Navigating the Economy: Short and Long Term Considerations for Local Government November 18, 2009 CGFOA Annual Conference

PREVIOUS RESEARCH IDENTIFIED UNDERLYING STRUCTURAL DYNAMICS

Municipal Finance in Colorado Sales tax dependent Sales tax sensitive to Structural changes to the demographics in the state Structural changes in the economy Perfect Storm?

Colorado is a Baby Boomer State In 2000 Colorado 4 th lowest in US for population over 65 Colorado 6 th highest in US in percentage of “Baby Boomers” 45% of Colorado’s workforce is a “Baby Boomer” (Census 2000) The “Law” of 1 for 2 In 2015, every15 minutes the natural increase (births – deaths) in Colorado will be 1 and the number of people turning 65 will be 2 ( State Demographer’s Office)

Implications of Being a Baby Boomer State Baby Boomers born 1946 – 1964 In 2010, first Boomers will reach 65 Between 2000 and 2020 Colorado’s population 55 – 64 will grow at 5.9% per year US population 55 – 64 will grow 3.9% per year Total population in Colorado will grow 1.7% per year State 55-64ers will more than double; 342,000 to 745,000 By 2030, Colorado’s population 65+ will be 3x that in 2000 Growing from 400,000 to 1.2 million

Colorado Population by Age: 1970 Source: State Demographer’s Office

Colorado Population by Age: 1980 Source: State Demographer’s Office

Colorado Population by Age: 1990 Source: State Demographer’s Office

Colorado Population by Age: 2000 Source: State Demographer’s Office

Colorado Population by Age: 2010 Source: State Demographer’s Office

Colorado Population by Age: 2020 Source: State Demographer’s Office

Colorado Population by Age: 2030 Source: State Demographer’s Office

Demographics and Their Impact on Funding Government Aging of the Baby Boomers affects Age of head of householder Household size Number of workers per household Each of these demographics affects taxable spending Income demographic may offset age

Why Does Aging Population Matter?

Why Does Income Matter?

Boulder Trend: Age of Householder

The Impact of Age

Countering the Claim that Baby Boomers are Different Will still likely retire on fixed income Level may be higher Adequately saved for retirement? Living longer

Boulder Trend: Income

The Impact of Income: Higher Income HHs Spend More Absolutely…

…Yet Not as a Percent of Income

Implications in Boulder

FAST FORWARD ONE YEAR THE RECESSION HAS NOT CHANGED THE UNDERLYING DYNAMICS…

Coloradans are Still Aging

And Older Households Still Projected to Spend Less

Baby Boomers Less Likely to be Different Recession impacts Loss of retirement assets Tighter credit Less home equity Almost 50% of all households projected to be underwater by 2011

Key Economic Trends Inflation rates across sectors of the economy are not constant Projected rate on taxable base fails to keep pace with rate on key gov’t expenditures Retail sales tax as major revenue source will fund proportionally less of the base budget Purchases in US migrating from goods to services

Inflation Dynamics Still Unfavorable to Local Government

Consumer Behavior Remains Unfavorable to Sales Tax

The Shift to Services is Projected to Exacerbate

…BUT RECESSION HAS LIKELY EXACERBATED UNDERLYING DYNAMICS

What Will a Consumer “Lite” Recovery Look Like?

Relative to Past, Trend Forecasts Not Promising

Consumption Realignment

HOW ARE COLORADO’S MUNICIPALITIES RESPONDING? An Economic Crisis is a Terrible Thing to Waste

Effective Responses: The National Research Instead of…Consider… Reacting to the short termTaking the long term view Making across the board or arbitrary cuts Making strategic cuts that preserve core mission and/or cutting underperforming programs Making decisions at the top of organizations Including the creative energy of all staff as well as the community in managing the problem Expecting to finance government in the historical way Exploring innovative manners for financing government. Managing the expenditure side only Managing the revenue side equally, to the extent possible Operating with the same business modelUsing hard times to pursue organizational change or shed outdated business practices

How are Colorado’s Local Governments Responding? PrincipleColorado Municipal Initiative Engage both employees and citizens in identifying the core mission of the organization and structure future budgets around that core mission Boulder and Durango’s extensive outreach to citizens and employees Explore and implement innovate manners of funding public services Aurora’s proposal for a GID for the library system Explore and implement alternative, more efficient means of service delivery Regional delivery of services in the San Luis Valley

In Summary Recession can’t be ignored Underlying dynamics remain Consensus for “New Normal” Necessity begets innovation Innovative responses taking place across the state

Contact Information Phyllis Resnick R 2 Analysis