Education & Resources
POLICY UPDATES AND EDUCATIONAL ARTICLES TO HELP ORGANIZATIONS THRIVE
September Economic & Revenue Forecast Gonzo: “Mr. Mayor, I’m looking for a frog who can sing and dance!”
Mayor Ed Koch: “If he can balance the budget, I’ll hire him!” – The Muppets Take Manhattan For most people, the first week of fall means cozy sweaters, football, and pumpkin spice lattes. For those of us at the Capitol, it also means the September budget forecast. Yesterday, the Joint Budget Committee (JBC) heard the quarterly presentation on the state’s budget and economic outlook from Legislative Council Staff (LCS) and the Governor’s Office of State Budget and Planning (OSPB). Although the September budget forecast slightly improved from the July forecast, Colorado is still in a very dire budget situation with a structural deficit of about $850 million and a weak economic outlook, to put it lightly. Which brings us to our quote for the week – Colorado’s budget situation is getting so bad, they’d probably hire Kermit the Frog if he could balance the state’s budget. And even if Kermit can’t balance the state’s budget, he still has other talents – such as being the face of one of the most popular franchises in the history of American entertainment. By combining the words “marionette” and “puppet,” Jim Henson created The Muppets in 1955. Kermit the Frog, Henson’s most recognizable character, was originally made from an old green coat and ping pong balls for eyes, and voiced by Henson for nearly forty years. In total, Kermit has been puppeteered by three actors, and voiced by five. Henson is also one of just four people to be honored on Hollywood’s Walk of Fame, in addition to their character being honored on the Walk of Fame too. Over the years, Kermit’s character has appeared on talk shows, received awards, and even delivered a few commencement speeches. Kermit can do it all, and at this point… our state’s budget might be in better shape if Kermit was in charge. Economic Forecast Both the LCS and OSPB presentations were similar in that economic expansion is expected, but at a slower rate. In spite of this, next year’s budget isn’t looking promising. Both presentations predicted a weakening of the labor market and consumer spending to continue decreasing due to inflation, which will exacerbate declining business investment in Colorado. Inflation also slightly ticked up in July, largely due to housing. Colorado’s inflation rate sits at 2.1 percent, which is still lower than the national inflation rate at 2.9 percent. The forecast projected a higher risk of a recession than what was projected earlier this year, with heightened risks and uncertainty of tariffs’ impact on the state. The forecast reflected the effective tariff rate at 8.2 percent, which is the highest it’s been in nearly one hundred years. On the unemployment side, Colorado’s unemployment rate ticked down to 4.2 percent in August, remaining slightly lower than the national average of 4.3 percent. This number is expected to continue going down. Activity in the labor market has been relatively flat, with layoffs and discharges remaining similar to previous forecasts. Revenue Forecast According to yesterday’s forecast, Colorado is looking at a structural deficit of nearly $850 million for FY 2026-2027, largely due to Medicaid costs increasing faster than originally anticipated. LCS predicted about $800 to $900 million in reductions will be needed to balance the 2026-27 budget. In other words, it will cost the state roughly $850 million to continue providing government programs and services that are currently in place. In both presentations, Colorado’s revenue is projected to drop below the TABOR cap in FY 2025-2026, but is expected to return above the cap in FY 2026-2027. This is the first time in six years that TABOR refunds haven’t been projected, as a result of a 1.1 percent projected decline in revenue. Because there won’t be a TABOR surplus this year, the General Assembly will have to handle costs that the surplus would’ve covered, particularly the senior and disabled veterans’ homestead exemption. This cost alone would be about $198 million in general fund dollars. Not having a TABOR surplus is also projected to reduce certain tax credits that have been passed in recent years, like the electric vehicle tax credit. The general fund is set to increase next year by 7.4 percent, but lawmakers are still projected to have $116 million less to spend than what was available for 2025-2026. That’s accounting for the statutory reserve requirement that needs to be filled, TABOR refunds that need to be fulfilled from 2024, and other obligations the General Assembly must meet. Economists presented two potential options for lawmakers to proceed with for FY 2026-2027. The first would hold appropriations constant and have $116 million less to spend in the next budget year. The second option would use the governor’s proposed budget actions for FY 2025-2026 and projected obligations for next fiscal year, which would cause the reserve to fall to 9.8 percent – which would need to be paid back the following budget year. In short, lawmakers have to find around $850 million in budget reductions for the upcoming fiscal year. Finding reductions is becoming increasingly difficult – the “easy” cuts were made to the state’s budget during this year’s regular session and lawmakers were able to somewhat maneuver around another huge round of cuts during the special session. All of this to say, lawmakers are running out of options for “easy” cuts and it’s likely we’ll start to see more difficult cuts next session. Legislative Council Staff (LCS) Office of State Planning and Budgeting (OSPB) Minority Leader Pugliese Resigns Last week, House Minority Leader Rose Pugliese resigned from her seat, effective immediately. In her resignation letter, Pugliese shared that the decision was made partially due to wanting to spend more time with her kids, but also because of the “toxic” nature of the Capitol, following a very public confrontation she had with Democrat leadership at the end of the special session last month. Read more – Top Republican in Colorado House, citing ‘toxic’ politics, resigns from Legislature House Republicans Select Caldwell as New Minority Leader As Pugliese resigned her seat and leadership position, House Republicans selected Representative Jarvis Caldwell from Monument to serve as the new Minority Leader. Caldwell briefly made a speech after being selected, and focused on continuing to bring Republicans together toward shared goals. Read more – Colorado Republicans choose Caldwell to succeed Pugliese as House minority leader Scott Slaugh Appointed to House District 64 Vacancy Last week, Scott Slaugh from Johnstown was selected by a vacancy committee to replace former Representative Ryan Armagost, who resigned last month. Slaugh has been a U.S. Army Reserve Officer for the last 22 years, and his priorities include issues related to veterans, housing, and education. Read more – Scott Slaugh wins House District 64 seat, replacing Ryan Armagost What’s Next The JBC is set to meet again on November 1, when the Governor’s Office will present their budget proposal. Until then, keep an eye out for more updates as it relates to the budget, vacancy appointments, and other updates. Have a good rest of your week. Comments are closed.
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