JOINT RELEASE: Economy remains resilient while Colorado households bear the cost of federal policies
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 September quarterly economic forecasts.
“From groceries to gas, inflation continues to drive up everyday costs for Coloradans,” said JBC Chair Rep. Emily Sirota, D-Denver. “It’s certainly troubling that household finances continue to deteriorate and delinquency rates are increasing, which means Coloradans are facing extreme headwinds just to make ends meet. Medicaid is growing unsustainably and despite our deep budget cuts last session, more painful decisions must be made to ensure this program doesn’t crowd out funding for housing, childcare and K-12. One thing remains clear in this mixed economic forecast: without serious TABOR reform in Colorado, there will be trade-offs and painful cuts to the programs, services and healthcare families rely on.”
“Coloradans don’t need an economic forecast to know we have a cost of living crisis – we feel it every time we fill up the car, buy groceries, and pay the bills,” said JBC Vice Chair Sen. Jeff Bridges, D-Arapahoe County. “Decisions in DC add even more uncertainty and drive up costs at exactly the wrong time. Colorado’s economy remains strong, but that doesn’t mean our families aren’t feeling the pain. More than ever, our job is to protect the services people rely on, ensure we get the most from every dollar, and keep working to lower the cost of living for every Coloradan.”
“Colorado Democrats have implemented bold, cost-saving policies to help bring down the cost of housing, healthcare and childcare, but high and climbing prices continue to eat away at families’ budgets,” said JBC Member Rep. Kyle Brown, D-Louisville. “Medicaid cost growth, largely driven by long-term care and prescription drugs, is higher than previously forecasted. Every state is dealing with rising Medicaid costs, and in Colorado we are working to reduce strain on our state budget by creating a more sustainable path for the program so that it doesn’t crowd out K-12 education or other core services funding. Medicaid spending must be reined in while protecting core services for the most vulnerable Coloradans.”
“Despite extremely painful cuts the legislature has already made to address budget shortfalls in recent years, this forecast suggests the Joint Budget Committee will have to come back again to make even more difficult cuts to services Coloradans rely on,” said JBC Member Sen. Judy Amabile, D-Boulder. “Ongoing burdens from the federal government, including the disastrous H.R.1., are driving up prices. Meanwhile, the cost of providing lifesaving care to Colorado’s most vulnerable through Medicaid continues to rise faster than we can afford. Without major changes, we’ll continue to be forced to make painful cuts to programs Coloradans rely on.”
The Legislative Council Staff (LCS) forecast anticipates General Fund revenue to be $16.78 billion in FY 2025-2026, $18.40 billion in FY 2026-2027, and $18.87 billion in FY 2027-2028. This represents an overall increase of $220 million in the FY 2025-26 and $330 million for FY 2026-2027 as compared to the June forecast.
The Office of State Planning and Budgeting (OSPB) forecast anticipates that General Fund revenue will be $16.78 billion for FY 2025-26, $18.10 billion for FY 2026-2027 and $18.57 billion for FY 2027-2028. This represents an overall decrease of $150 million in the FY 2025-26 and an increase of $210 million for FY 2026-2027 as compared to their June forecast.
According to LCS scenario B, which accounts for expected cost growth in Medicaid and other current-law programs, the General Fund would end FY 2027-28 with a 6.2 percent reserve, $1.58 billion less than the current statutory requirement, unless further cuts are made next year.
The LCS and OSPB forecasts anticipate that FY 2027-28 revenue will be above the TABOR cap by $578.7 million and $286.9 million, respectively. This means that TABOR will likely trigger a temporary income tax rate reduction that disproportionately benefits the wealthiest Coloradans while requiring cuts to core services like Medicaid that benefit the most vulnerable Coloradans.
For the 2026-27 FY (which began July 1, 2026), revenue is forecasted to be above the cap by $827 million in the LCS forecast and $607 million per OSPB, a revision of $344 million and $137.4 million, respectively.
The annual inflation rate is 3.9 percent, remaining elevated since February. President Trump’s unpopular war with Iran has destabilized markets and increased energy costs. Nationwide energy inflation is 16.3 percent, driven by 27.4 percent inflation in gasoline and 52.0 percent inflation in fuel oil including diesel, which hit a record-high of more than $6 per gallon this month. Energy inflation in the Denver metro area is even higher at 17.2 percent in July 2026. Although Colorado’s economy remains resilient, rising costs, a stagnant job market, and high levels of consumer debt are straining families’ budgets.
Rising Medicaid costs continue to impact the state budget. The interim Commission on Medicaid has been meeting to develop long-term strategies to reduce spending, protect access to care, and chart a sustainable path forward for Medicaid. According to information released yesterday, Medicaid spending exceeded previous forecasts by $158 million for the 2025-26 FY and $443 million for the 2026-2027 FY, and year-over-year cost growth is projected to be $417 million for the 2027-2028 FY.
The corporate tax cuts in H.R. 1 forced cuts to programs that create opportunities for working families. The Family Affordability Tax Credit (FATC) will be entirely turned off for the 2026 tax year. Both forecasts released today continue to expect the FATC to be off for 2027 as well. LCS expects FATC to be partially available in 2028 while OSPB expects it to continue to not be available. Families who would have been eligible for the FATC will be eligible for a new, smaller, tax credit created last session, the Family Affordability Credit (FAC). Estimates show families could still receive up to $260 for each child under age six and up to $195 for each child between six and 16 because of HB26-1223.
While wages have ticked upward for the majority of workers, including low-wage earners, they have barely kept pace with high inflation. In addition, many Coloradans are underemployed or have left the workforce and job growth remains stagnant at 0.4 percent. Unemployment remains low.
In November, Coloradans will see several measures on their ballots to potentially impact the future of vital programs like schools and healthcare after years of pressure from continuous budget shortfalls. Proposition NN, which was referred to the ballot by the legislature in 2026, would allow Colorado to retain revenue above the current TABOR cap to drive funding to K-12 schools. Amendment 87 would institute a graduated income tax structure, with the top 3 percent of earners paying more in taxes and the other 97 percent of Colorado taxpayers paying less than they do now. If Prop NN passes, it would funnel hundreds of millions per year to Colorado schools. If Amendment 87 passes, it would funnel about $2 billion per year to services like Medicaid, childcare, and education.
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