Bad News

America's economy is tanking and it's taking Colorado with it. The good news is that Colorado is doing a bit better than other states. The bad news is that we're still hurting. How bad?

Over the next five years, it cuts nearly $500 million from our General Fund and $200 million from Cash Funds. In one sense, nothing has actually changed. It just means that we're now predicting we'll have less money than we were predicting a few months ago.

By we, I mean the legislature's economists and the governor's economists. Their predictions are in the Legislative Council and OSPB revenue forecasts. They both came out today and they mostly agree on the numbers. (Not that it matters -- they're both projections. Some amount of money will actually come it and it won't be the amount in either projection).

The forecast pretty much wipes our capital construction spending. That's the money we put into new buildings and equipment and some maintenance on existing buildings and equipment.

The forecast cuts capital in the current pending to about $45 million for next year, then eliminates it for the following years. If you want to see the effect of that, look at the list of projects the Capital Development Committee has come up with. The CDC has proposed funding projects down to line 35 (the numbers on the far left are the CDC priority. The next column is the OSPB priority). The $45 million we have now would cut the list at line 17, though we could probably stretch it through 18.

That's not the likeliest thing to happen. The CDC is meeting to reprioritize the list in a way that reflects the new reality. Or new expected reality.

That's the most immediate effect of the new forecast, but it might not be the worst. The $500 million dollar change comes from a 1.3% adjustment to the revenue projection. That's not much, especially when you consider the accuracy of economic forecasts.

Legislative Council Economist Mike Mauer warned that more bad news could easily eat into our SB-1 transfer to transportation and even our GF under the 6% limit.

When money comes into our general fund it first gets set aside in a reserve account. After that's filled, it goes into what we generally think of as the general fund, the money we spend running the state. That GF is capped by TABOR at 6% over the previous years GF. If enough money comes in to let the GF grow by 6%, any excess goes to transportation, what we call the SB-1 transfer. That transfer is capped at around $250 million.

What's next in line for money? We used to call it “excess general fund reserve.” It was a good name, because it implied that the money was just padding our savings account.

In 2002 the legislature passed HB-1310. That essentially spent any excess general fund reserve. It divides whatever money is there 1/3^rd to capital construction and 2/3rds to highways.

It's that last pot of money we're losing now. But it wouldn't take much to drain money from SB-1 and the main GF account.