Forecasters see slower economic growth

Dueling experts fear high energy, cooling housing

Lynn Bartels, Rocky Mountain News

Published March 21, 2007 at midnight

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Colorado's economy will continue to grow next year, but the pace will slow a bit, affecting the state's revenue projections, according to two forecasts given to lawmakers Tuesday.

Colorado's general fund will post 6.1 percent revenue growth in the 2006-07 fiscal year that ends June 30, predicted Todd Saliman, the budget director for Gov. Bill Ritter. He expects a 5 percent increase in 2007-08.

Mike Mauer, the chief legislative economist, concurred with the slower growth rate expectation.

"Growth in Colorado's advanced technology, defense, tourism, and natural resource industries, which will fuel growth in the important business and professional services sector, should be strong enough to override the contraction in the housing market," he wrote.

Both of the financial experts said high energy prices and a cooling housing market are potential trouble spots for the state.

Lawmakers use the quarterly forecasts to set the budget and decide which projects to fund.

"We've been spoiled by the last few projections you've given us," said Sen. Abel Tapia, D-Pueblo, who is chairman of the Joint Budget Committee.

Those earlier projections from December and September showed stronger revenue growth.

But the expectations were knocked off course by back-to- back blizzards in December, which resulted in the state collecting $19 million to $26 million less in sales tax revenues than projected, a sign of how quickly the economy can turn.

The legislative sales tax forecast for the month of December was $2.057 billion. Now it is $2.031 billion.

In addition, severance tax revenues were flat, to the concern of lawmakers who are funding pet projects out of the money levied on oil and gas extractions.

"It's disappointing to say the least," said Rep. Kathleen Curry, D-Gunnison.

The legislature traditionally uses figures by its own economists to set the budget, but considers the forecast from the governor's office.

The two projections were nearly identical in some cases:

For example, the legislative economists estimated the Referendum C collection over five years at $5.37 billion. The governor's office estimated it at $5.35 billion.

The original projection, when Ref C was put on the 2005 ballot, was that the tax would bring in $3.7 billion over five years.

Voters approved it to help the state recover from a recession that led to revenue deficits and cuts of nearly $1 billion.

Saliman said sales tax revenue projections were down $19 million because of the snowstorms. Mauer, in the legislative office, revised the projections downward $26 million.

Total general fund revenues for next fiscal year are projected at $7.7 billion.

The big question lawmakers wanted to know Tuesday was how much money is available in a pot that doles out two-thirds of the money to roads and one-third to capital projects, including building repairs and construction.

The forecast is $87 million, with $58 million going to roads and $29 million to capital.

"I just hope the economy stays strong," said Rep. Al White, R-Winter Park. "The question is what happens when we have another recession or another terrorist strike?

"Those are questions I think we have to worry about."

Economic trends

• Forecast: The state's economy is expected to continue to grow in 2007. Growth in Colorado's advanced technology, defense, tourism, and natural resource industries should be strong enough to override problems in the housing market. Risks include a decline in industries related to the housing market, such as construction and financial services.

• Consumer confidence: Confidence and spending could decline more than expected as a result of the weak housing market. Consumers with high debt and low savings may reduce spending. A prolonged stock market decline would have a negative impact.

• Bottom line: The economy appears to be headed for a soft landing rather than a significant downturn.Source: Colorado Legislative Economists

Charting rates

Non-farm employment increased 2.4 percent in Colorado in 2006, ahead of the national rate of 1.9 percent, and the strongest growth since 2000. Below, the percent change in job sectors in 2006 over 2005:

• Leisure/hospitality Grew 2.8%

• Professional/ business services Grew 4.7%

• Finance/insurance Grew 1.1%

• Education/ health services Grew 2.8%

• Real estate Grew 2.0%

• Retail trade Grew 0.9%

• Construction Grew 4.8%

• Natural resources/ mining Grew 20.9%

• Manufacturing Lost 0.7%

• Telecom Lost 5.8 percent

• Non-farm Grew 2.4%Source: Colorado Department Of Labor And Employment

bartels@RockyMountainNews.com or 303-954-5327