DENVER – Colorado taxpayers could get $750 each in Taxpayer’s Bill of Rights (TABOR) refunds later this summer – up from an anticipated $500 – and inflation in Colorado could slow next year, according to new revenue forecasts released Tuesday by economists with the nonpartisan Legislative Council Staff and the governor’s office.
The Legislative Council Staff (LCS) and Office of State Planning and Budgeting (OSPB) presented their June economic and revenue forecasts to the Joint Budget Committee on Tuesday. The LCS forecast showsan additional roughly $1 billion in General Fund revenue above the TABOR cap compared to the March forecast for both FY2021-22 and 2022-23, while the OSPB is forecasting similar additional revenue based off high income tax revenues this spring.
That would mean, according to LCS, that taxpayers could potentially get even larger TABOR refund checks later this summer after the governor signed the Colorado Cashback Plan in late May. The plan allows the state to refund 85% of FY221-22 excess TABOR revenue early through the checks.
At the time, the expectation was that individual filers would get $500 each and joint filers would get $1,000 if they filed 2021 tax returns. Originally, the refunds were going to be $400 and $800 respectively.
In the Tuesday forecast from LCS, economist said the direct payments could go up to $750 for individuals and $1,500 for joint filers.
“Direct payments in 2022 are estimated to be $750 for single-filing taxpayers and $1,500 for households filing jointly,” Legislative Council Staff wrote in Tuesday’s forecast. Those payments are expected to be sent to most taxpayers between August and October.
The excess TABOR funds come from an error in March forecasts for FY2021-22 and FY2022-23, according to the LCS
Both LCS and the OSPB are forecasting inflation to peak this year and slow over the next two as of Tuesday’s projections, and both see marginal chances of a recession despite the current risks posed by inflation, China’s zero-COVID policy, and the war in Ukraine.
According to OSPB, inflation for the Denver-Aurora-Lakewood area peaked in March at 9.1% and dropped to 8.3% in May. The office said inflation is expected to moderate over the rest of the year but at a slower rate than was thought in March because of “sustained price pressures in the shelter and other services categories combined with high food and energy prices and lingering supply chain issues.”
The OSPB revised Colorado inflation forecasts for 2022 up from 7.2% in March’s forecast to 8.2% in June’s, and the 2023 inflation forecast from 3% as of March to 4.4% as of June. The 2024 inflation is forecast to be 2.8% in 2024, according to the OSPB June forecast.
LCS is forecasting inflation rates of 7.9% for 2022, 4.6% for 2023, and 3.1% for 2024, comparatively.
Both the OSPB and LCS say they inflation poses a downside risk to the economic forecasts and additional uncertainty, as it is generally outpacing income increases nationwide, though Colorado’s wages have gone up more than the U.S. average over the past several months. OSPB expects Colorado’s unemployment rate to settle around 3.3% (it was 3.5% in May), while the U.S. rate could rise slightly.
“The inflation rate is expected to face additional upward pressure from shelter and service prices relative to the nation as a whole,” OSPB forecasters wrote. “Real retail sales growth remains positive in 2022 at a pace slightly higher than the U.S., but then similar to the country as a whole, turns negative in 2023 in the face of rising inflation.”
Both forecasts see an elevated risk of a recession compared to earlier this year, which LCS could reduce revenue in the General Fund. But both forecasts also said those risks are not considered to be major at this time.
“The risk of sustained inflation throughout the forecast period is elevated, as is the risk of recession, while geopolitical conflict, inflation and monetary policy tightening challenge economic growth,” LCS forecasters wrote.
“While risks associated with a resurgent COVID-19 pandemic have receded, high inflation and the attendant, increasingly forceful, monetary policy response have emerged as primary threats to the economic expansion,” LCS added in the summary. “…The coming months will illuminate the inflation response to monetary policy, as well as any persistent impacts for households and businesses. This forecast anticipates continued, slowing, expansion, but the path forward has become more tenuous.”
Democrats on the Joint Budget Committee said the new forecasts were overall good news matched with the May unemployment data that came out last week.
“Today’s forecast shows that our economy is making a bold recovery with unemployment rates falling to pre-pandemic levels, nearly all sectors thriving, and Colorado’s employment gains outpacing the nation,” said JBC Chair Rep. Julie McCluskie, D-Dillon.
“Today’s data makes clear that Colorado’s economy continues to outpace other states when it comes to economic recovery and growth,” said the JBC’s Sen. Rachel Zenzinger, D-Arvada.
Gov. Jared Polis touted the increased TABOR payments at a news conference Tuesday afternoon.
"I am thrilled that due to our strong economy, Coloradans will be receiving nearly double what we initially hoped," Polis said.