By Peter Marcus, DENVER DAILY NEWS
This just in — Colorado’s economy stinks and it’s not getting better anytime soon.
Most of us have accepted the reality of a crumbling economy — especially lawmakers looking to close a $384 million budget shortfall for next year. But those who believe the federal economic stimulus package and state programs are going to quickly save the state from the unbearable grips of recession — you’d better think again, say economists.
“It looks like the most severe decreases in economic activity have already occurred, but we don’t expect the economy is going to begin recovering again until sometime in early 2010, and I don’t think the recovery is going to be very strong,” said Natalie Mullis, the Colorado Legislature’s chief economist. “I think it’s going to be a very subtle recovery. We’ll probably bounce along the bottom for a while before we start really growing again, and even then at modest rates.”
Lawmakers recently needed to come up with an additional $249 million to balance this year’s budget, which is resulting in their starting next year with a $384 million shortfall. Gov. Bill Ritter has asked departments to slash spending by 10 percent. He also said more furloughs and other personnel reductions will be necessary.
The shortfall comes from a decrease in income and sales taxes as a result of the economic downturn.
Retail sales — which is how the state collects most of its revenue — is expected to be down 7.8 percent this year, with a modest uptick of 2.1 percent in 2010, said Mullis. But even with the slight improvement in 2010, retail trade sales are only expected to be at $70.4 billion, still significantly less than the $74.8 billion experienced in 2008.
The forecast released on June 22nd also states that employment is expected to fall by 3.6 percent in 2009, and then another four-tenths of a percentage in 2010. Mullis expects that by 2010, the state will see a modest increase of 1 percent in the employment category.
The jobless rate nationally climbed to a 26-year high of 9.5 percent, and in Colorado that rate is at 7.6 percent. Analysts, however, say the rate could be closer to 16.5 percent when taking into account people who are taking furlough days, have had their hours, salaries and bonuses cut, and have lost good jobs for ones that pay much less and offer less benefits.
“When you look at all that kind of stuff, and when you’re worried about sales tax and income tax revenue, I think it’s perfectly valid to say that it’s going to be a couple of years before consumers really start spending again, incomes start going up, and the tax revenues start rolling into the state,” said Tucker Hart Adams, an economist and president of the Colorado Springs-based Adams Group, Inc. “I think we’ve dodged the bullet on total implosion of the financial system, they’ve poured huge amounts of money into it, and that’s calmed down. But it’s going to get worse for another quarter or two, and then it’s not going to get better very fast.”
Mullis also points to the number of new housing permits being issues statewide. In 2005, 46,300 permits were issued; in 2006, 39,300 permits were issued; in 2007, 30,400. But this year, the forecast states that only around 8,300 new home permits will be issued — down about 56 percent from where it should be, said Mullis.
Next year may see a slight increase, with the forecast calling for 11,300 permits to be issued in 2010 and 25,600 in 2011.
Mullis points out that new housing permits are a good indicator of where the economy is headed because when people move into new houses, they become aggressive consumers, purchasing everything from window shades to furniture.
Meanwhile, Adams does not believe that the $787 billion economic stimulus package and similar state programs will help the state crawl out of the darkness anytime soon. She says that it may take more than two years before the state sees solid results.
“Basically, no stimulus money has come in that’s doing anything,” said Adams. “It’s not that the money hasn’t been authorized, it’s in terms of all of the endless red tape and the amount of paper that has to be filled out for every program.”
“We’ve been through the emergency stuff,” she continued. “Now we’ve got the hard part.”
Distributed by Colorado Capitol Reporters
