Forecasts diverge on TABOR surplus after surprise severance‑tax refunds; JBC urged to weigh tight options

Chief economist Greg Sobetsky told the Joint Budget Committee that Legislative Council Staff revised down general‑fund and cash‑fund revenue forecasts in the March 2025 presentation, driven by weaker final tax payments and a string of large severance‑tax refunds.

"We are revising down our expectations for revenue, attendant with tax collection expectations for the current fiscal year," Sobetsky said, opening a detailed review of revenue, TABOR refunds and budget scenarios.

What changed: LCS said severance‑tax activity this fiscal year reflected a large number of assessed‑value (AV) credits claimed by oil and gas producers for property taxes paid in 2024. Those AV credits, Sobetsky said, are rooted in high oil prices in 2022 that produced elevated assessed values, and they produced an unusually large series of refunds in early 2025. LCS reported a record monthly refund in February tied to those claims and revised severance tax collections substantially downward for FY 2024‑25; the staff presented a severance‑tax collection estimate of $18.5 million for that fiscal year but warned the number could be lower or even negative depending on final filings.

TABOR and property‑tax reimbursements: LCS reported the state faces roughly $212 million in obligations for two property‑tax reimbursement mechanisms (the homestead exemption for seniors, disabled veterans and surviving spouses, and a portability provision in Senate Bill 24‑111). With an LCS estimate of only about $108 million in TABOR surplus for FY 2024‑25, Sobetsky said the result would leave roughly $104 million in net obligations that would fall to the FY 2025‑26 general‑fund budget unless later revenue revisions reverse the gap.

Two agencies' different pictures: OSPB presented a forecast that was similar in many respects but arrived at a larger current‑year TABOR surplus. Will Mixon of OSPB said the office’s March estimate placed the FY 2024‑25 TABOR surplus at roughly $302 million. Mixon attributed most of the interagency difference to competing assumptions about individual income tax filings, large monthly severance refunds and smaller differences in cash‑fund receipts.

"Between these kind of major revenue streams we have about $200 million more in revenue expected for the current year," Mixon said when describing OSPB's totals and contrasting them with LCS.

Budget scenarios and timing: Sobetsky presented two policy scenarios the JBC typically uses. Scenario A is the baseline that carries current‑law appropriations forward; LCS showed about $320 million available under that baseline for FY 2025‑26 after accounting for the homestead obligations and other current‑law items. Scenario B incorporated committee actions recorded through March 13–16 and showed larger near‑term spending needs (LCS said roughly $692 million in added appropriations in FY 2025‑26 above the baseline, including higher‑education, K‑12, judicial and other items).

Tax credits and triggers: LCS reviewed two recent tax credits enacted in the 2024 session: the family affordability tax credit and an expansion of the state earned‑income tax credit (identified in the presentation as House Bill 20 4‑13 11 and House Bill 20 4‑11 34 in the transcript). Sobetsky and other staff explained the credits' availability is determined by December forecasts. They emphasized that under current law the credits for tax year 2025 have been triggered by the December forecast and are available; applicability for tax year 2026 will be determined by the December 2025 forecast.

Committee questions: Members repeatedly asked whether programs created in recent bills include a fiscal trigger and whether the homestead portability bill or credits could be paused if TABOR surplus were insufficient. LCS and OSPB staff answered that the homestead reimbursement is a constitutional obligation to reimburse local governments and cannot simply be withheld; the family affordability and EITC increments are set by statutory triggers based on the December forecast and can phase down or be unavailable if the compound average annual growth measure is too low.

OSPB and LCS cautioned that March and April tax‑filing data and the June personal‑income final filings will materially change these outcomes. OSPB's Mixon said the office's March revision cut general fund revenue by about $345 million in the current fiscal year, and that combined downward revisions to major lines (severance, individual income, sales and use, and corporate income taxes) accounted for most of the change.

What the committee faces: Both agencies warned the margins are tight. Sobetsky said the risk that the FY 2024‑25 surplus will not fully fund the homestead and portability reimbursements is real and that committee members should plan for that possibility. OSPB noted its budget submission includes additional policy choices (for example, proposals on severance spending and interest sweeps) that would change net available funds, and said officials can present decision items if the committee wants to act.

Ending: Members asked to see reconciled comparisons between the agencies' tables. Director Ferrendino and staff said they would supply reconciled figures; both LCS and OSPB urged lawmakers to treat the next months' filings as decisive inputs for final budget balancing.