Elizabeth Ramey, economist with Legislative Council Staff, told the Joint Budget Committee that the federal tax package known in the presentation as the OBAA will sharply reduce Colorado income-tax revenue. "We expect the OVA to have, about a $1,200,000,000 impact in reducing revenue in the current fiscal year," Ramey said, and she emphasized the number reflects an 18-month effect because the bill's timing pulls portions of tax-year 2025 and 2026 into the same fiscal year.

The Legislative Council estimate breaks the hit into roughly $815 million on the individual side and $336 million on the corporate side in the main update shown to the committee. Ramey and other staff explained much of the individual-side impact comes from business provisions that flow through pass-through returns: for the relevant tax year they estimated roughly $300 million of the individual impact and about $200 million of that was tied to pass-through business provisions.

Emily Dorman, economist with Legislative Council Staff, reviewed how those revenue impacts change the state budget picture. Dorman said the OBAA reduced general fund revenue for fiscal year 2025 and 2026 in the forecast update and altered tax-credit triggers: "The Family Affordability Tax Credit and the Expanded Earned Income Tax Credit are expected to be unavailable in tax years 2026 and 2027," she told the committee. She also noted an offset to school-meal funding: increased standard deductions and other OBAA provisions are expected to raise revenue for the Healthy School Meals for All (Proposition FF) cash fund by about $28 million in the current fiscal year and $46 million in 2026–27.

Dorman walked members through the forecast revisions. Compared with the June forecast, the update showed a modest upward revision for fiscal 2025 overall (+$138 million) but a large downward revision for fiscal 2026 (about $745 million). Dorman summarized the TABOR/TARGET effects in the presentation: the committee was shown an expected small TABOR surplus in fiscal 2025 (about $311 million above the cap), a drop below the cap in fiscal 2026, and a rebound above the cap in fiscal 2027 (roughly $759 million) driven in large part by tax-credit trigger mechanics that reduce credits in low-revenue years.

Office of State Planning and Budgeting Director Mark Farandino and deputy chief economist Bryce Cook presented a similar picture from the executive branch: Farandino said the OBAA’s total federal impact is about $1.2 billion in the near term and that state-level expenses tied to the federal changes (notably SNAP administration and some Medicaid cost shifts) will increase the budgetary pressure over the next several years. He and others warned the OBAA both reduces revenue and shifts federal costs toward states in a way that will be felt in program budgets.

Committee members pressed staff on timing and data sources. Ramey said much of the cash impact will start to appear as taxpayers file 2025 returns: "I would expect us to see some significant impacts when people file their tax returns for tax year 2025… starting in March and April of next year," she said. Members also discussed the treatment of the federal taxable-income (FTI) base used by Colorado (rather than adjusted gross income), and staff noted Colorado’s linkage to federal taxable income magnifies the state impact relative to many other states.

What happens next: staff told members estimates will be refined as new JCT (Joint Committee on Taxation) information, Department of Revenue cash-flow data and quarterly forecasts become available. Dorman and Ramey repeatedly characterized the estimates as preliminary and with higher-than-normal forecast risk; Dorman warned the fiscal 2026 general fund reserve is now expected to end the year hundreds of millions below the statutory 15% requirement in the scenario shown to the committee.

Ending: Legislative Council and OSPB staff said they will return with updates in the regular forecasting cycle and provide distributional and other follow-up analyses committee members requested (for example, who bears the burden of tip and overtime exemptions introduced by the OBAA). Meanwhile, staff and the governor’s office signaled they will continue work to identify program adjustments and possible supplemental actions as the committee and executive branch weigh options.