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DENVER, CO – Democratic members of the Joint Budget Committee (JBC) today released the following statements after the Legislative Council Staff (LCS) and the Office of State Planning and Budgeting (OSPB) delivered the March quarterly economic forecasts.
“The Joint Budget Committee faces an extraordinarily challenging budget process this year because of the rationing equation in TABOR. Uncertainty at the federal level also poses very real threats to our work at the state level,” said JBC Chair Jeff Bridges, D-Arapahoe County. “However, unlike Washington, we have combed through the budget to make thoughtful, strategic, and bipartisan cuts. Even tougher decisions lie ahead that will impact everyday services Coloradans rely on. Despite these challenges, we’ll wrap up our work later this week to pass a responsible, balanced budget.”
“Today’s forecast is a reminder that looming trade wars, federal cuts to Medicaid, and sweeping federal layoffs, will significantly harm Colorado’s economy, drive up prices and worsen our budget crisis,” said JBC Member Emily Sirota, D-Denver. “Coloradans are counting on us to responsibly balance our budget, which means we will need to make cuts in places no one wants in order to protect essential services and our most vulnerable community members. Our tight budget condition is the result of increased Medicaid costs and fiscal constraints, and that means we will need to make tradeoffs to deliver on the services Coloradans rely on.”
“This economic forecast highlights the uncertainty driven by federal decision-making and the concerns many Coloradans share about the nation’s economy,” said JBC Member Judy Amabile, D-Boulder. “These challenges compound an already difficult budgeting process that the Joint Budget Committee has been working through and presents new challenges as we think long term about the state’s budget and economy. As we approach the end of our budgeting process, I will work hard to protect critical funding for services like education and behavioral health care – investments that will build stronger, healthier communities for years to come.”
“As we get closer to delivering a balanced budget for Coloradans, federally-fueled economic uncertainty is creating alarming risks to our economy and new pressures on our budget process,” said JBC Vice Chair Shannon Bird, D-Westminster. “While we have difficult, painful budget decisions still before us, we’ve worked hard to prioritize the investments that Coloradans rely on in education, health care and public safety. Colorado has a long history of passing bipartisan budgets, and I’d like to recognize the JBC’s diligent, thoughtful work to find responsible cuts that, while still painful, will help us finalize a balanced and responsible budget in these difficult circumstances.”
Despite headwinds exacerbated by federal policies, Colorado’s economy remains strong. Driven by lower housing inflation, headline inflation in the Denver area is lower than the nation, and inflation in Colorado has been measured at much lower levels than nationally. The LCS forecast anticipates Colorado’s economy will continue to grow, however “rapidly shifting federal policy” has resulted in downward revisions to the economic forecasts. According to LCS, “over the forecast period, increased tariffs are expected to reduce trade volumes, put upward pressure on prices, and dampen business investment in structures and equipment.” Tariffs will “put upward pressure on retail gasoline prices.”
Given the uncertainty surrounding consequential economic decisions made by the Trump administration, including tariffs, freezing federal funds and promised extensive changes to federal economic and tax policy, Colorado’s recession risk has been elevated. President Trump's tariff policies have resulted in more business volatility and uncertainty for consumers, and LCS staff believes there are now more risks to the forecast that could worsen budget conditions (downside risks) as a result of these federal policies. For example, tariffs on the import of crude oil from Canada could raise prices for Colorado consumers.
Colorado has a large number of federal employees, some of whom have been subject to mass layoffs by the Trump administration at the USDA, NOAA, IRS and other federal departments.
Colorado’s budget conditions remain constrained as costs grow. Medicaid costs have increased in Colorado, mainly due to aging demographics and higher demand for more expensive services, such as long term care. Colorado is facing a budget deficit of more than $1 billion, however, increased costs in Medicaid make up nearly 60 percent of this deficit.
Colorado’s Medicaid funding could further be jeopardized if Congress adopts a plan to drastically reduce Medicaid spending. This federal funding cut to Medicaid has the potential to impact Colorado's ability to provide health care to nearly 400,000 Coloradans.
The state is also required to fulfill voter-approved investments that further reduce the amount available in a capped budget and require legislative trade offs.
The Legislative Council Staff (LCS) forecast anticipates General Fund revenues to be $17.89 billion in FY 2025-2026, adding to an opening balance of $2.20 billion in reserves, and $18.78 billion in FY in 2026-2027 – a 6.5 percent decrease in total funds available when compared year over year.
The Office of State Planning and Budgeting (OSPB) anticipates that General Fund revenue will be $17.2 billion for FY 2024-2025 and $18.0 billion for FY 2025-2026 – a $344.6 million decrease for FY 2024-2025 and a $108.5 million decrease for FY 2025-2026 as compared with the December revenue forecast.