State economic forecasts paint slightly rosier budget picture — but next year’s deficit is still dire

Colorado’s projected budget hole may not be quite as deep as originally projected, but economic forecasters warned Thursday that the state was still in for a difficult year.

New state economic forecasts predict legislators will have about $250 million more in revenue they can use to put together the budget compared to earlier September projections. But in effect, the new numbers lessen the predicted budget hole from roughly $921 million to $672 million for the next fiscal year, which begins in July.

The change largely comes from revisions to population growth and some revenue forecasts that affect the government spending cap set by the Taxpayer’s Bill of Rights, or TABOR.

“That is not to say we are out of the woods,” Mark Ferrandino, the governor’s budget director, said. “We’re just a little less worse off than before.”

The state economic forecasts in September predicted the nearly $1 billion hole as ballooning Medicaid costs, flattening inflation and slowing population growth ate into the state spending cap. That horizon led to a stream of bleak budget hearings, as members of the powerful Joint Budget Committee warned of financial bloodletting to balance the books.

These new predictions reduce that deficit, but far from erase it. They also don’t account for the voter-approved ballot initiative in November that requires lawmakers to earmark $350 million for law enforcement purposes. That measure, Proposition 130, does not include a hard timeline for implementation, however, potentially allowing lawmakers to set the money aside over several years.

“It’s a good-news, bad-news scenario,” Sen. Jeff Bridges, a Greenwood Village Democrat and chair of the budget committee, said. “We essentially have a quarter of a billion more under the TABOR cap, but since September, voters also passed a requirement that we spend $350 million on law enforcement.

“So we’re essentially back to where we started: We’re a billion dollars in the hole, and we have to figure out how we’re going to continue to keep communities safe, make housing affordable and serve the folks who depend on us.”

Gov. Jared Polis’ proposed 2025-26 budget, released Nov. 1, called for a series of cuts, delayed implementations of laws and other changes to balance the revenue and spending. Members of the Joint Budget Committee, who ultimately write the budget that goes before the legislature as a whole, have criticized some of the proposals.