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

Legislative Staff Agencies House Chief Clerk Marilyn Eddins Senate Secretary of the Senate Executive Committee Effie Ameen Legislative Council Legislative Legal State Auditor’s Office Joint Budget Committee Services Staff State Auditor – Dianne Ray Director – John Ziegler Director – Dan Cartin Director – Mike Mauer 13 Budget Analysts 2 Administrative Staff 2

JBC Budget Process Appropriations Committees Figure Setting Supplementals Briefings and Hearings 3

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 4

How Members Participate in the Budget Process Oversight Express Participate in Role of Concerns to Utilize JBC JBC Staff Committees Your JBC Meetings of Reference Members 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 Unemployment & Underemployment Rates 18% 16% 14% Underemployment (U6) 12% 10% 8% 7.4% U.S. 6% 6.1% Colorado 4% 3.9% U.S. Unemployment (U3) 2.8% Colorado 2% 2008 2010 2012 2014 2016 2018 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.

General Fund Revenue, Actual and Forecast Forecast $14 $13.1 $13 $12.4 $11.7 $12 $11 $9.8 $10.0$10.3 $10 $8.5 $9.0 $9 $7.5 $7.7 $7.7 $ in billions $8 $7.1 $6.9 $6.7 $6.4 $6.5 $7 $5.5 $5.4 $5.7 $6.1 $6 $5 $4 $3 $2 $1 $0 Source: OSPB September 2018 Forecast 11

Following double-digit growth in FY 2017-18, revenue growth is expected to moderate Gross General Fund Revenue Year-over-year Billions of Dollars growth 14.1% increase in FY 2017-18 $14 2.8% • Wage gains and business profits 4.7% $13 • Rebound in energy and manufacturing 4.9% $12 • Federal tax policy distortions • $113.3 million in one-time Tobacco $11 MSA payments $10 $9 $8 $7 $6 $5 $4 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. 500 450 400 350 Severance Taxes 300 250 200 TABOR Growth*, 100% General Fund Revenue, 69% 150 100 50 - 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 li mit. 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* *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. Source: Legislative Council Staff September 2018 forecast based on current law and FY 2018-19 appropriations.

General Fund Budget Trends Index FY 2000-01 = 100 Indices represent cumulative growth since FY 2001, or over the last two business cycles. 400 Medicaid Caseload, 256% 350 Excludes newly eligible caseload under the Affordable Care Act* 300 Health Care Policy & Financing General Fund Appropriations, 178% 250 State Share School Finance, 114% TABOR Growth**, 100% 200 General Fund Appropriations, 97% General Fund Revenue, 69% 150 100 50 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 l imit. 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 Capital Construction $109.2 1% HUTF Transfer Other $79.0 $852.6 1% 7% Higher Education $894.9 8% K-12 Education $4,644.2 40% Public Safety and Courts $1,405.6 12% Human Services $867.0 7% Health Care Policy and Financing $2,822.8 24% 5

TABOR Outlook Revenue Subject to TABOR Dollars in Billions Expected TABOR Surpluses $16 $174.8M $209.4M $15 $16.2M $14 $13 Referendum C Cap $12 $11 $10 TABOR Limit Base $9 Referendum C $8 Five-Year Timeout Period $7 Source: Colorado Office of the State Controller and Legislative Council Staff September 2018 forecast.

A TABOR Illustration TABOR Limit Income and General Fund Sales taxes Fees TABOR Refund Cash Funds 18

TABOR surplus revenue is set aside in the year in which a surplus occurs to pay refunds in the following budget year Expected TABOR Refunds & General Fund Budget Impacts Dollars in Millions $209.4 $174.8 $37.5* No Surplus TABOR Surplus & Set Aside: 2017-18 2018-19 2019-20 2020-21 Refunded in Fiscal Year: 2018-19 2019-20 2020-21 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.

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.

TABOR surplus revenue is set aside in the year in which a surplus occurs to pay refunds in the following budget year Expected TABOR Refunds & General Fund Budget Impacts Dollars in Millions $209.4 $174.8 Six-Tier Sales Tax $62.4 Refunds $20.1 Reimbursements for Property Tax Exemptions $147.0 $154.6 $37.5* No Surplus TABOR Surplus & Set Aside: 2017-18 2018-19 2019-20 2020-21 Refunded in Fiscal Year: 2018-19 2019-20 2020-21 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.

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 $9,000 Funding Level without Budget $8,000 Stabilization Factor $7,000 $6,000 $2,543 Millions of Dollars $2,507 $2,258 $2,260 $5,000 $1,983 $1,939 $1,923 $1,901 $4,000 $3,000 $3,181 $3,982 $3,299 $3,592 $3,892 $2,985 $2,852 $2,000 $2,672 $1,000 $769 $660 $680 $603 $560 $522 $523 $228 $0 FY 2011-12 FY 2012-13 FY 2013-14 FY 2014-15 FY 2015-16 FY 2016-17 FY 2017-18 FY 2018-19 State Ed Fund/Public School Fund General Fund Local Share 24

30% 40% 50% 60% 70% Note: Prior to 1993, K-12 funding was done on a calendar year basis. 1983 Relative State and Local Shares of 1984 1985 43% 1986 57% 1987 1988 1989 1990 1983 to FY 2015-16 1991 1992 School Finance, 1992-93 1993-94 TABOR 1994-95 1995-96 1996-97 1997-98 1998-99 Mostly Property Taxes Local Share 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 Am. 23 2005-06 2006-07 2007-08 2008-09 2009-10 Mill Levy Freeze 2010-11 2011-12 2012-13 2013-14 66% 34% 2014-15 2015-16