Projected new state revenue could be limited by federal spending cuts to schools and other services
Revenue collections that pay for services such as schools and health care are expected to be slightly higher than previously predicted but not enough to mean big changes in funding for FY 2013-14. State economists today modestly adjusted their revenue outlook while expressing concern about the economy.
“Today’s forecasts help us move into FY2013-14 with a more solid foundation for state investments,” said Carol Hedges, director of Colorado Fiscal Policy Institute, a project of the Colorado Center on Law and Policy. “We sure hope we don’t have to use it all to make up for congressional action that passes the responsibility for federal deficit reduction to the states. A federal approach that relies too heavily on cuts in services threatens to stall the fragile recovery identified in these most recent revenue estimates.”
Economic reports produced independently by the Colorado Legislative Council staff (LCS) and the Governor’s Office of State Planning and Budgeting offered similar findings. The highlights from the LCS report include:
- No need for additional mid-year cuts in funding for state services in FY2012-13.
- Modest increases in revenue for this year (FY2012-13) and next year (FY2013-14) combine for a projected increase of $163.2 million above the June revenue forecast.
- A projected $589.8 million is available to spend in FY2013-14 above the amount budgeted for FY 012-13.
However, that $590 million in added revenue should not be seen as the answer to additional cuts in services. Several key factors are not yet calculated into the budget forecast that could account for most of that amount:
- The FY2013-14 budget needs to cover the rising cost of services due to inflation and the rising demand for services such as Medicaid and public schools due, in part, to population growth.
- Federal budget cuts are likely to reduce the federal aid portion of the state budget. Sequestration could cut $61 million from Colorado’s budget, half of which would hit schools. Larger cuts are possible if a different deficit reduction deal is reached.
- The estimate of revenue includes $139 million in estate taxes which is unlikely to be collected given an expected change to the federal estate tax law that would eliminate Colorado’s estate tax revenue.
View a PDF of the release here.