march 2017 legislative council staff economic and …...fy 2016-17 to fy 2017-18 $538.9 million...
TRANSCRIPT
![Page 1: March 2017 Legislative Council Staff Economic and …...FY 2016-17 to FY 2017-18 $538.9 million $78.5 million-$76.5 million $264.1 million *Assumes $169.2 million FY 2016-17 shortfall](https://reader034.vdocuments.us/reader034/viewer/2022042307/5ed3a2e018dc2351871e472b/html5/thumbnails/1.jpg)
March 2017
Legislative Council Staff
Economic and Revenue Forecast
![Page 2: March 2017 Legislative Council Staff Economic and …...FY 2016-17 to FY 2017-18 $538.9 million $78.5 million-$76.5 million $264.1 million *Assumes $169.2 million FY 2016-17 shortfall](https://reader034.vdocuments.us/reader034/viewer/2022042307/5ed3a2e018dc2351871e472b/html5/thumbnails/2.jpg)
2
The U.S. and Colorado economies are expected to
continue to expand at a moderate pace over the
forecast period.
• Business activity has improved
• Modest rebound in oil and gas industry activity
• Consumer spending remains healthy
• Employers continue to add jobs at a moderate rate
![Page 3: March 2017 Legislative Council Staff Economic and …...FY 2016-17 to FY 2017-18 $538.9 million $78.5 million-$76.5 million $264.1 million *Assumes $169.2 million FY 2016-17 shortfall](https://reader034.vdocuments.us/reader034/viewer/2022042307/5ed3a2e018dc2351871e472b/html5/thumbnails/3.jpg)
3
The U.S. economy continues to expand.
U.S. Real Gross Domestic Product Annual Percent Change and Contributions
Source: Bureau of Economic Analysis.
-0.3%
-2.8%
2.5%
1.6% 2.2% 1.7% 2.4%
2.6%
1.6%
2008 2009 2010 2011 2012 2013 2014 2015 2016
Personal Consumption
Gross Private Investment
Gov't Consumption & investment
Net exports
Real GDP
![Page 4: March 2017 Legislative Council Staff Economic and …...FY 2016-17 to FY 2017-18 $538.9 million $78.5 million-$76.5 million $264.1 million *Assumes $169.2 million FY 2016-17 shortfall](https://reader034.vdocuments.us/reader034/viewer/2022042307/5ed3a2e018dc2351871e472b/html5/thumbnails/4.jpg)
4
U.S. Nonfarm Employment Year-over-Year Change in February 2017
Source: Bureau of Labor Statistics. Seasonally adjusted.
3.0%
2.4%
2.3%
3.4%
2.0%
1.0%
2.0%
2.9%
3.3%
2.3%
0.9%
1.0%
2.0%
0.8%
3.0%
2.0%
3.2%
1.0%
0.9%
1.7%
1.7%
2.1%
0.1%
-0.3%
0.0%
-4.2%
-0.5%
Percent Change
571.0
511.0
416.7
293.2
257.0
234.0
227.9
225.2
176.0
172.0
158.0
119.0
106.2
97.7
94.3
88.6
65.6
51.0
48.3
44.0
38.8
29.1
27.0
-0.3
-5.0
-12.0
-20.0
Professional & Business Services
Education & Health Services
Health Care & Social Assistance
Professional & Technical Services
Leisure & Hospitality
Trade, Transportation & Utilities
Accommodation & Food Services
Administrative & Support Services
Construction
Financial Activities
Government
Local Government
Finance & Insurance
Retail Trade
Educational Services
Transportation & Warehousing
Real Estate, Rental, & Leasing
Other Services
Wholesale Trade
Federal Government
Management of Companies & Enterprises
Arts, Entertainment, & Recreation
Manufacturing
Utilities
State Government
Mining & Logging
Information Services
Thousands of Jobs
Job gains have been broad-based across most industries.
![Page 5: March 2017 Legislative Council Staff Economic and …...FY 2016-17 to FY 2017-18 $538.9 million $78.5 million-$76.5 million $264.1 million *Assumes $169.2 million FY 2016-17 shortfall](https://reader034.vdocuments.us/reader034/viewer/2022042307/5ed3a2e018dc2351871e472b/html5/thumbnails/5.jpg)
5
Colorado Nonfarm Employment Year-over-Year Change in February 2017
Source: Bureau of Labor Statistics. Seasonally adjusted.
