Overview

• Nonpartisan Legislative Council Staff project a structural shortfall of nearly $850 million in the fiscal year that begins July 1, 2026.
• Legislative economists say lawmakers will start drafting the 2026–27 budget nearly $800 million in the hole as rising obligations outstrip revenue growth.
• Medicaid spending is growing about 9% annually and is expected to absorb all allowable budget growth next year, with roughly $644 million more needed, according to the governor’s budget director.
• TABOR’s cap is projected to be exceeded next fiscal year by $364 million to $706 million, which would trigger taxpayer refunds and further constrain available funding.
• Forecasters flag elevated recession risk tied to tariffs and economic softening, with a 50-50 chance of recession in 2026 and a sharply higher effective tariff rate cited by state budget officials; recent emergency actions closed much of a $750–$783 million hole caused by federal tax changes but did not resolve the long-term gap.