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OSPB presents alternate March forecast, sees smaller TABOR shortfall and stresses filing'season uncertainty
Summary
The Office of State Planning and Budgeting told the Joint Budget Committee it projects a smaller TABOR shortfall for FY26 than LCS and attributed much of the difference to timing assumptions about refunds and cash with returns; OSPB warned that March'April filings will decide the outcome.
Mark Ferrendino, director of the Office of State Planning and Budgeting, and his team presented OSPB's March economic and revenue forecast to the Joint Budget Committee on March 19 and described an outlook that is similar in the medium term but differs importantly in the near'term revenue estimate.
OSPB's takeaway: the agency projects Colorado will be $229 million below the TABOR cap for FY26 (an upward revision of about $79 million from their December submission), while projecting a return above the cap in FY27 (their packet showed an expected $711 million surplus in FY27). Deputy Director Bryce Cook said OSPB's economic view is modestly stronger in the near term than LCS'noting higher measured GDP and some productivity gains'but also flagged jobless growth and downside risk from geopolitics and oil prices.
A key point of disagreement with LCS is timing and magnitude of refunds and cash with returns for tax year 2025 filing season. OSPB told the panel it is penciling in about 20% year'over'year growth in Colorado refunds over the February'June window and a roughly 13.4% decline in cash due with returns for the same period; those timing assumptions and estimated payments drive a roughly $480'$481 million difference between the two agencies' current'year general fund forecasts, OSPB staff said.
OSPB also walked members through revenue stream details: a revised but still modest outlook for sales and use tax collections, a projected uptick in severance (oil and gas) revenues while acknowledging oil prices are volatile, and a set of cash fund and excise tax assumptions that underpin their budget presentation. On Healthy School Meals for All program revenue, OSPB projected higher receipts than earlier estimates and flagged the potential TABOR refund/retain decision should receipts exceed the statutory limit.
Budget implications and policy notes: Ferrendino and colleagues presented a budget path that would be balanced if the committee accepted their assumptions (OSPB noted their model assumes a 13% reserve in the near term proposal the administration had discussed). The director highlighted several policy choices that would materially affect balance: Pinnacle conversion, Medicaid caseload/utilization growth, and transfers or sweeps of severance and cash fund revenues.
Ending: OSPB stressed that March and April tax'filing activity will determine whether the state closes to the TABOR cap or remains below it, and urged the committee to view the March forecast as one of two competing, plausible views pending June filing'season data.
