June 2017 Legislative Council Staff Economic and Revenue ... · Employment (Demand) Source: Source:...

June 2017

Legislative Council Staff

Economic and Revenue Forecast

2

ECONOMIC FORECAST

Molas Lake in Silverton. Suzanne Keim

3

The U.S economy continues to expand.

Source: National Bureau of Economic Research (NBER) and Colorado Legislative Council June 2017 forecast.

0 20 40 60 80 100 120 140

December 1900 - September 1902August 1904 - May 1907

June 1908 - January 1910January 1912 - January 1913

December 1914 - August 1918March 1919 - January 1920

July 1921 - May 1923July 1924 - October 1926

November 1927 - August 1929March 1933 - May 1937

June 1938 - February 1945October 1945 - November 1948

October 1949 - July 1953May 1954 - August 1957

April 1958 - April 1960February 1961 - December 1969

November 1970 - November 1973March 1975 - January 1980

July 1980 - July 1981November 1982 - July 1990

March 1991 - March 2001November 2001 - December 2007

June 2009 - Present

Months of Economic Growth

June 2009 - Present

Post WWII Average:

61.5 Months

Forecast Period

4 Source: U.S. Bureau of Labor Statistics. Seasonally adjusted.

Colorado’s unemployment rate is at the lowest rate in

the series history.

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

1977 1982 1987 1992 1997 2002 2007 2012 2017

May 2017

2.3%

Unemployment Rate

5

Colorado Employment Growth by Sector

4.0% 4.0%

2.1% 2.0% 2.0% 1.9% 1.5%

3.0% 4.6%

1.0% 1.8% 1.3%

4.1% 1.7% 1.6%

3.6% 3.0%

1.2% 1.2% 0.7% 0.4% 0.0%

-0.4% -1.7% -2.0%

-7.8%

12.8 10.9

9.6 8.0

5.7 5.0 4.9 4.8 4.8 4.3 3.8 3.3 3.3 2.8 2.5 1.9 1.5 1.3 1.3 0.8 0.2 0.0

-0.3 -0.6 -0.8

-1.9

Leisure & HospitalityAccomodation & Food Services

Trade, Transportation & UtilitiesProfessional & Business ServicesHealth Care & Social Assistance

Retail TradeEducation & Health Services

Administrative & Support ServicesOther Services

GovernmentProfessional, Scientific & Technical Services

Local GovernmentTransportation & Utilities

Financial ActivitiesConstruction

Arts, Entertainment & RecreationReal Estate

Finance & InsuranceWholesale Trade

State GovernmentFederal Government

ManufacturingInformation

Management of Companies & EnterprisesEducational Services

Mining & Logging

Thousands of Jobs Percent Change

Source: U.S. Bureau of Labor Statistics with Legislative Council Staff rebenchmark estimates. Seasonally adjusted.

6 Source: U.S. Bureau of Labor Statistics. Seasonally adjusted.

Colorado Labor Supply and Demand

1.5

2.0

2.5

3.0

1990 1995 2000 2005 2010 2015

Millions of Workers

Labor Force

(Supply)

Employment

(Demand)

7 Source: Source: U.S. Bureau of Labor Statistics. Data are seasonally adjusted.

81.3%

69.2%

67.1%

56.8%

30%

40%

50%

60%

70%

80%

90%

50s 60s 70s 80s 90s 00s 10s

Aged 25 to 54

Men

Total Civilian

Women

Prime Working Age

U.S. Labor Force Participation Rate Share of the Civilian Population

8

State Unemployment Rates, April 2017

Source: Bureau of Labor Statistics. Seasonally adjusted. Map prepared by Legislative Council Staff.

9

Wage Withholding

Source: Office of the State Controller and Colorado Department of Revenue with Legislative Council Staff seasonal

adjustments. Data through May 2017.

$250

$300

$350

$400

$450

$500

2006 2008 2010 2012 2014 2016

Millions in Monthly Collections

10

$0.6

$0.8

$1.0

$1.2

$1.4

$1.6

$1.8

$2.0

2007 2009 2011 2013 2015 2017

Business Income

Source: Bureau of Economic Analysis. Profits and income with inventory valuation and capital consumption adjustments.

Business Investment, Income and Profits

Trillions of Dollars

Corporate Profits

after Tax

Equipment & Intellectual

Property Investment

Proprietors' Income

11

Contracting

Expanding

30

40

50

60

70

2006 2008 2010 2012 2014 2016

Manufacturing Activity Expanding

Source: Institute for Supply Management.

Institute for Supply Management Indices

Diffusion Index

Manufacturing

Business Activity

12

Will wages show up in prices?

Source: U.S. Bureau of Labor Statistics.

Inflation is calculated as the growth in urban area prices in a given period relative to the same period in the prior year.

*Headline inflation includes all products and services. **Core inflation excludes food and energy prices.

1.9%

1.7%

5.4%

0.9%

3.1%

-0.9%

1.8%

2.7%

0.9%

2.3%

2.4%

Headline

Core

Energy

Food

Housing

Apparel

Transportation

Medical Care

Recreation

Education

Other

-3%

-2%

-1%

0%

1%

2%

3%

4%

5%

6%

7%

2007 2009 2011 2013 2015 2017

CPI-U Inflation Year-over-Year Change in Prices May 2017 over May 2016

13

Federal Reserve Balance Sheet

Source: Federal Reserve Board of Governors.

