Colorado's budget forecast worsens as uncertainty grows
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Colorado's economic outlook is darkening as federal policies cast a shadow over the state's financial future, according to two fresh forecasts from legislative economists and the governor's office.
Why it matters: The state budget forecasts, released each March, set the foundation for Colorado's annual spending plan.
- As lawmakers grapple with a $1.2 billion shortfall, more difficult decisions over spending and cuts to critical programs loom.
The big picture: A perfect storm of economic pressures is at play. That includes projections of:
- Lower sales tax revenues
- Rising unemployment
- Market volatility
- Falling consumer confidence
- Higher inflation expectations, partly fueled by Trump-era tariffs
- Mounting fears of a recession
State of play: The latest legislative economic forecast, published Monday, downgrades Colorado's general fund revenue outlook — shrinking the 2026 TABOR surplus, and possibly eliminating it entirely.
- That could mean no TABOR refunds for taxpayers next year and leave the state short on funds to cover homestead property tax exemptions for seniors and disabled veterans.
- The forecast lowers the current budget revenue by $52 million (-0.3%) compared to previous projections.
Yes, but: It's not all bad news. Both forecasts project the General Fund balance to be slightly higher — ranging from $16 million to $79 million — for spending in the 2025-26 budget, which starts July 1.
- "The general fund is a tricky thing," said Greg Sobetski, the state's chief legislative economist. "It doesn't always move in the same way as the economy."
The intrigue: While both forecasts show declining revenues and a shrinking TABOR surplus, they differ in the near-term TABOR surplus projection.
- Gov. Jared Polis' office projects a $302 million surplus. Legislative economists peg it at just $108 million.
- The roughly $200 million discrepancy is driven largely by differing expectations for individual income tax revenue this fiscal year.
The bottom line: With federal policies and funding threats in flux, Colorado's financial future remains unpredictable.
- "The word of the day is uncertainty," Colorado budget director Mark Ferrandino said.