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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.

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.