$0$50

$100$150$200$250$300$350$400$450

$0

$1

$2

$3

$4

$5

2007 2009 2011 2013 2015 2017

Trillions

Traditional Portfolio

All Other

Central Bank

Liquidity Swaps

Mortgage Backed Securities

& Federal Agency Debt

Par Value of

U.S. Treasury Notes and Bonds,

and Agency Debt

by Maturity Date

Billions

14

Constrained economic expansion is expected through

the forecast period.

Several factors that will continue to slow growth:

1) Limited Availability of Workers

2) Competition for Business Inputs

3) Credit Limitations

4) Monetary Policy

15

REVENUE FORECAST

Molas Lake in Silverton. Suzanne Keim

16

Change in Expectations for FY 2016-17* Individual income tax collections disappointed as taxpayers held off

claiming income in anticipation of future tax cuts.

Millions of Dollars

-$144.6

$75.0

-$66.9

-$25.3

-$78.2

-$49.2

Total Revenue

Withholding

Estimated Payments

Cash with Returns

Refunds

Accrual Adjustment

Total Collections from Individual Income Taxes

Wage Withholding

Estimated Payments

Cash with Returns

Refunds

Accrual Adjustment

*Change relative to the March 2017 Legislative Council Staff forecast.

INDIVIDUAL INCOME TAX

17

-$67.0

$95.9

-$128.4

-$22.1

-$16.9

$4.4

Total Revenue

Withholding

Estimated Payments

Cash with Returns

Refunds

Accrual Adjustment

Change in Expectations for FY 2017-18* The forecast for estimated payments was downgraded on lower capital

gains expectations.

Millions of Dollars


Wage Withholding

Estimated Payments

Cash with Returns

Refunds

Accrual Adjustment



18

-$105.7

$83.6

-$149.9

-$25.9

-$14.3

$0.8

Total Revenue

Withholding

Estimated Payments

Cash with Returns

Refunds

Accrual Adjustment

Change in Expectations for FY 2018-19* The forecast for estimated payments was downgraded on lower capital

gains expectations.

Millions of Dollars


Wage Withholding

Estimated Payments

Cash with Returns

Refunds

Accrual Adjustment



19

TABOR Outlook – June 2017 LCS Forecast

Source: Office of the State Controller and Legislative Council Staff June 2017 revenue forecast.

$7

$8

$9

$10

$11

$12

$13

$14

$15

06-07 07-08 08-09 09-10 10-11 11-12 12-13 13-14 14-15 15-16p 16-17f 17-18f 18-19f

Referendum C

Five-Year Timeout

Period

Bars Represent Revenue

Subject to TABOR

Referendum C Cap

TABOR Limit Base

FY 2015-16: $122.1 million below limit *

FY 2016-17: $281.4 million below limit



TABOR Surplus

20

TABOR Outlook – Without Healthcare Enterprise

Senate Bill 17-267


$7

$8

$9

$10

$11

$12

$13

$14

$15

06-07 07-08 08-09 09-10 10-11 11-12 12-13 13-14 14-15 15-16p 16-17f 17-18f 18-19f

Referendum C

Five-Year Timeout

Period


Subject to TABOR

Referendum C Cap

TABOR Limit Base




FY 2018-19: $214.0 million surplus

TABOR Surplus

21

Changes Attributable to Healthcare Enterprise

Senate Bill 17-267


$7

$8

$9

$10

$11

$12

$13

$14

$15

06-07 07-08 08-09 09-10 10-11 11-12 12-13 13-14 14-15 15-16p 16-17f 17-18f 18-19f

Referendum C

Five-Year Timeout

Period


Subject to TABOR

Referendum C Cap

TABOR Limit Base





TABOR Surplus

1. TABOR revenue reduced by $585.5M in FY 2017-18;

$844.1M in FY 2018-19

2. Referendum C Cap reduced by $200M in FY 2017-18

3. TABOR surplus not expected through FY 2018-19

22

2,068

1,582

1,933

1,503

1,870 1,778

1,847

$0

$500

$1,000

$1,500

$2,000

$2,500


General fund revenue is projected to grow at a rate

consistent with inflation and population growth.

General Fund Revenue Inflation-adjusted, per capita

23

-$169.1

$7.2

-$136.6 -$200

-$150

-$100

-$50

$0

$50

$100

$150

$200

$250

$300

This Year’s General Fund Budget Situation

FY 2016-17

General Fund Revenue Relative to Required Reserve

Published

March With

Legislation

June 4.6% Reserve

Source: Legislative Council Staff and Joint Budget Committee Staff.

24

Benchmark:

Required reserve

$254.2

$13.3

-$179.1 -$300

-$200

-$100

$0

$100

$200

$300

$400

$500

March June

Next Year’s General Fund Budget Situation

FY 2017-18

Published

March

With

Legislation

June 4.8% Reserve


Benchmark:

Prior year’s budget

Benchmark:

Required reserve

General Fund Revenue Relative to Benchmark

25

$800.1

$531.3

$0

$250

$500

$750

$1,000

Upcoming Budget Year’s General Fund Situation

FY 2018-19

Published

Not

Applicable

March

With

Legislation

June


$269 million

General Fund Revenue Relative to Prior Year’s Budget

June 2017 Legislative Council Staff Economic and Revenue ... · Employment (Demand) Source: Source:...

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