3.5%
3.9%
2.2%
2.8%
3.9%
3.1%
1.7%
1.8%
3.0%
3.6%
2.9%
2.8%
1.5%
1.3%
2.9%
6.5%
1.5%
0.7%
1.9%
0.7%
0.8%
1.5%
1.0%
-1.1%
-0.8%
-14.7%
Percent Change
10.5
10.1
8.3
8.0
7.6
7.5
7.1
6.6
4.9
3.4
3.3
3.1
3.0
2.6
2.6
2.3
1.5
1.1
0.9
0.7
0.5
0.5
0.4
-0.4
-1.7
-3.3
Education & Health Services
Health Care & Social Assistance
Professional & Business Services
Leisure & Hospitality
Professional, Scientific & Technical Services
Accomodation & Food Services
Trade, Transportation & Utilities
Government
Financial Activities
Transportation & Utilities
Finance & Insurance
State Government
Retail Trade
Local Government
Other Services
Real Estate
Construction
Administrative & Support Services
Federal Government
Wholesale Trade
Information
Arts, Entertainment & Recreation
Educational Services
Management of Companies & Enterprises
Manufacturing
Mining & Logging
Thousands of Jobs
![Page 6: March 2017 Legislative Council Staff Economic and …...FY 2016-17 to FY 2017-18 $538.9 million $78.5 million-$76.5 million $264.1 million *Assumes $169.2 million FY 2016-17 shortfall](https://reader034.vdocuments.us/reader034/viewer/2022042307/5ed3a2e018dc2351871e472b/html5/thumbnails/6.jpg)
6
U.S. corporate profits and manufacturing activity continue
to improve.
Sources: Bureau of Economic Analysis and Institute for Supply Management.
$0.6
$0.8
$1.0
$1.2
$1.4
$1.6
$1.8
$2.0
2006 2008 2010 2012 2014 2016
Proprietors'
Income
Equipment & Intellectual
Property Investment
Corporate Profits
after Tax
30
35
40
45
50
55
60
65
70
2006 2008 2010 2012 2014 2016
Business Investment, Income & Profits Trillions of Dollars
ISM Manufacturing Index Diffusion Index
Contracting
Expanding
![Page 7: March 2017 Legislative Council Staff Economic and …...FY 2016-17 to FY 2017-18 $538.9 million $78.5 million-$76.5 million $264.1 million *Assumes $169.2 million FY 2016-17 shortfall](https://reader034.vdocuments.us/reader034/viewer/2022042307/5ed3a2e018dc2351871e472b/html5/thumbnails/7.jpg)
7
Residential real estate indicators remain encouraging for
both national and Colorado housing markets.
Source: U.S. Census Bureau. Seasonally adjusted three-month moving averages.
0
50
100
150
200
250
2006 2008 2010 2012 2014 2016
Multi-FamilySingle Family
0.0
1.0
2.0
3.0
4.0
5.0
2006 2008 2010 2012 2014 2016
Residential Building Permits Thousands of Units
United States Colorado
![Page 8: March 2017 Legislative Council Staff Economic and …...FY 2016-17 to FY 2017-18 $538.9 million $78.5 million-$76.5 million $264.1 million *Assumes $169.2 million FY 2016-17 shortfall](https://reader034.vdocuments.us/reader034/viewer/2022042307/5ed3a2e018dc2351871e472b/html5/thumbnails/8.jpg)
8
Inflation has been rising.
Source: U.S. Bureau of Labor Statistics. Inflation is calculated as the growth in urban area prices in a given period relative to the same
period in the prior year. *Headline inflation includes all products and services. **Core inflation excludes food and energy prices.
