FOR IMMEDIATE RELEASE
April 15, 2020
Brown: “While the situation is highly fluid, the severe budget challenges facing the state include a sharp decline in tax revenues, growing unemployment and increased pressure from Medicaid and PERA.”
Denver, CO – In an ongoing effort to understand the economic impacts of the COVID-19 crisis, today CSPR released a new analysis focused on the state budget and the challenges lawmakers will face as they convene to develop a balanced Colorado budget.
Co-authored by CSPR Director of Policy and Research Chris Brown and CSPR Fellow Simon Lomax, “Is the State Budget Ready for a Recession?” examines projected declines in state revenue, expanded unemployment and the growing pressure of current state programs including PERA and Medicaid.
In almost a blink of an eye, the global economy has come to a grinding halt to stop the spread of COVID-19. Across the United States, roughly 95% of the population was under some form of stay-at-home order in early April, including all of Colorado’s 5.76 million residents.
When and how our economy will recover is the question Coloradans are asking today and the subject of CSPR’s latest analysis. “While the situation is highly fluid, the severe budget challenges facing the state include a sharp decline in tax revenues, growing unemployment and increased pressure from Medicaid and PERA (Public Employee Retirement Association),” said Brown.
State lawmakers will convene next month to take up the state budget and focus on recovery. “This will require a new mindset,” said Lomax. “Policies and programs that appeared feasible just a few short weeks ago cannot be viewed in the same light today.”
View the full report here. Key findings of the CSPR analysis include:
- A significant reduction in state revenue between $2 Billion to $3.2 Billion dollars over the next 15 months. For additional perspective, this decline is equivalent to the total budgets for both Transportation and Human Services. This amounts to between $871 and $1,305 per Colorado household.
- The current state general fund reserve amounts to roughly $1 Billion, just above the statutorily required rate of 7.25%.
- A majority of the estimated $2.5 Billion in federal stimulus will not able to cover losses in revenue, and will go directly to help state departments cover new costs related to the current crisis, such as expenses related to transitioning education from the classroom to online.
- The long-term budget pressures presented by PERA (Public Employee Retirement Association) and any increase in Medicaid enrollment will also play a major factor in budget considerations.
- The economic fallout caused by COVID-19, has overshadowed the potential economic impacts from the rapid drop and volatility in oil and gas prices. That fallout translates to a significant cut oil and gas property tax revenues to local government.
- Recently passed revenue line items, including an increased general fund contribution to PERA ($225M annually) and the state funding of full-day kindergarten (Est $200 M annually) will add pressure to other state budget items such as transportation and higher education in order to make up for lost revenues.
In addition to the new analysis, CSPR launched the COVID-19 Colorado Resource Page that includes frequent updates on data, analysis and links to COVID-19 resources. Visit the resource page here.
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Common Sense Policy Roundtable is a non-profit, free enterprise think tank dedicated to the protection and promotion of Colorado’s economy.