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JBC warned small TABOR surpluses, tax‑credit cuts likely and federal reconciliation could erase reserves
Summary
Legislative and executive budget analysts told the Joint Budget Committee that slower economic growth and lower collections have narrowed Colorado’s TABOR surpluses, will reduce several 2026 revenue‑linked tax credits, and that a federal reconciliation bill could eliminate the state’s cushion.
Legislative fiscal staff and the Office of State Planning and Budgeting told the Joint Budget Committee on June 10 that lower economic growth and collections have narrowed the state’s TABOR surpluses and will reduce or suspend several revenue‑linked tax credits for tax year 2026.
The Legislative Council’s June forecast shows weaker collections than March and calculates that the family affordability tax credit and an expanded earned income tax credit will be unavailable for tax year 2026 under the statutory revenue triggers. Emily Dorman of Legislative Council said the credits’ availability “is determined by later forecasts” and that the June numbers put the credits into the reduced‑or‑off category.
Why it matters: Colorado’s TABOR (Taxpayer’s Bill of Rights) refunds and tax credit triggers are highly sensitive to small revenue changes. Legislative Council staff said that, under the June forecast, revenue subject to TABOR would fall short of the cap in fiscal 2026, producing only narrow surpluses in 2025–27 and forcing partial reductions of some newer credits (including energy‑related credits that require a 4% growth trigger).
Office of State Planning and Budgeting director Mark Ferrandino and deputies gave a matching assessment: the state faces “tapering” surpluses and a revenue picture that is close to Legislative Council’s numbers. Will Mixon, OSPB, stressed that if Congress enacts the tax provisions in the federal reconciliation bill currently circulating in Washington (often referred to in testimony as HR1), the state could lose hundreds of millions of dollars in revenue. OSPB’s preliminary estimate: a roughly $500–600 million net negative impact on Colorado’s general fund revenue over the forecast window. Ferrandino said that effect would push Colorado below the TABOR cap in 2026 and 2027 and that the resulting obligation — for example, property tax reimbursements tied to the senior homestead changes — would then fall to the general fund.
What staff recommended: Both Legislative Council and OSPB emphasized the uncertainty and recommended the JBC plan for multiple contingencies — including tight appropriations, monitoring the December forecast (the statutory trigger date for some credits), and preparing for federal policy shifts that would be ongoing rather than one‑time.
Key supporting details - Legislative Council expects lower cash fund revenue partly reflecting bills passed in 2025 that reclassified or redirected cash fund interest into the general fund and a diversion into the new “Kids Matter” account for school finance; the net result shifts revenue patterns and reduces some cash‑fund balances. - Staff showed that several statutory, revenue‑linked credits will be evaluated at future forecast dates (June, September, December), and small forecast moves can change whether a credit is available and at what amount. Justin Braque (JBC staff) walked the committee through the specific credit triggers and timing. - OSPB and Legislative Council both flagged tariffs, geopolitical risk, and consumer uncertainty as material downside risks. Dorman (Legislative Council) and Will Mixon (OSPB) said a modest recession or an unfavorable federal bill could quickly turn narrow surpluses into structural shortfalls.
What comes next: The committee was urged to treat the December forecast as decisive for the family affordability and expanded EITC credits, and staff said they would use the June–December cycle to advise on whether statutory triggers should be changed or whether the committee should prepare budget adjustments. Director Ferrandino and Legislative Council staff said they will provide updated, granular revenue scenarios should Congress act on the reconciliation package.
Ending: Committee members asked staff to produce a March‑to‑June delta chart of TABOR surpluses and to prepare analyses of how a federal tax change would flow through Colorado’s tax base so the JBC can weigh policy and contingency options ahead of the December forecast.
