December Economic & Revenue Forecast

COLORADO LEGISLATIVE STRATEGIES NEWSLETTER

​Introduction

Christmas and Hanukkah came early for the Joint Budget Committee yesterday when they opened up their December economic and revenue forecasts. Fortunately, it wasn’t all coal! It was just mostly coal. And some socks. 

The big takeaway is that instead of being in a nearly billion dollar hole, next year’s budget is only in a $672 million dollar hole. 

Here are some quick points to know from the forecasts, followed by some links to media coverage, and links to all the forecast documents. 

Economic Forecast

The economic outlook is generally good. The U.S. economy continues to grow at a moderate pace of around 2 percent. And inflation has been trending downwards since its peak in 2022, although there was a slight increase again recently. The U.S. is now at 2.7 percent inflation and Colorado is even lower at 2 percent. Additionally, U.S. and Colorado unemployment remain low at just over 4 percent. 

The forecast anticipates a continued, slowing expansion of the economy. The forecast, however, doesn’t factor a possible government shutdown or any other potential federal changes from the new administration. 

Revenue Forecast

As a reminder, the September revenue forecast showed that next year’s budget was starting at a deficit of $921 million – nearly a billion dollar deficit. Based on that forecast the Governor submitted his budget proposal at the beginning of November that included drastic cuts, some of which have been drawing much criticism from members of the Joint Budget Committee. 

Now instead of a $921 million dollar deficit, there is a $672 million dollar deficit. That $249 million in additional budget space came from General Fund revenue projections being revised upward and Cash Fund revenues overall being revised down. 

General Fund revenue continues to exceed the TABOR cap with refunds projected at $356 million in 2025, $844 million in 2026, and $1.2 billion in 2027. However, the refund amount for this year is so low (remember all the tax credit bills…) that regular forecast error could actually bring us below the cap. 

Expect there to be some changes to the Governor’s budget proposal in January – the forecast projected that if the Governor’s November budget proposal was approved in full there would be nearly $100 million additional dollars available above the reserve requirement. So there will certainly be some changes just based on the new projections in the December forecast, but the Chair of the Joint Budget Committee explicitly invited major changes to the proposal based on the significant concerns voiced by members of the powerful committee to various proposals. 

Conclusion

We wish you a safe and happy holidays. Enjoy the little break before all hell breaks loose. The Joint Budget Committee starts back up on January 6 and the 2025 session starts on January 8.

Links to media coverage of the December forecast:

• Colorado Politics – Colorado's budget deficit 'improves' to $672M, instead of $1B
• Colorado Sun – Colorado’s budget deficit is now forecast to be smaller than the $1 billion hole originally predicted
• Colorado Public Radio – Colorado budget picture still tight, but slightly improved in forecast
• Denver Post – State economic forecasts paint slightly rosier budget picture — but next year’s deficit is still dire

Links to all December forecast documents:

Legislative Council Staff

• Presentation
• Full Report
• Consumer Price Index

Office of State Planning and Budgeting

• Presentation
• Full Report 
• Supplemental​