{"id":36670,"date":"2022-12-21T10:07:11","date_gmt":"2022-12-21T17:07:11","guid":{"rendered":"https:\/\/dh.durangoherald.com\/tj\/inflation-threat-of-recession-continue-to-impact-colorado-economic-outlook\/"},"modified":"2022-12-21T17:07:11","modified_gmt":"2022-12-21T17:07:11","slug":"inflation-threat-of-recession-continue-to-impact-colorado-economic-outlook","status":"publish","type":"post","link":"https:\/\/dh.durangoherald.com\/tj\/inflation-threat-of-recession-continue-to-impact-colorado-economic-outlook\/","title":{"rendered":"Inflation, threat of recession continue to impact Colorado economic outlook"},"content":{"rendered":"\n

\"Members
Members of the Colorado House of Representatives work in the Capitol on May 9. (Pema Baldwin for Colorado Newsline)<\/span><\/figcaption><\/figure>\n<\/p>

State economic forecasters told Colorado lawmakers Tuesday that they are expecting positive \u2013 but slow \u2013 economic growth will continue to be heavily impacted by inflation through 2023.<\/p>\n

Analysts with the nonpartisan Legislative Council Staff expect<\/a> a national 2% growth overall for 2022 and a 1.2% growth in 2023.<\/p>\n

\u201cReally, the No. 1 story affecting the economy has been inflation for all of 2022 and late 2021,\u201d Jeff Stupak, a monetary policy and inflation analyst for the Legislative Council Staff, told the Joint Budget Committee on Tuesday morning.<\/p>\n

He said he expects inflation to come out to a national average of 8.1% for 2022 and slow to 4.6% in 2023.<\/p>\n

Housing is the largest contributor to inflation even as costs fall, Stupak said, with food costs coming in second. In Denver, home prices are down 4.5% from their peak in the summer, but interest rates handed down from the Federal Reserve in hopes of easing inflation have weakened purchasing power for potential homebuyers.<\/p>\n

\u201cIf you take a hypothetical homebuyer who was in the market in December 2021 with monthly payments of $1,900, let\u2019s say that person wasn\u2019t able to buy a home and now they\u2019re back on the market looking,\u201d Stupak said. \u201cThat same person, if they wanted to keep the same down payment and monthly payment, they would have gone down from being able to afford a $550,000 home to a $413,500 home. So about a 25% decrease in their purchasing power.\u201d<\/p>\n

Economists with the Governor\u2019s Office of State Planning and Budgeting agree<\/a> with the forecast of a slowdown of economic growth next year.<\/p>\n

\u201cThe labor market and consumer spending are currently outpacing previous expectations for this year, but slower consumer demand and economic growth are expected in the second half of 2023,\u201d Bryce Cook, chief economist at OSPB, told members of the Joint Budget Committee, which comprises lawmakers from the state House and Senate and writes the state budget.<\/p>\n

Experts are still wary of a possible near-term recession and warn of its impacts on the budget and taxpayer refunds.<\/p>\n

\u201cAmid this rapid monetary policy tightening, the housing correction and declining household balance sheets, we believe that risks to the forecast remain elevated and weighted toward the downside,\u201d Stupak said.<\/p>\n

Impacts of measures passed in November<\/div>\n

Two measures that Colorado voters approved<\/a> in the midterm election will reduce state revenue but won\u2019t cause revenue to dip below the Taxpayer\u2019s Bill of Rights constitutional cap and therefore won\u2019t necessarily affect the state budget in the near future.<\/p>\n

TABOR puts a cap on government growth and spending, calculated with annual inflation and population rates. Anything over the TABOR limit gets refunded to taxpayers using a variety of mechanisms.<\/p>\n

Proposition 121, which reduced the income tax rate to 4.4% from 4.55%, is expected to reduce income tax revenue by about $670 million for the current fiscal year. The Legislative Council Staff expect the revenue impact to be $440 million for the next fiscal year and more than that in subsequent years as taxable income increases.<\/p>\n

At the same time, economists expect a TABOR surplus during the same time period.<\/p>\n

\u201cSo the result of reducing income tax revenue is that we have a smaller TABOR surplus and a smaller TABOR refund obligation,\u201d Greg Sobetski, chief economist for the Legislative Council Staff, said. \u201cThat means less general fund revenue but also less general fund obligations for refunds, so a net zero impact on your discretionary budget so long as we do actually have a TABOR surplus.\u201d<\/p>\n

Voters also approved Proposition 123, which sets aside up to 0.1% of taxable income each year for affordable housing programs starting next year. That will divert about $150 million in fiscal year 2022-23 and about $300 million in fiscal year 2023-24.<\/p>\n

\u201cWith Prop 123, that money is still not available for your general budget,\u201d Sobetski said. \u201cBut that\u2019s not a change relative to preexisting law and that money now gets moved to another fund and has to be spent from that fund for affordable housing programs.\u201d<\/p>\n

Proposition FF, which will fund school meals, is estimated to increase taxes by $48.7 million in fiscal year 2022-23 and by $97.4 million in fiscal year 2023-24. Like the other ballot measures, it will have no impact on the discretionary budget.<\/p>\n

The Legislative Council Staff members forecast tax revenue will be above the TABOR cap by $2.5 billion in the current fiscal year, $1.5 billion in fiscal year 2023-24 and $1.4 billion in fiscal year 2024-25.<\/p>\n

OSPB has less optimistic predictions: $2.4 billion above the TABOR cap in the current fiscal year, $469 million in fiscal year 2023-24 and $736 million in fiscal year 2024-25. The agency expects there to be \u201ca slight downturn for a couple of quarters in late 2023,\u201d director Lauren Larson said.<\/p>\n

The governor\u2019s office will use the December economic forecast to inform an amendment to its state budget request, which it will submit in January.<\/p>\n

To read more stories from Colorado Newsline, visit www.coloradonewsline.com<\/em><\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":"

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