Watchdog Observations on Colorado Growth
A new national ranking of the best-managed states places Colorado in the top 10, but those who closely follow the state’s economy say growth issues could make governing more of a challenge in the years ahead.
The study by the website Wall Street 24/7 ranked Colorado No. 7 on its list of best-run states. Among the 2017 statistics examined in the analysis were the state’s 2.8 percent jobless rate, the fourth lowest in the nation; annual gross domestic product growth of 2.7 percent, the eighth best showing nationwide; and a poverty rate of 10.3 percent, which is about half that of Louisiana’s.
But the ranking also spotlighted some less positive trends, including how public pensions were only 46 percent funded and how home prices in the fast-growing state have outpaced those in nearly every other state.
“Housing prices are a big concern, and they have been for several years,” Richard Wobbekind, executive director of the Business Research Division at the University of Colorado Boulder, told Watchdog.org.
Colorado has had the fastest growing home prices in the nation over the past decade, a trend that’s driven by net migration of workers into the state and an overall deficit in the state’s housing stock, according to Wobbekind. Rising home prices can eventually make the state less appealing to skilled workers and thus become a drag on economic growth, he said.
Though Wobbekind agreed that Colorado is a well-run state, he also pointed to looming challenges the state faces. These include the Taxpayer Bill of Rights (TABOR), a state constitutional amendment that limits spending and revenue growth.
Although TABOR has kept state spending in check, it has also reduced the state’s options for coping with growing pains, which are concentrated in the region from Fort Collins down to Colorado Springs, he said. The growth in that area has placed tremendous stress on the state’s infrastructure, which translates to snarling traffic on major arteries.
“I think that managing growth has been a bit of a challenge,” Wobbekind said.
Having a skilled labor force, however, has been a boon to the state, helping to drive down unemployment to under 3 percent, he said. A high percentage of workers are college graduates, something that attracts high-tech jobs to Colorado, according to Wobbekind.
“Part of the situation there is that we have a very highly educated state,” he said, adding that state officials need to continue to provide avenues for people to get apprenticeships and specialized training.
Despite the numbers of highly educated workers in the state, Colorado’s high school graduation rate is only 20th in the nation, according to Wobbekind. So ensuring that all the state’s residents acquire additional skills would ease problems associated with a tight labor market, he said.
Wobbekind is also concerned about the state’s pension debt load. Though the underfunding won’t cause any immediate problems, that could change over the long haul, he said.
“The budgetary situation, in terms of pensions, entitlements and health care, is going to be incredible for the long-term economic growth,” Wobbekind said.
Joshua Sharf, a fiscal policy analyst at the Independence Institute in Denver, sees dangers ahead if Gov.-elect Jared Polis and the new legislature turn their back on some of the policies that have made Colorado successful. That would include whittling down the provisions of the TABOR law, which would lead to poorer governance and management, Sharf said.
“Our concern is that politicians are perpetually hostile to limits on their power, especially the taxing power,” he told Watchdog.org.
Infrastructure funding remains a top concern as everyday traffic problems mount in Denver and traffic delays increase on Interstate 70, Sharf said.
“Unless we deal with highway traffic issues … it’s going to be increasingly difficult for people to live here,” he said.
At the same time, rising housing prices have contributed to homeless problems as the cost of homes has shot up faster than incomes, according to Sharf. Several counties in the Front Range region have agreed to attempt to limit development through existing corridors, he said, and that will further drive up the cost of housing in the state.
“We have not done a particularly good job of managing growth thus far,” Sharf said.
He also questioned state policies that require utilities such as Xcel Energy to generate a certain percentage of their power from renewables, since that could increase the cost of utility services.
“That’s going to lower the standard of living for many people,” Sharf said.
Kelly Moye, spokeswoman for the Colorado Association of Realtors, agreed that wages in the state were not keeping pace with rising housing costs. Eventually, high housing prices can be a disincentive for people looking to relocate to Colorado – and also a disincentive for businesses to move in, Moye said.
Colorado housing prices have been steadily going up, but not at double-digit rates, she said.
“If you were to average it all, it would be about 8 percent (annually) for the last five years, so that’s about 40 percent,” she told Watchdog.org.
A median-price single-family home in Denver now costs $475,000, according to Moye, and a typical couple in the city makes about $95,000 in household income annually.
“We’re right at the limit that a typical couple can afford to buy a typical home,” she said.
But some progress has been made to help increase the housing stock in the state, according to Moye. Groups such as the Association of Realtors successfully pressed for changes to a Colorado construction defect law that had stalled the building of condos due to lawsuits, she said.