Colorado's Money Woes: What's Next?

Colorado is bracing for another challenging fiscal year, with lawmakers preparing for significant budget cuts.

Income Drop and Spending Cuts

• Expected Income Drop: The state's income is projected to decline, necessitating substantial spending cuts.
• Budget Cuts: Lawmakers will need to cut spending by approximately $850 million.
• Previous Cuts: The state has already cut $1.2 billion this year and an additional $783 million over the summer due to changes in federal tax laws.

Economic Challenges

• General Fund: The state's primary source of income, the general fund, is expected to have less revenue.
• Federal Shutdown Impact: A 43-day federal government shutdown hindered economic data collection.
• Job Market: Available data indicates a cooling job market and significant wage growth disparity between lower- and higher-income earners.

TABOR Law Constraints

• Taxpayer Refunds: The Taxpayer's Bill of Rights (TABOR) law limits state revenue and spending.
• Refunds: Taxpayers will receive refunds in 2026 but not in 2027.
• Tax Credits: Certain tax credits will not be available in 2026 and 2027.

Medicaid Spending

• Major Expenditure: Medicaid accounts for about one-third of the state's spending.
• Governor's Plan: The governor proposes reducing Medicaid spending by nearly $300 million.
• Criticism: Both Democrats and Republicans criticize the plan, arguing it will harm low-income families.
• Governor's Stance: The governor insists the cuts are necessary for the program's sustainability.

Budget Requirements and Hiring Freeze

• Deficit-Free Budget: The state constitution mandates a deficit-free budget, requiring spending reductions next year.
• Hiring Freeze: The governor has imposed a state hiring freeze through the end of February.