Colorado faces budget shortfall and economic uncertainty

Colorado's latest budget forecast reveals significant economic uncertainty. The forecast, released on Monday, outlines concerns about higher inflation, potential recession risks, and a struggling housing market. Mark Ferrandino, from the governor's Office of State Planning and Budgeting, highlighted that the economy is feeling the effects of this uncertainty. Concerns include rising unemployment, declining confidence among consumers, and increased consumer debt. Greg Sobetski, the chief economist for the Legislative Council, noted that the housing market is particularly affected, with multi-family construction seeing a steep decline. Economists warn that factors like changes in federal policies, international trade issues, and high prices are leading to a negative economic outlook. The state has downgraded its revenue forecasts, predicting a reduced budget surplus for fiscal year 2024-25, which might impact funding for property tax exemptions for seniors and veterans. The governor's office expressed some optimism about avoiding a recession, despite indicating that economic growth is slowing. The forecast estimates GDP growth at 1.5% for 2025, lower than previously expected. There is an anticipated 30% chance of a recession due to factors like high interest rates, rising consumer debt, and global conflicts. State officials expect a slight increase in general fund revenue for 2025-26, primarily driven by higher individual income taxes. However, this is in contrast to the Legislative Council's outlook, which anticipates difficulties in fully funding the property tax exemption. Governor Jared Polis attributed the economic struggles largely to tariffs imposed during the Trump administration. He emphasized that these tariffs are harming the economy and increasing fears about inflation. Despite the challenges, the projected general fund balance offers some hope amidst a tough budget year, with a budget shortfall still estimated at $1.2 billion for 2025-26.