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Colorado Lawmakers Confront $1 Billion Budget Gap After Trump Tax Overhaul

Lawmakers will convene in mid-August to fill a $1 billion budget hole left by a federal law cutting income tax revenues.

Colorado House Speaker Julie McCluskie holds her head as she listens to Mark Ferrandino, executive director of the Office of State Planning and Budgeting, address legislative leadership about a shortfall of more than $950 million in this year’s state budget during a hearing at the Colorado State Capitol in Denver on July 30, 2025. (Photo by RJ Sangosti/The Denver Post)
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Overview

  • The One Big Beautiful Bill Act, signed July 4, is projected to reduce Colorado’s corporate and individual tax revenues by $1.2 billion in 2025-26, state budget officials said.
  • Colorado’s Taxpayer’s Bill of Rights limits revenue growth, allowing only about $250 million to be retained above the cap and leaving a $1 billion shortfall in the $43.9 billion spending plan.
  • Governor Jared Polis plans a mid-August special session to consider closing business tax breaks, trimming state programs and tapping reserves to close the gap.
  • Drawing down the state’s reserve fund to cover the shortfall would cut reserves from 15% of general-fund spending to roughly 9%, below levels needed to guard against a recession.
  • Colorado’s automatic linkage to federal tax law amplifies sensitivity to national changes, and new SNAP and Medicaid cost shifts could add $50 million–$100 million in the first year and as much as $1 billion by 2032.