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Colorado lawmakers will need to close a nearly $1.5 billion gap in the state budget in the coming weeks, hundreds of millions of dollars more than they expected, according to a new nonpartisan economic analysis.
Legislative Council Staff and the Governor’s Office of State Planning and Budgeting presented their quarterly economic forecast, which covers revenue estimates and an overall economic outlook, to the Legislature’s six-member Joint Budget Committee on Thursday. It is the last forecast the bipartisan committee has before it finalizes a proposal for the 2026-2027 fiscal year budget. The original plan was to introduce the budget legislation at the end of this month.
The Legislature is constitutionally required to pass a balanced budget each year.
“Today’s economic forecast is a stark reminder that despite the cuts we’ve already made, we still need to close a staggering budget deficit of more than $1 billion,” said JBC Chair and State Representative Emily Sirota, a Denver Democrat, said in a statement. “I didn’t run for office to slash essential programs that hardworking Coloradans depend on. There is only so much money we can spend under the fiscal constraints of TABOR, which means every decision requires a painful trade-off.”
TABOR refers to the Taxpayer’s Bill of Rights, the constitutional amendment that caps government growth and spending based on a formula that limits increases according to annual population growth and inflation. The state is required to return any revenue collected over that cap back to taxpayers. Democrats, who hold majorities in both chambers of the Legislature, blame TABOR for longterm budget woes, chronic underfunding for the state’s public education system and other essential services, and an inability to keep up with ballooning Medicaid costs.
Revenue predictions for the current fiscal year sit below the TABOR cap by about $900 million per LCS and $229 million per OSPB. A surplus of about $276 million is expected next fiscal year, according to LCS, which will be enough to fund a senior property tax benefit.
“We continue to be in an environment where any change to our revenue forecast, or revenue that performs above or below our forecast expectations, will cause direct dollar-for-dollar impacts on the budget outlook,” said Greg Sobetski with LCS.
Medicaid Likely to Be Cut
The projected budget deficit increased by about $650 million over the figure that was presented in December. The increase is due to lower revenue projections — mostly from corporate income taxes, Sobetski said, which took a bigger revenue hit than initially predicated because of federal tax cuts passed last summer.
To close the deficit without making any more spending cuts, the state would be left with a 6.5 percent reserve, less than half of the 15 percent reserve ideal. Last year, lawmakers approved a balanced budget that cut spending for some pilot programs and shifted transportation funding obligations, but there is nearly no more fat to trim in the budget this year. That means programs like Medicaid are likely going to see reductions.
“We’re doing our best to minimize harm, but the truth is it’s impossible to cut hundreds of millions of dollars year after year without impacting the priorities that Coloradans care about and core services for vulnerable people,” Senator Judy Amabile, a Boulder Democrat, said in a statement.
OSPB had a higher projection for state revenue collection this year, because the office expects more individual income tax revenue before the filing deadline on April 15.
“Individual income taxes are certainly the most important revenue stream,” OSPB Manager Will Mixon said. “It comprises around 60 percent of general fund revenue, more than half of all TABOR revenue, and there are still significant amounts outstanding with March and April tax returns.”
This story was originally published by Colorado Newsline. Colorado Newsline is part of States Newsroom, a nonprofit news network supported by grants and a coalition of donors as a 501c(3) public charity.
