Colorado faces $1B budget deficit in wake of Big Beautiful Bill

(The Center Square) — Colorado officials are pointing fingers at cuts in the One Big Beautiful Bill Act after recently announcing the state is facing a $1.2 billion tax revenue shortfall.

“The numbers don't lie, and this new federal law is already ripping a massive hole in our current year’s budget and creating tens of millions of dollars in ongoing funding obligations to the state,” Eric Maruyama, a spokesperson for Gov. Jared Polis’ office, told The Center Square.

Others say that other factors are at play, including the state’s ever-growing spending.

“The state of Colorado’s current budget position has as much to do with its spending as it does with its revenues,” said a statement from the Common Sense Institute of Colorado to The Center Square.

A previous report from state economists predicted a $600 million tax revenue loss. Now $1.2 billion, that represents 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 current predicted shortfall, the deficit is expected to be $955 million.

Polis, a Democrat, is considering calling a special legislative session to balance the budget.

“Governor Polis has been open about the sad reality that the state can’t make up for the funding that our federal government is taking away from Coloradans,” Maruyama said. “The governor has previously indicated we may need to reconvene the General Assembly to deal with the terrible impacts from the bill, and we are still reviewing the impacts of this new law to evaluate next steps, including a potential special session.”

On July 30, a number of state agencies presented to the Executive Committee of the Legislative Council on the challenges they will face. Republicans labeled the session, which the governor’s Office of State Planning and Budgeting presented at, “hyper-partisan.”

More from this section

Russian oil tanker docks in Cuba after US blockade relief

Cambodia extradites accused cyberscam boss to China

Pakistan says holding talks with Afghan government in China

OSPB’s Executive Director Mark Ferrandino said in that presentation that the deficit will also be impacted by federal tax changes, mostly due to increased deductions for corporations, which will immediately take effect in Colorado.

The One Big Beautiful Bill Act also shifts 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 expected to increase.

Colorado Democrats and Republicans disagree on where the blame should be placed for the deficit.

“Coloradans can't afford the budget cuts & increased costs due to the GOP budget,” said Colorado House Democrats on social media.

Colorado Republicans responded to that claim in a press release that refers to the One Big Beautiful Bill Act by its numerical designation: H.R.1.

“The Democrats’ last-minute scramble to address a problem of their own making is frustrating,” said Senate Minority Leader Cleave Simpson. “The Democrats’ obsessive and irresponsible spending has forced this legislature to operate under a structural deficit for years. This crisis is entirely self-inflicted, not because of H.R.1, but because of the Democrats’ mismatched priorities. We’ve been warning them all along. If only they had listened.”