Joint Budget Committee approves introduction of tax-credit trigger bill after debate over base year and forecasting

The Joint Budget Committee on April 28 debated a draft bill that would change how the state decides whether to make family affordability and earned-income tax credits available, ultimately voting 6-0 to introduce a version that includes Representative Sirota’s proposed edits.

Greg Sawetzky, chief economist for Legislative Council Staff, told the committee the draft makes two primary changes: it shifts the base year used in the compound annual growth-rate (CAGR) calculation away from FY 2024–25 actual revenue and it looks at forecasts for two fiscal years when determining whether credits should trigger. “These are the tax credit triggers for the family affordability credit, the earned income tax credit,” Sawetzky said when introducing the bill. He warned that under current law the trigger could turn credits on when revenue at the fiscal-year horizon would be insufficient to fund other obligations.

Representative Sirota urged the committee to avoid evaluating two years at once, saying the CAGR mechanism was built to operate year by year and that looking at two fiscal years could accidentally “shut off” credits for multiple years. She proposed instead fixing the base at the March 2024 OSPB forecast number so the statute would reference a definitive, unchanging dollar amount.

Pierce Lively, Office of Legislative Legal Services, described the March 2024 OSPB forecast alternative as “just a point in time” — a numeric base that would not be updated — and said the bill authors intended to ensure the mechanism is not construed as a TABOR refund mechanism. Staff modeling shown to the committee illustrated three scenarios (OSPB forecast, LCS forecast, and a conservative “low” scenario constructed as $340 million below LCS in one illustration) and demonstrated situations where the trigger could fully turn on credits while forecasted revenue left insufficient room for other obligations.

Chief forecasting staff emphasized that both the version presented this morning and Representative Sirota’s variant would make it less likely than current law that credits are turned on in a budget environment that cannot support them. Still, staff recommended preparing both drafts so members could compare language and outcomes. Committee members asked for an immediate draft reflecting Representative Sirota’s suggested changes; staff agreed to prepare it.

Vice Chair moved to introduce the tax-credit-availability draft that incorporated Representative Sirota’s edits; the motion passed 6-0. The committee instructed staff to make technical changes as necessary and to provide the comparison draft for further consideration.

Next steps: staff will circulate the Sirota-version draft and the committee indicated a desire to reconvene as soon as both chambers’ schedules permit.