Colorado lawmakers are projected to have up to $320 million more to budget next year.
That may sound like a lot, but the money will quickly be drained by year-over-year increases on the state’s current spending levels and by upholding promises about increasing education funding. Economic activity is slowing, and that’s expected to affect the amount of money available to pay for property tax breaks for seniors. And don’t forget the money the state plans to pay to honor a $350 million law enforcement funding ballot measure passed by voters last year.
The Republican budget bill being debated in Congress would cause problems that eclipse all of those other drags on state finances. The governor’s office believes that measure could erase much, if not all, of the $320 million in one sweep.
If there’s a recession, all bets are off.
In the best case scenario, the legislature is projected to face a $700 million hole next year if it wants to maintain its current spending plans. But that’s assuming there is no recession and that the current version of the Republican federal spending plan doesn’t pass, according to the nonpartisan Legislative Council Staff and the Governor’s Office of State Planning and Budgeting. The agencies provided their quarterly economic and tax revenue forecasts to the Joint Budget Committee on Wednesday.
“Trump’s disastrous tariff taxes continue to wreak havoc on our economy and the erratic trade policy is projected to continue hurting our economy, slowing job growth and increasing chances of a recession,” Gov. Jared Polis said in a written statement. “These national circumstances present a difficult economic environment for the state.”
Gov. Jared Polis prepares to sign bills into law at the governor’s mansion in downtown Denver on Tuesday, June 3, 2025. (Jesse Paul, The Colorado Sun)Elizabeth Ramey, principal economist for Legislative Council Staff, said Colorado is lagging behind national economic indicators, like job growth.
“We are still anticipating economic growth but at a slower pace,” she said.
The news comes after the legislature this year passed a $43.9 billion spending plan for the fiscal year beginning July 1 that cut funding for transportation projects, local governments and dozens of social programs in order to keep up with the rising costs of health care and education. In all, the JBC this year had to cut spending plans by about $1.2 billion to balance the state budget.
The forecasts presented to the JBC on Wednesday will mostly affect budgeting for the 2026-27 fiscal year, which begins July 1, 2027. The budget writing process begins in November and ends in April, meaning the predictions offered Wednesday will be well out of date by then.
If Republicans in Congress pass a funding bill that makes cuts to Medicaid, or the economy tanks in the coming months and tax revenue drops precipitously, the legislature will have to return to the Capitol for a special session to make changes to the existing budget.
The governor’s office estimates that the GOP federal funding bill would cost the state up to $650 million to support Medicaid and the Supplemental Nutrition Assistance Program. The tax changes in the measure could cause an additional $600 million annual hit to state tax revenue.
“That could really wreak havoc with where we are from a budget perspective,” said Mark Ferrandino, the governor’s budget chief.
The federal budget measure remains in flux. Republicans in the House and Senate are in disagreement about key parts of the legislation.
A recession could cause an additional $1.6 billion hole in the state budget, the governor’s office estimates. Combined, that’s a roughly $2.6 billion deficit, more than the state has in its reserves.
The JBC knew it would be bad. But maybe not this bad.
Lawmakers knew more budget trouble was coming after this year. But the situation may end up much worse than they expected.
One thing that appeared to catch the JBC off guard Wednesday was the effect of the slowing economy on tax breaks.
Both nonpartisan legislative staff and the governor’s office warned that while tax revenue is expected to exceed the Taxpayer’s Bill of Rights cap on government growth and spending over the next few years, it won’t be by that much.
The result is that the legislature may be on the hook for millions to cover property tax breaks for seniors, which would result in cuts to current spending plans and programs.
A smaller TABOR surplus also means Coloradans won’t see an income tax reduction or refund on their taxes.
The Joint Budget Committee meets at the Colorado Capitol complex in Denver on Monday, Jan. 6, 2025. (Jesse Paul, The Colorado Sun)Additionally, the slowing economy is on pace to trigger cuts to or the elimination of tax breaks passed by the legislature over the past two years. The breaks were created with a mechanism that reduces or ends them when the economy isn’t growing fast enough, which is what’s happening now.
Legislative Council Staff announced Wednesday that cuts are coming in 2026 to the state’s electric vehicle, e-bike and heat pump tax credits. They will be halved as a result of the slowing economy.
Workforce, family affordability and earned income tax credits could be reduced if the economy doesn’t improve before September, when the next economic and tax revenue forecasts will be presented to the JBC.
Members of the JBC said they would look at tweaking the tax credits before next year should the legislature be called into a special session. Otherwise, the legislature won’t reconvene until January.
Read More Details
Finally We wish PressBee provided you with enough information of ( Colorado just faced a tough budget year. It’s forecast to get much worse. )
Also on site :