The news on the state’s revenue expectations is better than expected, but state economists warned lawmakers Friday that there is still a lot of uncertainty about the impacts of COVID on the economy. Until the vaccine is distributed, job losses and the winter will still be hardest on the lowest income workers in Colorado, economists warned.

The December revenue forecast looked good, on paper. The Joint Budget Committee, joined by more than a dozen other lawmakers, heard that they will have $3.75 billion to spend for the 2021-22 budget, based on the forecast from economists at the Legislative Council.

The economists with the governor’s office of state planning and budgeting were more wary. Their estimate was at around $2.6 billion.

But that’s all one-time funds, meaning spending for new programs is largely out of the picture when the General Assembly returns on Jan. 13 for its 2021 session.

Economists from both entities said the state’s revenue estimates are higher than they were in December, due largely to income tax collections for calendar year 2019 that came in later in 2020 and that have been higher than expected. That’s why it’s one-time money.

“Many households and businesses have recovered to pre-pandemic levels, [but] others continue to get hit extremely hard,” said economist Kate Watkins of the Legislative Council. The first distributions of the COVID-19 vaccine has heightened optimism and is expected to boost economic activity, but not until probably mid to late next year, she said.

As a result, and based on past recessions, labor markets and hiring will lag. “That’s just the way that it tends to be, as hiring a new employee tends to be the last decision that a firm makes, wanting to make sure that they’re in a good financial situation to do so.”

Higher-wage earners have recovered financially faster from the pandemic than those in the lower-income sector, Watkins explained. That’s also led to people in those higher-wage sectors to hang onto savings, waiting for the day when the pandemic has subsided and spending can ramp up again.

About 63% of the jobs lost in the early months of the pandemic have been recovered, but it’s largely in higher-wage jobs, and not in restaurants, bars, event venues and the like, all relatively low-wage jobs, the forecast noted.

The good news is that the economy is recovering faster than projections in the year indicated, but Watkins warned that risks to the forecast include the length of the current surge in COVID-19 cases. That’s put more than half of the state’s counties into “red level” status, which requires indoor dining to cease and which imposes higher capacity restrictions on a variety of retail businesses.

Inflation is also a concern, but mitigated by the continuing decline in oil prices, according to the forecast.

Retail sales painted an interesting picture. While sales in restaurants and bars have been devastated, sales tied to in-home consumption have more than made up for it. That’s largely in grocery and other food sales and in-home entertainment.

Additional risks to the forecast, and what economists are watching for in the first half of 2021: more weakening of the economy due to the surge in COVID-19 cases; a downturn in spending with the end of federal stimulus payments, and long-term damage from the pandemic, which Watkins referred to as “scarring.” One example of scarring, according to Watkins, is a business that takes on additional debt to stay afloat, and then shifts in consumption makes the business unprofitable. The business is then overleveraged without strong sources of income, she explained.

OSPB economists were more cautious. Their forecast said the short-term economic outlook has deteriorated, while the medium/long-term outlook – from the second quarter of 2021 to two to three years down the road – has improved.

That downturn in the short-term outlook is also predicated on the surge in COVID-19 cases, the forecast said. By April through June, 2021, however, vaccine distribution should improve the state’s economic outlook.

Similar to the Legislative Council forecast, OSPB also reported strong household finances and a weak labor market. Both forecasts said that participation in the labor market declined significantly for women, dropping to levels not seen since 1986. That’s due to job losses as well as an inability to find child care, according to the Legislative Council report.

Unemployment will continue to be at high levels into 2021, both forecasts said.

What wasn’t listed as a risk to the forecast: evictions. State and federal eviction moratoriums are scheduled to expire at the end of the month. The OSPB forecast noted the expiration of those moratoriums but didn’t estimate what kind of impact that could have on the recovery. Rent collections have remained stable, the OSPB forecast said, with 94% of renters paying on time through October.

House and Senate Democrats on the JBC said in a statement after the forecast presentations that while the recovery is more positive, the impact on low-wage earners continues to be a concern.

That means the JBC and the legislature will need to ensure those vulnerable communities have the support and resources they need to “equally recover” from the pandemic, according to JBC Chair Sen. Dominick Moreno of Commerce City.

Vice-Chair Rep. Julie McCluskie of Dillon echoed those concerns. While the forecast shows the economy bouncing back, low-wage workers, small businesses, restaurants and schools “desperately need more federal assistance to get through the months ahead.”

A statement from Gov. Jared Polis called the forecasts “surprisingly good and welcome economic news for Colorado, given that the entire world is in the grip of a deadly virus and the United States is experiencing an all-time high in hospitalizations and deaths. But this positive data must not detract from the real-life struggles that many small businesses and families are still facing here in Colorado.” Polis also called on Washington to take action to assist Coloradans still struggling financially in the pandemic.