Colorado Legislative Strategies Updates 3.17.23

3/17/2023

COLORADO LEGISLATIVE STRATEGIES NEWSLETTER

March 17, 2023

Introduction

Happy St. Patrick’s Day! The 68th day of the legislative session brought a lot of green to the Capitol. While not an official holiday (except for in Massachusetts and Suffolk County New York), St. Patrick’s Day is a popular cultural and religious celebration. It’s named after St. Patrick, the patron saint of Ireland, who is believed to have died on this day in 461 AD.

Ironically, St. Patrick wasn’t actually from Ireland. He was actually born in Roman Britain but is credited with bringing Christianity to Ireland, thus he became the patron saint of Ireland. Shamrocks are associated with today because it is said that St. Patrick used the shamrock to explain the Holy Trinity. He probably wasn’t talking about how you need to get a bill through the House, the Senate, and the Governor, though.

At the Colorado legislature, it was another busy week. Here’s a rundown of top news from the Capitol this week and a deeper dive into the latest economic and revenue forecast.

This Week

Not quite as rare as seeing a four-leaf clover, this week included legislators from both sides of the aisle coming together to work on several issues.

On Tuesday morning, legislators from both parties joined Governor Polis for a press conference to announce two new bills intended to boost Colorado’s workforce.

The first bill, sponsored by Speaker McCluskie and Assistant House Minority Leader Pugliese, introduces a program that would provide training toward associate degrees and industry certificates in specific industries. Over the next two years, the program would provide training in industries as childhood education, firefighting, law enforcement, and construction trades.

The second bill, sponsored by Senator Bridges and Minority Leader Lundeen, would create a $1,500 scholarship for 15,000 high school seniors in the class of 2024. The 15,000 scholarships would target industries with workforce shortages, particularly in STEM and healthcare.

On Wednesday, House Bill 1171, which sets strict criteria for when a landlord has “just cause” to evict a tenant, passed third reading in the House on a 38-26 vote. Seven democrats joined the Republicans in voting against the bill, including Speaker McCluskie.

On Thursday morning, legislators from both sides of the aisle saddled up to vote down Senate Bill 038, which would have prohibited the slaughter of horses for human consumption. By the time the bill made it to second reading, it had been amended significantly and it was unclear whether the problem it was trying to address is even an issue in Colorado, or the U.S. Eight democrats joined twelve republicans in voting for a Committee of the Whole (COW) amendment that killed the bill on a bipartisan 20-14 vote. In other words, they “cowed” a horse bill.

On Friday afternoon, the House Health and Insurance committee met to consider two healthcare bills. House Bill 1201 would prohibit insurance carriers from using “spread pricing” practices. Spread pricing is a practice used by insurance carriers in which the carrier charges an employer/policy holder more for a prescription drug than what the carrier originally paid the pharmacy for. The bill passed out of committee on a bipartisan 10-1 vote. House Bill 1218requires a hospital to inform its patients if a healthcare service is not provided at that hospital for nonmedical reasons. The bill passed out of committee on a 8-2 vote.

Economic Forecast

On Thursday, the Joint Budget Committee (JBC) heard the March Economic & Revenue Forecast. Four times a year, the JBC gets these forecasts from Legislative Council Staff (LCS) and the Governor’s Office of State Planning and Budgeting (OSPB).

The economic news was generally good. The forecasts anticipate continued growth, albeit slow growth, through 2023 and a return to a more moderate pace of expansion in 2024 and 2025. At this point, inflation and labor market data suggest that the probability of a near-term recession is receding. However, the forecasts noted that any number of outside shocks could push the economy off its expected path of growth.

The chart below shows we are forecasted to have 1.1 percent growth in 2023 and 2.1 percent growth in 2024.

The primary risk to economic expansion is the Federal Reserve’s ability to rein in inflation without triggering a recession. While the likelihood of a recession is going down, the probability of continued inflation above the Fed’s target rate is high.

Headline inflation is falling, but remains elevated. The chart below shows that while energy and transportation prices are easing, housing continues to exert upward pressure.

Overall, the economic outlook in both forecasts is positive and better than it was in December. Inflation is still elevated but it’s coming down, and the Fed hasn’t triggered a recession. However, risks to the forecasts remain elevated amid rapid monetary policy tightening, a housing market correction, and declining household balance sheets.

Revenue Forecast

On the revenue side, general fund revenue will continue slow growth, mostly tracking with the December forecast expectations. The chart below shows general fund revenue is projected to grow by 3.3 percent this year and 4.0 percent next year.

Relative to the December forecast, general fund revenue was revised upward by $296 million this year, $391 million for the budget year, and $250 million in the out year. That means more money for the legislature to spend, and of course, a lot of money for big TABOR refunds.

The chart below shows the revenue above the TABOR cap. After a historic $3.73 billion refund obligation in 2021-22, the forecast projects refund obligations of $2.75 billion, $2.02 billion, and $1.75 billion in the next three years.

When the state is in a TABOR surplus, money coming in essentially just goes right back out. Since the refunds are paid for out of the general fund, any additional dollar of general fund coming in just has to go back out as a refund. Moreover, any additional dollar of cash fund revenue will also mean a dollar of general fund has to go toward the refund obligation.

Accounting for everything they can at this point, the forecasts presented a budget outlook for this year. The chart below shows that if everything were just held constant from the last budget then there would be $1.979 billion additional revenue to spend or save. That seems like a lot, but when you factor in assumptions about what must be funded this year the number shrinks to $628 million, and that number is really $300-400 million smaller because capital construction is going to take a big chunk of it. The JBC will be finalizing that number next week.

In summary, there is going to be a little more money for the legislature to spend this year. It’s still a relatively tight budget year, and new programs will still face an uphill climb to get funded. We had been hearing there could be as little as $15 million for all legislative bills, well the ones that aren’t a priority enough to get a “set-aside” in the budget. So that number will likely rise but it will still pale in comparison to the combined fiscal notes of all the bills that will be waiting for an appropriation, which is around $150 million right now based on the introduced bills.

Watch out for more information about the budget and the implications for other bills in the coming weeks. The JBC will close out the budget next week and the Long Bill will be introduced in the Senate the following week.

Links to All March Forecast Documents

Legislative Council Staff (LCS)

Office of State Planning and Budget (OSPB) – Selected by JBC for the budget

Next Week

Next week is a busy week. Several healthcare bills are expected to go to the House floor for second reading, including House Bill 1224 (Colorado Option) and House Bill 1225 (Prescription Drug Affordability Board). Two of the three abortion bills in the democrats’ abortion bill package, Senate Bill 188 and Senate Bill 190 are expected to be on the Senate Floor for second reading. In committee, Senate Bill 017 (Additional Uses Paid Sick Leave) and Senate Bill 058 (Job Application Fairness Act) are expected to have their second committee hearing in the House Business committee, and House Bill 1215(Limits on Hospital Facility Fees) is scheduled for its first committee hearing in the House Health and Insurance committee. Final budget decisions will be made, and the General Assembly will be preparing to take on the budget in the following week. Many of this session’s most controversial bills have yet to make their way through the process in the next seven weeks, and the fun is just getting started.

Have a good weekend ☘️

Education & Resources