-3%
-2%
-1%
0%
1%
2%
3%
4%
5%
6%
7%
2007 2009 2011 2013 2015 2017
2.8%
2.2%
15.6%
0.0%
3.2%
0.4%
6.6%
3.5%
1.5%
2.7%
2.0%
Headline
Core
Energy
Food
Housing
Apparel
Transportation
Medical Care
Recreation
Education
Other
Consumer Price Index for All U.S. Urban Areas Year-over-Year Change in Prices
2.8% Headline*
2.2% Core**
February 2017
Selected Components
February 2017
![Page 9: March 2017 Legislative Council Staff Economic and …...FY 2016-17 to FY 2017-18 $538.9 million $78.5 million-$76.5 million $264.1 million *Assumes $169.2 million FY 2016-17 shortfall](https://reader034.vdocuments.us/reader034/viewer/2022042307/5ed3a2e018dc2351871e472b/html5/thumbnails/9.jpg)
9
Economy activity remains oriented towards further
advancement at a moderate pace for the Colorado and
U.S economies.
Several factors that will continue to slow growth.
1) Full employment
2) Monetary policy
3) Demographic change
![Page 10: March 2017 Legislative Council Staff Economic and …...FY 2016-17 to FY 2017-18 $538.9 million $78.5 million-$76.5 million $264.1 million *Assumes $169.2 million FY 2016-17 shortfall](https://reader034.vdocuments.us/reader034/viewer/2022042307/5ed3a2e018dc2351871e472b/html5/thumbnails/10.jpg)
10
2%
4%
6%
8%
10%
12%
14%
16%
18%
2007 2009 2011 2013 2015 2017
4.7%
2.9%
Economic indicators suggest the nation is nearing full
employment.
Source: Bureau of Labor Statistics. Seasonally adjusted. Colorado U6 rates shown as four-month moving averages.
U.S.
Colorado
Unemployment (U3)
Underemployment (U6)
Unemployment and Underemployment Rates
9.2%
7.3%
U.S.
Colorado
![Page 11: March 2017 Legislative Council Staff Economic and …...FY 2016-17 to FY 2017-18 $538.9 million $78.5 million-$76.5 million $264.1 million *Assumes $169.2 million FY 2016-17 shortfall](https://reader034.vdocuments.us/reader034/viewer/2022042307/5ed3a2e018dc2351871e472b/html5/thumbnails/11.jpg)
11
$0
$1
$2
$3
$4
$5
2007 2009 2011 2013 2015 2017
Monetary policy will slowly tighten.
Source: Federal Reserve Board of Governors.
0%
1%
2%
3%
4%
5%
6%
2007 2009 2011 2013 2015 2017
Federal Reserve Balance Sheet
Traditional Portfolio
All Other
Central Bank
Liquidity Swaps
Mortgage Backed Securities
& Federal Agency Debt
Effective Federal Funds Rate
Trillions
![Page 12: March 2017 Legislative Council Staff Economic and …...FY 2016-17 to FY 2017-18 $538.9 million $78.5 million-$76.5 million $264.1 million *Assumes $169.2 million FY 2016-17 shortfall](https://reader034.vdocuments.us/reader034/viewer/2022042307/5ed3a2e018dc2351871e472b/html5/thumbnails/12.jpg)
12
The aging of the population is changing income and
consumption patterns.
Average Income by Age, 2015
Thousands of Dollars
$0
$10
$20
$30
$40
$50
$60
$70
$80
$90
$100
Source: Bureau of Labor Statistics, 2015 Current Expenditure Survey.
Age Cohorts
$0
$10
$20
$30
$40
$50
$60
$70
$80
$90
$100
Average Expenditures by Age, 2015
Thousands of Dollars
Age Cohorts
![Page 13: March 2017 Legislative Council Staff Economic and …...FY 2016-17 to FY 2017-18 $538.9 million $78.5 million-$76.5 million $264.1 million *Assumes $169.2 million FY 2016-17 shortfall](https://reader034.vdocuments.us/reader034/viewer/2022042307/5ed3a2e018dc2351871e472b/html5/thumbnails/13.jpg)
13
$6.6
$5.5
$7.7
$6.5
$10.0
$11.7
$0
$2
$4
$6
$8
$10
$12
General Fund Revenue Billions of Dollars
Source: Office of the State Controller and Legislative Council Staff March 2017 revenue forecast.
