The state's anticipated revenues for this year and the next two show big payouts for TABOR refunds, even if voters adopt Proposition CC in the fall.
And that could lead to a special legislative session, according to members of the Joint Budget Committee (JBC).
TABOR refunds are expected to hit $1.3 billion in the next three years, according to forecasts released Wednesday from General Assembly economists and the governor's Office of State Planning and Budgeting (OSPB).
That starts next spring, with a $156.4 million refund paid out to seniors and disabled veterans through the state's property tax exemptions. Another $139.3 million will be returned to taxpayers in the form of a sales tax refund, with refunds based on individual income.
The sales tax refund and and a second refund mechanism tied to income taxes are based on individual income, with refunds ranging from $38 for single filers with incomes below $39,900 to $644 for those with incomes above $226,000 annually.
Those refunds will happen regardless of voter decisions on Proposition CC, because those obligations were incurred in the 2018-19 fiscal year.
The measure, which will appear on ballots this November, would allow the state to keep future refunds allowed by the Taxpayer's Bill of Rights, or TABOR, to go to schools and transportation.
The forecast from OSPB calls for $165.1 million in refunds to seniors and disabled veterans in 2020-21, based on state surplus revenues from 2019-20. Another $247.1 million would be refunded through the sales tax mechanism.
In 2021-22, the refunds grow substantially larger, according to the forecast: $173.3 million in senior and disabled veterans property tax refunds; $292.6 million in a temporary income tax rate reduction; and $157.1 million returned as a sales tax refund.
The refunds forecast by Legislative Council economists are even higher: $574.1 million to be refunded next spring (including $150 million to seniors and disabled veterans), $310 million in 2020-21, and $342.1 million in 2021-22.
JBC Chair state Sen. Dominick Moreno of Commerce City told reporters after the forecast presentation that the uptick in state revenues came as something of a surprise.
"We will be over our TABOR limit" and the surplus will exceed even what was expected to be refunded for senior and disabled veteran property taxes. That was unexpected, Moreno said.
"Now we will be over $150 million, and if nothing changes in the budget, we will be issuing refunds in 2019-20."
Are lawmakers thinking about something that could be done before November to change that?
"We are limited in what we can do when the legislature is not in session," Moreno said. "The legislature could come back into special session if it is warranted and increase the TABOR revenue limit."
It's been done before, and cleared by the General Assembly's lawyers after the passage of the 2017 measure known as the Sustainability of Rural Colorado. That could mitigate the impact of the refunds, but would require a special session that will require a long conversation with a lot of people. Those discussions "are in their infancy," he said.
The state's expected revenue also grew sharply in the last forecast, which was issued in March. Economists from both OSPB and the Legislative Council predicted higher revenues at around $459 million more than they forecast in March.
Kate Watkins, chief economist for the Legislative Council, told the members of the Joint Budget Committee that those higher forecasts are due to higher income tax collections, largely attributable to the federal Tax Cuts and Jobs Act.
In 2019-20, the state should anticipate higher revenues of $388.6 million and $438.9 million the following year, Watkins said. However, economists are uncertain whether those higher tax collections are permanent or whether they're temporary due to changes in taxpayer behavior in an effort to adjust to the changes in federal tax policy.
Still, the good news was tempered with concerns over future economic activity. Both OSPB and the Legislative Council economists warned of slowing business activity, pointing to factors coming from outside of Colorado, such as the ongoing tariff and trade wars launched by the president, uncertainty over the federal budget and global economic factors tied to Great Britain's exit from the European Union.
The state has experienced 10 straight years of economic growth, the longest in history, according to Legislative Council economist Larson Silbaugh. During that time, the state added 535,000 jobs and unemployment dipped from 10% to 3.6%. Average wages in Colorado, at $30.17 per hour, are well above the national average of $27.53, he said.
The downside, however, is that personal consumer spending is declining. Spending on cars and furniture is flat, and that means business and manufacturing activity is feeling the heat.
Changes in federal tax policy tied to the Tax Cuts and Jobs Act artificially improved the nation's gross domestic product at first, Silbaugh said. Now, "we're paying for it with slower [economic] growth."
Another downside in the revenue forecast is what's happening to severance tax revenue. The state expects to collect about $241.8 million in 2018-19 from oil and natural gas, minerals and coal severance taxes. (Severance taxes are paid for the privilege of "severing" the natural resources from the ground.)
But outyears don't look so good: In 2019-20, those revenues will dip to $101.5 million, almost entirely predicated on a decline in oil and gas taxes, according to the Legislative Council forecast. While OSPB predicts a rebound in 2020-21 to $202.6 million collected, Legislative Council is less optimistic, believing those revenues will not recover in the following year.
Republican Sen. Bob Rankin of Carbondale noted the revenues may not be sufficient to fund programs paid for with severance taxes, particularly water projects.
The news for the state's agriculture industry is also not so good: Economists noted that banks are tightening their loan requirements for the ag sector, based on low commodity prices and concerns over the trade and tariff wars.
However, according to OSPB Deputy Director Luke Teater, "Colorado has one of the least trade-dependent economies in the nation."