The Colorado Outlook Economic and Fiscal Review, March 2018 The following information is excerpted from the Colorado Office of State Planning and Budgeting’s March 2018 forecast. To access the full forecast document, click on the image above or follow this link: https://goo.gl/YfafiV
The Economy Colorado’s economy is on solid footing with strong employment growth and expectations of an ongoing expansion. New business formation continues to grow, while Colorado oil production is at record levels. Stabilizing farmland values and increases in energy prices and production have recently supported Colorado’s rural areas. Looking forward, higher costs of living and tighter labor market conditions are expected to constrain further growth through the forecast period. 6,000
Colorado Employment Indicators
500
5,000
400
4,000
300
3,000
200
2,000
100
1,000
Jan-18
Income Tax Wage Withholdings (left axis) Average Weekly Initial Claims for Unemployment Insurance (right axis)
16,000 14,000
Colorado oil production has been rising throughout 2017 and is currently at its highest level on record. Employment in the oil and gas sector continues to improve, but has yet to recover from the 2015 downturn. Improved technology and more efficient drilling techniques are allowing oil producers to produce more oil with fewer employees.
30
12,000
25
10,000
Barrels
Thousands
20
8,000
15
6,000
10
4,000
Jan-17
Jan-16
Jan-15
Jan-14
Jan-13
Jan-12
Jan-11
Jan-10
Jan-09
Jan-08
Jan-07
Jan-06
Jan-05
Jan-04
0
Jan-03
0
Jan-01
5
Jan-00
2,000
CO Oil Production (Left Axis)
100
35
Oil Production and Industry Employment
Source: Colorado Department of Revenue and Colorado Department of Labor and Employment
Jan-02
Jan-17
Jan-16
Jan-15
Jan-14
Jan-13
Jan-12
Jan-11
Jan-10
Jan-09
Jan-08
Jan-07
Jan-06
Jan-05
Jan-04
Jan-03
Jan-02
Jan-01
0
Jan-00
0
Income tax wage withholdings continue to grow, while initial claims for unemployment are near their lowest level since September 2000, indicating a very tight labor market with fewer layoffs as the economic expansion continues.
Unemployment Claims
$ Millions
600
CO Oil Industry Employment (Right Axis)
Source: U.S. Energy Information Administration, Colorado Department of Labor and Employment
Colorado Rural Mainstreet Index
90
Stable farmland values and a slowing decline in farm income have somewhat mitigated the challenges faced by state agricultural producers in recent months. Credit conditions remain weak, but a relative improvement in farmland values has somewhat offset the negative impact of low commodity prices.
80 70 60 50 40 30 20 10
Jan-18
Nov-17
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
May-15
Mar-15
Jan-15
0
7.0%
Source: Creighton University
6.0%
Colorado continues to experience employment growth across all industries, led by the recovery in the oil and gas industry. Among metro areas, Greeley and Grand Junction experienced the most job growth over the last twelve months, at 6.2 percent and 3.9 percent, due largely to the recovery in oil and gas. 65
Year-over-Year Job Growth by Metro Area, December 2017
6.2%
5.0%
3.9%
4.0%
2.7%
3.0%
2.5%
2.2% 1.7%
2.0%
1.1% 1.0%
0.5%
0.3%
0.0% Greeley Grand Fort Denver Colorado Boulder Junction CollinsSprings Loveland
Average of ISM U.S. Manufacturing and NonManufacturing Indices
Rural CO
Pueblo Statewide
Source: Colorado Department of Labor and Employment
60
The U.S. Manufacturing Composite Index and the U.S. Non-Manufacturing Composite Index report the momentum of economic activity as assessed by businesses across the country and in most industries. The February indices show strong expansion across both the manufacturing and nonmanufacturing sectors.
55
50
45
40
Jan-18
Jul-17
Jan-17
Jul-16
Jan-16
Jul-15
Jan-15
Jul-14
Jan-14
Jul-13
Jan-13
Jul-12
Jan-12
Jul-11
Jan-11
Jul-10
Jan-10
Jul-09
Jan-09
Jul-08
Jan-08
35
Source: Institute for Supply Management
JP Morgan Global Composite PMI
56 55
Global economic improvement is continuing into the first quarter of 2018 as broad-based growth occurs across countries and industries. According to the JP Morgan Global Composite PMI, almost all nations experienced an increase in economic output in February and global growth is now at its highest level since 2014.
54 53 52 51 50 49
Jan-18
Oct-17
Jul-17
Apr-17
Jan-17
Oct-16
Jul-16
Apr-16
Jan-16
Oct-15
Jul-15
Apr-15
Jan-15
Oct-14
Jul-14
Apr-14
Jan-14
Oct-13
Jul-13
Apr-13
Jan-13
48
Source: IHS Markit
General Fund Revenue Forecast After a modest 3.1 percent increase in FY 2016-17, General Fund revenue is forecast to increase at a much stronger rate of 12.9 percent in FY 2017-18 due to strong economic growth, a rebound in corporate income tax receipts, robust investment income gains, and federal tax changes. General Fund revenue is projected to increase at a modest 3.2 percent in FY 2018-19 due to lower employment growth in a tight labor market and as income tax revenue grows more slowly. This forecast assumes that the combination of factors that are generating robust revenue growth in FY 2017-18 is mostly one-time in nature. However, it is possible that revenue in FY 2018-19 will increase at a higher rate with continued economic expansion. Forecast
$13
$11.6
$12 $11
$9.8
$10 $8.5
$ in billions
$9
$7
$7.7
$7.5
$8
$6.9
$6.5 $5.5
$6
$5.4
$5.7
$10.0
$12.0
$10.3
$9.0
$7.7 $7.1
$6.7
$6.4
$6.1
$5 $4 $3 $2 $1 $0 FY FY FY FY FY FY FY FY FY FY FY FY FY FY FY FY FY FY FY 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 Source: Office of the State Controller and OSPB Forecast
General Fund Budget General Fund Money, Obligations, and Reserves $14 Projected reserve excess of $492.0 million
$13
Projected reserve excess of $548.1 million
$1.411
$12 $1.168
Billions
$11 $10 $13.143 $12.305
$9
$11.733
$11.137 $8 $7
Under the Governor’s budget request, the General Fund reserve is projected to be $492.0 million above the required statutory reserve amount of 6.5 percent of appropriations in FY 2017-18. In FY 2018-19, the General Fund reserve is projected to be $548.1 million above the 8.0 percent reserve requested in the Governor’s budget.
$6 FY 2017-18 Projected Funds Available
FY 2017-18 Obligations
General Fund Spending
FY 2018-19 Projected Funds Available Reserves
Funds Available
FY 2018-19 Obligations
Required Reserves
Taxpayer’s Bill of Rights: Revenue Limit $16,000 $14,000
TABOR revenue came in $435.9 million below the Referendum C cap in FY 2016-17 and is projected to be $74.9 million under the cap in FY 2017-18. TABOR revenue is expected to be below the cap by $276.8 million in FY 2018-19 and $206.5 million in FY 2019-20.
$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
