It’s déjà vu for the Colorado legislature, which once again faces the prospect of having to close a budget deficit exceeding $1 billion.
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Lawmakers on the powerful Joint Budget Committee received the new projection Friday when economists for both the nonpartisan Legislative Council Staff and the governor’s office presented their latest economic forecasts.
“I don’t think it was joyous,” Sen. Barb Kirkmeyer, a Brighton Republican, said of the news, which elicited sighs and distressed looks from several JBC members.
The forecasts project a continuation of a bleak budget trend for the state, which contended with shortfalls of $1 billion or more in 2025 and 2026 that forced a slew of cuts to government services and social programs.
Both the legislative and governor’s office economists say that if the legislature wants to return to a 15% reserve for its general fund — which covers most day-to-day operations in the budget — they’ll be looking at a roughly $1.5 billion shortfall for the 2027-28 fiscal year’s budget, which begins next July.
The reserve serves as the legislature’s rainy day fund, to be tapped in extreme circumstances such as a major economic downturn to keep government operations afloat.
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The legislature this year lowered the reserve threshold to 13% to help ease its budget woes for the current fiscal year. Rep. Kyle Brown, a Louisville Democrat, asked Friday what the general fund’s projected shortfall would be if those reserves were kept at that lower level.
Greg Sobetski, the LCS’s chief economist, said that would likely reduce the deficit to $1.2 billion.
Medicaid costs are a primary driver of the projected shortfall. In the last fiscal year, which ended June 30, the Colorado Department of Health Care Policy and Financing, which oversees Medicaid, overspent its general fund budget by $158 million — and it’s already projected to overspend by $443 million by the end of the current fiscal year in mid-2027, unless lawmakers make additional cuts.
In November, Gov. Jared Polis, who leaves office after this year, will present his budget proposal for the next fiscal year based on the new forecasts. The legislature convenes in January for its regular session and must pass a balanced budget by the spring.
This is a developing story that will be updated.
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