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Colorado schools and colleges got an early Christmas gift Tuesday as state economists revealed that proposed budget cuts can be eliminated because revenues are higher than originally thought.
The higher revenues prompted Gov. John Hickenlooper to propose restoring the $89 million K-12 education he previously said needed to be cut to balance next year's budget.
He is also recommending that state colleges and universities take a smaller hit than he originally proposed -- $30 million instead of $60 million. About $25 million of the funding proposed to be restored to higher education would go to student financial aid.
Hickenlooper's economic team said that's possible because of employment gains, growth in manufacturing and the oil and gas industries as well as increases in capital-gains taxes and sales taxes mean the state will take in $231 million more revenue than its economists had predicted back in September -- a 3.2 percent increase.
"I didn't know it was in your job description to be Santa's helper this year," Republican Sen. Kent Lambert told Hickenlooper's budget director, Henry Sobanet during a presentation to the Joint Budget Committee.
"We've been waiting for this kind of good news," House Democratic Leader Mark Ferrandino said in a statement.
Sobanet cautioned that the state is still in a "modest recovery," although the state's economic picture has brightened somewhat. "We're seeing activity that was simply just not evident during the summer, which was really full of a lot of turbulence and uncertainly," he said.
Hickenlooper said even with the good news Colorado officials must be "prudent and cautious" with spending. But he said it was a good day to talk about the budget.
"Henry got to go to the JBC with a little bit of holiday cheer," he said.
Legislative economists also presented their quarterly predictions for the state economy and tax revenue. Although their year-end revenue projection of $148 million was lower than the governor's staff, Sobanet said Hickenlooper's "requests can be accommodated through either (revenue) scenario."
Natalie Mullis, the chief economist for the nonpartisan Legislative Council, said September data had shown that employment was stalling and previously told lawmakers there was a high risk of going into a recession.
"I am very grateful to tell you we did not go into a recession," she said, but noted that the state's economy is growing at a slow rate. She said Colorado employment is estimated to grow by 1.4 percent this year and 1 percent next year.
"This growth will be restrained by continued imbalances in our economy, a hangover from the financial crisis," Mullis said. She said there will still likely be tight credit and high lending standards and that the housing and commercial real estate sectors are still suffering.
The Colorado Department of Labor and Employment said last month that state unemployment dropped slightly in October with the addition of 8,000 new jobs. The state's unemployment rate declined two-tenths of a percentage point to 8.1 percent in October. On Tuesday, the state labor department said Colorado's unemployment rate declined slightly to 8 percent in November. The national unemployment rate is 8.6 percent.
With the higher revenue forecast, Hickenlooper is also proposing setting aside $17.5 million for a tax cut for low-income seniors as part of the "homestead exemption," which lets homeowners 65 years and older deduct 50 percent of the first $200,000 of property value on their taxes. Hickenlooper had previously proposed allocating $9.5 million for the neediest seniors.
Republicans, however, have argued that the state should restore the full $98.6 million of the tax credit scheduled to be reinstated next year. Lawmakers from both parties have eliminated and postponed the tax break in the past to help balance the budget and Hickenlooper has said the state can't afford to bring back the full amount yet.
"While I am disappointed that Gov. Hickenlooper continues to propose a property tax increase on Colorado's seniors most in need, Colorado's slow economic recovery gives us reason for optimism," said Republican House Leader Amy Stephens.