Simon Lomax, Chris Brown

Policy fellow Simon Lomax speaks to the Common Sense Policy Roundtable breakfast on Dec. 11, 2019. Chris Brown, the think tank's director of policy and research, is seated at right.

The Common Sense Policy Roundtable put some numbers and analysis to the question on a lot of people's minds these days: Is Colorado built for a recession?

The answer depends on how money is invested and policies are crafted as the state and nation recover, according to a report released by the business-minded think tank Wednesday afternoon.

The next priority after the public health recovery from the global pandemic will be "ensuring state and local government can still function in this new, completely unexpected and highly uncertain environment," the report states.

"At the Colorado state Capitol in particular, this will require a new mindset," states the white paper co-authored by fellow Simon Lomax and policy and CSPR research director Chris Brown. "Policies and programs that appeared feasible just a few short weeks ago cannot be viewed in the same light today. Almost overnight, any room that existed for new priorities in the state budget disappeared, and it will be a struggle to save many existing programs from steep cuts."

Lawmakers will need to balance the state budget without inflicting "undue harm" to education and vital services, according to the Common Sense analysis.

Lawmakers, so far, have not been willing to say their wish list is dead — programs such as all-day free kindergarten and paid family leave, for example — but leadership has made it clear that when lawmakers return, tentatively May 18, the priority will be passing the state budget and School Finance Act, along with pandemic response.

The paper weighs projected declines in state tax revenue with expanded unemployment and mounting pressure on such programs as Medicaid and the state retirement fund, called the Public Employees' Retirement Association. 

“While the situation is highly fluid, the severe budget challenges facing the state include a sharp decline in tax revenues, growing unemployment and increased pressure from Medicaid and PERA,” Brown said in a statement Wednesday.

The full report, titled “Is the State Budget Ready for a Recession?” can be read by clicking here.

Analysts estimate the state budget will lose $2 billion to $3.2 billion over the next 15 months, which, for perspective, equals between $871 and $1,305 per Colorado household. The state currently has about $1 billion in its rainy day reserves.

The current estimated federal stimulus for the state, $2.5 billion, won't cover old costs, since much of it will be directed to new costs or programs caused by the emergency, the paper notes.

And then there's oil and gas, a major supplier of taxes and jobs for the state, that was being hit by international competition issues that imploded prices before the pandemic took hold. 

"The economic fallout caused by COVID-19 has overshadowed the potential economic impacts from the rapid drop and volatility in oil and gas prices," the paper states. "That fallout translates to a significant cut in oil and gas property tax revenues to local government."

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