25-44 45-64 65 & Over Linear (45-64) Linear (65 & Over)

Assumptions Forecast horizon of 2030 For all revenue and expenditures for which we had sufficient data, we completed forecasts Forecast assumptions – revenue models ◦ Assessed impact of aging only ◦ Held constant all other economic and demographic variables ◦ Results stated in growth rates of constant dollars ◦ This is not a budget exercise Forecast assumptions – Medicaid ◦ Augmented aging assumptions with HCPF’s health care inflation projections

We Studied the Impact of Aging on… The Revenue System ◦ Sales Tax ◦ Income Tax ◦ State responsibility for the Senior and Disabled Veteran Property Tax Homestead Exemption State Expenditures ◦ Medicaid ◦ Non health care related expenditures

Revenue Findings

Key Finding: Annual Growth Rates in Real Sales and Income Tax Revenues Will Slow Due to Aging Growth Rate in Sales Tax Revenue, 2015 Real Dollars Growth Rate in Income Tax Revenue, 2013 Real Dollars 1.95% 1.70% 1.90% 1.85% 1.65% 1.80% 1.60% 1.75% 1.55% 1.70% 1.50% 1.65% 1.60% 1.45% 1.55% 1.40% 1.50% 1.35% 1.45% 1.40% 1.30% 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

Aging Affects Sales Tax Through Consumption Patterns Average Annual Total Spending and Taxable Spending per Household by Age Cohort ($2015) $70,000 $60,000 $50,000 $40,000 $30,000 $20,000 $10,000 $- Under 25-44 45-64 65 years 25 years years and older years Average Annual Spending Average Annual Spending on Sales Taxable Items Poly. (Average Annual Spending) Poly. (Average Annual Spending on Sales Taxable Items)

The Result is a Decline in Per Household Taxable Spending Percent Change in Per Household Taxable Spending 0.00% -0.02% -0.04% -0.06% -0.08% -0.10% -0.12% -0.14% -0.16% -0.18% -0.20%

Colorado Projected to Continue to Grow 3,000,000 Total Number of Households 2,500,000 2,000,000 1,500,000 1,000,000 500,000 - 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

The Result is More Slowly Growing Sales Tax Revenue Percent Change in Total Taxable Spending 1.95% 1.90% 1.85% 1.80% 1.75% 1.70% 1.65% 1.60% 1.55% 1.50% 1.45% 1.40% 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

Income Tax Displays a Similar Pattern Taxable Income Per Capita by Age Cohort, 2013 $45,000 $40,000 $35,000 $30,000 $25,000 $20,000 $15,000 $10,000 $5,000 $- 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 65-69 70-74 75-79 80-84 85-89 90 and above

The Increase in Share of Older Coloradans Results in Decline in Per Capita Tax Revenue Forecast of Per Capita Income Tax Revenue as a Result of an Aging Colorado Population (Modeled in 2013 dollars and holding all economic effects constant) $885.00 $880.00 $875.00 $870.00 $865.00 $860.00 $855.00 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

Remember Colorado Continues to Grow Total Number of Households 3,000,000 2,500,000 2,000,000 1,500,000 1,000,000 500,000 - 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

Like the Sales Tax, TOTAL Income Tax Revenue Will Continue to Grow but at a Slower Rate Growth Rate in TOTAL Income Tax Revenue, 2013 Real Dollars 1.70% 1.65% 1.60% 1.55% 1.50% 1.45% 1.40% 1.35% 1.30% 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

Local Government Impacts will Depend on Relative Reliance on Revenue Sources Tax Revenue Profile of Colorado's Governments 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% State (General Fund, FY16 data) Municipal (2013 data) County (2013 data) Averge Reliance on Individual Income Tax Average Reliance on Sales Tax Average Reliance on Property Tax Average Reliance on Other Sources of Tax Revenue

Property Tax Exemption Impacts State Government Actual and Forecast State Reimbursements to Local Governments for Senior and Disabled Property Tax Homestead Exemption $350,000,000 1,400,000 Actual CFC Forecast $300,000,000 1,200,000 $250,000,000 1,000,000 Over 65 Population $200,000,000 800,000 $150,000,000 600,000 $100,000,000 400,000 $50,000,000 200,000 $0 0 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 Senior and Disabled Property Tax Exemption Cost Growth Over Age 65 Population

Expenditure Findings

Aging Affects State Budget Most Significantly in the Medicaid Program Aged Cohorts as a Share of Total Medicaid Population 4.00% 3.50% 3.00% 2.50% 2.00% 1.50% 1.00% 0.50% 0.00% 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24 2024-25 2025-26 2026-27 2027-28 2028-29 2029-30

Over 65 Cohorts Most Expensive Inflation Rates for Per Capita Expenditures by Cohort: Medical Services Premiums and Mental Health, FY 2017-18 6.00% 5.00% 4.00% 3.00% 2.00% 1.00% 0.00% Adults 65 and Disabled Disabled Disabled Buy- Parents/ Parents/ FPL MAGI Breast & Eligible SB 11-008 Foster Care MAGI Pregnant SB 11-250 Non-Citizens Partial Dual TOTAL Older Adults 60 to 64 Individuals to In Caretakers to Caretakers 69% Adults Cervical Cancer Children Eligible Children Adults Eligible Emergency Eligibles 59 68% FPL to 133% Program Pregnant Adults Services -1.00% -2.00% -3.00% 2017-18 Inflation rate MSP 2017-18 inflation rate MH

And as a Result, Spending on 65+ Cohorts Grows as a Share of Total Medicaid Program Aging Related Expenditure as a Share of Total Medicaid Program 25.00% 20.00% 15.00% 10.00% 5.00% 0.00% 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24 2024-25 2025-26 2026-27 2027-28 2028-29 2029-30

Over 65 Cohort Spending an Even Larger Share of the Non-Expansion Population Aging Related Expenditures as a Share of the Non-Expansion Medicaid Population 35.00% 30.00% 25.00% 20.00% 15.00% 10.00% 5.00% 0.00% 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24 2024-25 2025-26 2026-27 2027-28 2028-29 2029-30

Beyond Medicaid, Many Other Program Expenditures Directly Driven by Aging Old Age Pension Program - Department of Human Services (DHS) Older Americans Act – DHS State Funding for Senior Services – DHS Colorado Dental Health Care Program for Low Income Seniors – Department of Health Care Policy and Financing (HCPF) Adult Protective Services – Elder Abuse - DHS

Other Programs for Which Aging Also Has an Impact Colorado Department of Public Health and Environment (CDPHE) - Health Facility Oversight and Licensing Prevention Services – CDPHE Department of Corrections -DOC Department of Transportation - CDOT Department of Local Affairs (DOLA) – Division of Housing

Conclusion: Modest Age Related Revenue Impacts Exacerbated with Expenditure Pressure Sales Tax – The growth rate in real sales tax revenue will decline from a high of just over 1.85% in 2018 to just over 1.55% in 2030. Income Tax – The growth rate in real income tax revenue will fall from just under 1.65% in 2016 to just under 1.45% in 2030 Medicaid - Age related expenditures in the Medicaid program will grow from 16.73% today to 21.7% of total expenditures in 2030. Senior Property Tax Exemption – The exemption will grow from a high of 10.7% in FY 2016-17 to 4.7% by FY 2029-30