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Legislative staff directed to draft changes to tax‑credit triggers after economists warn of risk
Summary
Legislative Council economists told the Joint Budget Committee the current trigger language for the Family Affordability Tax Credit and expanded state EITC may not prevent budget stress; the committee authorized staff to draft fixes to the trigger base year and related options.
Legislative Council economists briefed the Joint Budget Committee that the statutory triggers for the Family Affordability Tax Credit and the expanded Colorado earned income tax credit may not operate as intended if the state’s fiscal base year is weak.
Greg Sobetsky, Legislative Council chief economist, told the committee the two credits are large and that their fiscal note estimate “was right around a billion dollars in terms of reduced state revenue attributable to those credits.” Sobetsky and Legislative Council principal economist Elizabeth Ramey warned that current law uses fiscal year 2024–25 as the base year for compound annual growth calculations that determine whether future tax years receive the credits; if FY 2024–25 is a weak base year the trigger could protect the state’s below‑cap position instead of preventing a drop below the TABOR (referendum C) cap.
Sobetsky explained the practical effect: because the statutes add back the revenue decrease attributable to the credits when computing growth, the trigger can make credits available based on forecasted growth even if actual revenue declines later in the year, creating a risk to the general fund if the December forecast overestimates collections. Ramey told members that, as of April 1 data, about $660 million in Family Affordability Tax Credit claims for tax year 2024 had already been filed, and staff estimated the EITC expansion could add roughly $185 million at full phase‑in.
After a policy discussion on alternatives the committee voted 5–0 (with one member excused) to authorize staff and OLLS to draft legislation to adjust the trigger baseline and to return options to the committee; the motion instructed staff to include alternatives such as changing the base year and which forecast to use when resolving the trigger.
Committee leaders said the goal is to avoid a statutory formula that relies on an unusually weak base year (FY 2024–25) that could make the credits more likely to be available even when doing so would constrain the general fund.
