The Colorado Outlook Economic and Fiscal Review, December 2017 The following information is excerpted from the Colorado Office of State Planning and Budgeting’s December 2017 forecast. To access the full forecast document, click on the image above or follow this link: https://goo.gl/jWvinQ

The Economy Colorado’s economic growth remains solid, with broad-based job growth and low unemployment. The urban areas along the Front Range, with their greater economic diversity and many growing industries, continue to outperform other areas of the state. However, the state’s strong expansion has led to higher costs of living and doing business, as well as among the tightest labor market conditions in the country. These factors have contributed to moderating growth, which is expected to continue through the forecast period. CO Leading Economic Index

The Federal Reserve Bank of Philadelphia’s monthly Leading Index for Colorado is indicating modestly slower growth for Colorado’s economy in coming months. The index combines indicators that have been found to precede changes in overall economic momentum, including housing permits, initial unemployment claims, and vendor delivery times.

3%

1% 0% -1% -2%

Jan-08 Jun-08 Nov-08 Apr-09 Sep-09 Feb-10 Jul-10 Dec-10 May-11 Oct-11 Mar-12 Aug-12 Jan-13 Jun-13 Nov-13 Apr-14 Sep-14 Feb-15 Jul-15 Dec-15 May-16 Oct-16 Mar-17 Aug-17

-3%

100

Source: Federal Reserve Bank of Philadelphia

CO Rural Mainstreet Index

90

Declining farm income and farmland values caused by low commodity prices continue to have a negative impact on agricultural conditions. The prolonged downturn challenges rural economies particularly in regions dominated by corn, cattle, and wheat production, markets which are especially depressed.

80 70 60 50 40 30 20 10

Sep-17

Jul-17

May-17

Mar-17

Jan-17

Nov-16

Sep-16

Jul-16

May-16

Mar-16

Jan-16

Nov-15

Sep-15

Jul-15

Jan-15

0

May-15

Percent

2%

Mar-15

4%

Source: Creighton University

5%

CO Year-over-Year Job Growth

Colorado job growth in 2017 has been steady, driven by solid economic growth. As of October, Colorado had added 53,400 jobs over the previous twelve months, a growth rate of 2.0 percent. However, tight labor market conditions continue to act as a headwind to further job growth.

4%

3%

2%

1%

CO Year-over-Year Job Growth by Industry

0%

Total Nonfarm

2.0%

Mining and Logging

Source: U.S. Bureau of Labor Statistics, Colorado Department of Labor and Employment

11.4%

Construction

Colorado continues to experience employment gains across most industries as businesses continue to see growing demand for their products and services. Mining and logging has experienced the largest year-over-year job growth, followed by construction and professional services.

65

Professional & Business Services

4.1%

Education & Health Services

2.7%

Information

2.4%

Leisure and Hospitality

1.5%

Financial Activities

1.5%

Government

1.2%

Manufacturing

0.5%

Other Services

0.3%

Trade, Transportation & Utilities

-0.2%

Average of ISM Manufacturing and NonManufacturing Indices

60

6.7%

-5%

0%

5%

10%

15%

Source: Colorado Department of Labor and Employment

The Manufacturing Composite Index and the Non-Manufacturing Composite Index report the momentum of economic activity as assessed by businesses across the country and in most industries. The November indices show continued expansion across both the manufacturing and non-manufacturing sectors.

55 50 45 40

Jan-08 Jun-08 Nov-08 Apr-09 Sep-09 Feb-10 Jul-10 Dec-10 May-11 Oct-11 Mar-12 Aug-12 Jan-13 Jun-13 Nov-13 Apr-14 Sep-14 Feb-15 Jul-15 Dec-15 May-16 Oct-16 Mar-17 Aug-17

35

Source: Institute for Supply Management

8

Global economic growth is expected to continue over the next few years, led by growth in emerging market economies. The improving global economy is reflected in the Goldman Sachs Global Current Activity Index, a measure of real-time economic activity which indicates that current global economic growth is at its highest level since 2011.

Goldman Sachs Global Current Activity Index

6 4 2

Aug-17

Feb-17

Aug-16

Feb-16

Aug-15

Feb-15

Aug-14

Feb-14

Aug-13

Feb-13

Feb-12

Aug-12

Aug-11

Feb-11

Aug-10

Feb-10

Aug-09

Feb-09

Aug-08

Feb-08

Aug-07

Feb-07

Feb-06

-2

Aug-06

0

-4 -6 -8 Source: Goldman Sachs

General Fund Revenue Forecast After modest increases of just 1.7 percent in FY 2015-16 and 3.0 percent in FY 2016-17, General Fund revenue is forecast to increase at a much stronger rate of 9.9 percent in FY 2017-18. The pickup in economic activity this year, as well as the robust stock market and deferred capital gains from 2016 into tax year 2017 are the main causes of the strong growth this fiscal year. General Fund revenue growth is forecast to moderate to 4.2 percent in FY 2018-19 as job growth slows and as some of the factors boosting growth this year are expected to be one-time occurrences. This forecast does not incorporate the impacts of new federal tax changes as final legislation had not been enacted at time of publication. Forecast

$13 $12

$11.3

$11

$9.8

$10 $8.5

$ in Billions

$9 $8 $7

$6.9

$6.5 $5.5

$6

$5.4

$5.7

$7.5

$7.7

$10.3

$9.0

$7.7 $6.7

$6.1

$10.0

$11.8

$7.1 $6.4

$5 $4 $3 $2 $1 $0

Source: Office of the State Controller and OSPB Forecast

General Fund Budget General Fund Money, Obligations, and Reserves $14

Projected reserve excess of $104.2 million

$13

Projected reserve excess of $289.0 million

$12

$1.047

$0.785

Billions

$11 $10 $9

$12.552

$11.998

$11.506

$11.213 $8 $7 $6 FY 2017-18 FY 2017-18 Projected Funds Obligations Available General Fund Spending

Reserves

FY 2018-19 FY 2018-19 Projected Funds Obligations Available Funds Available Required Reserves

The Governor’s November budget request raises the reserve requirement to 7.0 percent of appropriations beginning in FY 2018-19. Under this forecast and the November budget request, the State’s General Fund reserve is projected to be $104.2 million above the required statutory reserve amount in FY 2017-18 and $289.0 million above the higher required statutory reserve amount in FY 2018-19.

Taxpayer’s Bill of Rights: Revenue Limit $16,000

TABOR revenue came in $435.9 million below the cap in FY 2016-17 and is projected to be $414.3 million under the cap in FY 201718. TABOR revenue is expected to be below the cap by $429.9 million in FY 2018-19 and $413.3 million in FY 2019-20. However, this forecast does not incorporate the impacts of new federal tax changes as final legislation had not yet been enacted at time of publication.

$14,000 $12,000

Millions

$10,000 $8,000 $6,000 $4,000 $2,000 $0

TABOR Revenue

TABOR Limit

Referendum C Cap

Source: Office of the State Controller and OSPB Forecast

www.colorado.gov/ospb