(The Center Square) – Lawmakers tasked with determining Colorado’s state budget are looking at a $1.5 billion deficit following a pair of economic forecasts presented on Thursday.
Both the Legislative Council Staff and the Governor’s Office of State Planning and Budgeting presented their respective quarterly forecasts to the General Assembly’s Joint Budget Committee. They cited economic growth but elevated risks from tariffs and the ongoing conflict in Iran, among other issues.
The LCS projects general fund revenue at $16.5 billion in fiscal year 2025-26, but that’s downgraded by $354 million from the staff’s last forecast in December. LCS also projects revenue to fall short of the Taxpayer’s Bill of Rights’ Referendum C cap by over $914 million. Revenue above the cap must be refunded to taxpayers under the law.
Meanwhile, OSPB projects $17 billion in general fund revenue for the fiscal year, which is an increase of almost $50 million from the December forecast. That revision is “largely due to higher actual income revenue collections,” the governor’s agency said. The office forecasts revenue will be $229 million under TABOR’s cap for the fiscal year.
“Relative to the December forecast, we downgraded our current year revenue forecast by $350 million,” LCS Chief Economist Greg Sobetski told the Joint Budget Committee. “That’s in the big scheme of things a relatively minor adjustment to the revenue forecast. But because we’re below the TABOR limit, that $350 million revision to the revenue forecast is a dollar-for-dollar $350 million hit to our expectations for the budget.”
Sobetski said the downgrade is attributed to corporate income taxes, with payments from the previous quarter coming in under what was anticipated.
OSPB Director Mark Ferrandino acknowledged that “from a budget perspective, there’s some significant differences, but in the grand scheme between [OSPB] and [Legislative Council], you’re talking a few percentage points in revenue in the current year and very similar actually next year and the year after.”
The forecast means lawmakers on the budget committee must make cuts to spending as the state’s shortfall stands at $1.5 billion.
Joint Budget Committee Vice Chair Sen. Jeff Bridges, D-Greenwood Village, called the budget forecasts “nothing short of devastating” and warned of cuts in a written statement.
“Between rising prices, federal cuts to essential programs, and global uncertainty, the state budget is getting squeezed from all sides,” he said. “We’re working on solutions to modernize our budget and give the state more flexibility to weather economic ups and downs while better funding core priorities like education. But the reality right now is that our budget constraints mean painful cuts. A dollar for one area is a dollar less for another, and under the TABOR cap there simply isn’t enough room to do it all.”
In a written statement, Gov. Jared Polis praised the state economy’s resiliency while expressing concerns about a potential recession.
“Today’s forecast shows that despite increased costs on families from Trump’s illegal tariffs, international instability, and supply chain impacts from the war in Iran, Colorado remains resilient,” the Democratic governor said. “Our economy has not recovered from the cost of disastrous tariff taxes, and the chance of a recession remains concerning. However, our balanced budget proposal ensures our reserves remain healthy to protect the state from the growing chance of a future economic downturn.”