Increase relative to
December expectations
Expectations for revenue were increased slightly relative
to the December forecast.
![Page 14: March 2017 Legislative Council Staff Economic and …...FY 2016-17 to FY 2017-18 $538.9 million $78.5 million-$76.5 million $264.1 million *Assumes $169.2 million FY 2016-17 shortfall](https://reader034.vdocuments.us/reader034/viewer/2022042307/5ed3a2e018dc2351871e472b/html5/thumbnails/14.jpg)
14
2,068
1,582
1,933 1,870 1,800
1,850
$0
$500
$1,000
$1,500
$2,000
$2,500
Source: Office of the State Controller and Legislative Council Staff March 2017 revenue forecast.
General fund revenue is projected to grow at a rate just
slightly faster than inflation and population growth.
General Fund Revenue Inflation-adjusted, per capita
![Page 15: March 2017 Legislative Council Staff Economic and …...FY 2016-17 to FY 2017-18 $538.9 million $78.5 million-$76.5 million $264.1 million *Assumes $169.2 million FY 2016-17 shortfall](https://reader034.vdocuments.us/reader034/viewer/2022042307/5ed3a2e018dc2351871e472b/html5/thumbnails/15.jpg)
15
-$113.8
$256.5 $287.2
-$161.8
$264.1 $288.6
-$300
-$150
$0
$150
$300 December
March
TABOR Outlook
Revenue Above/(Below) the TABOR Limit
About 2.5% of General Fund Revenue
Halved Senate Bill 09-228 Transfers
Current Year
FY 2016-17
FY 2017-18
Budget Year
FY 2018-19
Out Year
Source: Office of the State Controller and Legislative Council Staff March 2017 revenue forecast.
![Page 16: March 2017 Legislative Council Staff Economic and …...FY 2016-17 to FY 2017-18 $538.9 million $78.5 million-$76.5 million $264.1 million *Assumes $169.2 million FY 2016-17 shortfall](https://reader034.vdocuments.us/reader034/viewer/2022042307/5ed3a2e018dc2351871e472b/html5/thumbnails/16.jpg)
16
-$169.2 -$190.9 -$169.1
-$400
-$300
-$200
-$100
$0
$100
$200
$300
This Year’s General Fund Budget Situation
FY 2016-17
General Fund Revenue
Relative to 6.5 percent Reserve
Published
December
After
Supplementals March
Source: Legislative Council Staff and Joint Budget Committee Staff.
![Page 17: March 2017 Legislative Council Staff Economic and …...FY 2016-17 to FY 2017-18 $538.9 million $78.5 million-$76.5 million $264.1 million *Assumes $169.2 million FY 2016-17 shortfall](https://reader034.vdocuments.us/reader034/viewer/2022042307/5ed3a2e018dc2351871e472b/html5/thumbnails/17.jpg)
17
$215.7 $237.5 $254.2
$0
$50
$100
$150
$200
$250
$300
December Supplemental March
Next Year’s General Fund Budget Situation
FY 2017-18
General Fund Revenue
Relative to Baseline Expenditures
Published
December
After
Supplementals March
Source: Legislative Council Staff and Joint Budget Committee Staff.
![Page 18: March 2017 Legislative Council Staff Economic and …...FY 2016-17 to FY 2017-18 $538.9 million $78.5 million-$76.5 million $264.1 million *Assumes $169.2 million FY 2016-17 shortfall](https://reader034.vdocuments.us/reader034/viewer/2022042307/5ed3a2e018dc2351871e472b/html5/thumbnails/18.jpg)
18
Revenue Available for
Other Obligations
Refill Reserve to 6.5%*
Other Constitutional Spending
Set Aside for TABOR Refund
Capital Cons. & Transportation
Other Statutory Spending
-$400
-$200
$0
$200
$400
$600
$800
$169.1 million*
$254.2 million
New Revenue New Obligations
Change in Revenue & Obligations FY 2016-17 to FY 2017-18
$538.9 million
-$78.5 million
-$76.5 million
$264.1 million
*Assumes $169.2 million FY 2016-17 shortfall is addressed by reducing the reserve and no change in operating
appropriations between FT 2016-17 and FY 2017-18.