Colorado addresses budget shortfall in special session

(The Center Square) – Facing a $1.2 billion budget shortfall, the Colorado legislature returned to the capitol to take action.

Gov. Jared Polis signed two bills as a part of the six-day special session, which was adjourned on Tuesday. The bills protect funding for food assistance programs and Medicaid for entities such as Planned Parenthood.

The legislation came in response to cuts in the federal One Big Beautiful Bill Act, which state officials are blaming for the shortfall.

“Colorado legislators stepped up and helped protect children's food access and minimized the devastating cost increases to health insurance premiums across the state, to the best of our ability,” said Polis, a Democrat. “During this special session, Colorado lawmakers did what the federal government refuses to do: closed special interest corporate tax loopholes and balanced our state budget while protecting funding for schools, roads, and health care.”

A previous report from state economists predicted a $600 million tax revenue loss. Revised to $1.2 billion in the wake of federal cuts, that represented less than 3% of Colorado’s total $44 billion budget for fiscal year 2025-26, which was passed in April and started on July 1. With the predicted shortfall, the deficit was expected to be $955 million.

One of the steps the legislature took to address the deficit was to change the tax law for Colorado businesses and business owners, which will bring in $150 million for the state.

Democrats applauded the special session’s actions.

“Colorado Democrats have responsibly picked up the pieces from Trump and Washington Republicans’ big ugly budget, which any one of the GOP members of our Congressional delegation could have stopped,” said House Speaker Julie McCluskie, D-Dillon. “We took a balanced approach that closed corporate tax loopholes, established a process to cut some spending, and used some of our rainy-day savings to protect funding for health care, roads, and education.”

While protecting funding for some programs, $300 million will still need to be cut at Polis’ discretion.

The One Big Beautiful Bill Act shifted some of the spending burden for programs like Medicaid and SNAP back to states. The Center Square previously reported on the impact the bill would have on these programs in Colorado.

In short, the state is expecting to bring in less tax money, while costs are also expected to increase. This is what led Polis to call the special session.

Republicans said the session passed no real solutions, instead “gaslighting” Coloradans.

“CO Dems had no long-term solutions, they chose to kick the can down the road,” said the Colorado Republican Party in a statement on social media.

Special interest groups are also pushing for more long-term solutions to the increased costs for the state.

“We are grateful to the governor and our legislators for coming together to find immediate solutions to begin to protect children from its impact,” said Heather Tritten, president and CEO of the Colorado Children's Campaign. “We look forward to working with policymakers to find long-term approaches to support kids' health and well-being.”