- Associated Press - Friday, March 17, 2017

DENVER (AP) - Colorado’s economy is growing, state revenues are too, and that paradoxically means a gap lawmakers would have to close if they adopted Gov. John Hickenlooper’s proposed budget is close to $700 million, his chief budget writer reported Friday.

That projection was $500 million when Hickenlooper released his proposed $28.5 billion budget last year for the fiscal year that begins this July 1.

Lawmakers start crafting their own budget next week.

Henry Sobanet, director of the Office of State Budgeting and Planning, told lawmakers that Colorado is coming out of a slow-growth period caused largely by depressed oil and gas prices. Consequently, state revenues are expected to grow by 4 percent this year and more than 5 percent in fiscal year 2017-18, he said.

That’s great news - except that constitutionally-mandated tax rebates, transportation, capital construction, educational, Medicaid and other spending have created a pending $697 million gap in the governor’s proposed budget, Sobanet reported.

Lawmakers will use the quarterly economic forecasts presented Friday by Sobanet and by Natalie Mullis, chief economist of the Legislative Council Staff, to craft a balanced budget during the Legislative session that ends in May.

“We have a healthy, strong economy. This is good for the people of Colorado,” said Republican Sen. Kevin Lundberg. “But for the state of Colorado, it’s a bit of a wake-up call. Even in good times, we’re spending more than we have to work with.”

Under the forecasts, the government would have to issue between $135 million and $264 million in taxpayer refunds next fiscal year. The Taxpayer’s Bill of Rights requires refunds whenever revenues surpass a cap that is based on population growth and inflation.

In recent years, lawmakers have been able to avoid refunds through a series of maneuvers that, even then, left Colorado’s K-12 schools with an accumulated $800 million shortfall in spending.

Mullis said the state will have $538 million more to spend next year - but that that figure would be nearly halved by the spending mandates and a requirement that a rainy-day general fund reserve by replenished.

Moreover, officials won’t know until April how much income from personal property taxes will be reduced under another legal mandate to cut them because commercial property taxes have slumped in recent years.

To close the budget gap, Hickenlooper has proposed reducing payments from hospitals; not fully funding K-12 education; cutting transportation spending increases; and keeping severance taxes normally used to compensate local governments for mineral extraction.

“In Colorado, unlike many other states, we are required by law to deliver a balanced budget on schedule, so we have no choice but to make this work,” said Republican Sen. Kent Lambert, chairman of the Joint Budget Committee.

Friday’s forecasts said that growth, mainly in metropolitan Fort Collins, Denver and Colorado Springs, is being restrained by tight labor and housing markets, rising federal interest rates and an aging population that spends less and generates less tax revenue. Low agricultural prices mean Colorado’s rural areas continue to struggle.

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James Anderson can be reached on Twitter at https://www.twitter.com/jandersonap

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