FOR IMMEDIATE RELEASE

Denver, CO — March 20, 2026 — Following the release of the state’s latest economic and revenue forecast, Colorado Republicans are raising serious concerns about the state’s financial stability and the long-term consequences of runaway government spending.

The March 2026 Colorado Economic and Revenue Outlook indicates the state is operating with a narrow financial margin as economic risks increase. Even by lowering the reserve from 15% to 13%, the forecast projects the General Fund will be $241.6 million below the 13% reserve in FY 2025-26 and $228.9 million below the reserve in FY 2026-27, leaving little capacity to address unexpected costs or an economic downturn.

Republican members state the report confirms their longstanding concern that Colorado’s spending is outpacing economic growth. 

“The latest forecast shows that Colorado’s budget remains under significant strain due to ongoing structural deficits over the past seven years,” said Minority Leader Cleave Simpson. “Democrats have dramatically increased government spending while ignoring clear signs that our economy is slowing. This fiscal irresponsibility is a risky strategy that puts taxpayers on the hook.”

Here is a summary of the 2026 Colorado Economic and Revenue Outlook:

Economic Instability and Labor Stagnation

• Recession Risk: The forecast estimates a 40% chance of a recession in the next 12 months, citing geopolitical instability and a cooling labor market as primary drivers.
• Frozen Labor Market: Topline data masks a “frozen” economy where labor force participation has fallen to its lowest level in Colorado since October 2020. Job growth is heavily concentrated in the healthcare sector, with nearly every other industry seeing flat or negative growth.
• Stagnant Wages: Real wage and salary growth in Colorado has fallen below long-term averages. Personal income has only been sustained by an 8.8% surge in government transfers, primarily Social Security, rather than private-sector productivity.

Fiscal Mismanagement and TABOR Evasion

• Tax Credit Triggers: The forecast reveals that low revenue growth has “turned off” the Family Affordability Tax Credit (FATC) and the expanded Earned Income Tax Credit (EITC) for Tax Year 2027. This results in a “stealth” revenue increase for the state General Fund of $431.7 million despite a weakening economy.
• TABOR Cap Manipulation: While revenue is expected to drop below the TABOR cap in FY 2025-26, it is projected to return above it in subsequent years, though growth is hampered by state diversions.
• Education Fund Pressures: New state school funding formulas and property tax changes have placed immense fiscal pressure on the State Education Fund, with the balance projected to decline significantly from $1,058 million to just $259 million by FY 2027-28.

Regulatory and Cost-of-Living Headwinds

• Insurance Crisis: Colorado insurance premiums have skyrocketed by 60% since 2018, far outpacing the national average. This is compounded by rising construction material costs and the unavailability of federal funding for infrastructure.
• Energy and Trade Uncertainty: Escalating energy prices due to global conflicts and ongoing changes in federal tariff policies create persistent costs that businesses and consumers must absorb.
• Infrastructure Gaps: The state faces a $350 million annual gap for road maintenance and a $1.5 billion shortfall for rail expansion. This deficit is a result of decisions the state has made, leading to noncompliance with the federal government and preventing access to over $100 million in federal funds that would have otherwise been available. 

The forecast also shows that consumer spending is increasingly driven by higher-income households, while middle- and lower-income families face rising financial pressure from debt, inflation, and higher living costs. Economists warn that this imbalance could leave the economy vulnerable if consumer confidence weakens or the stock market declines.

At the same time, Colorado families continue to face rapidly rising costs. Insurance premiums in the state have increased nearly 60 percent since 2018, housing construction remains slow due to high interest rates and regulatory costs, and inflation is expected to remain above the Federal Reserve’s target for years.

Republicans say these economic realities should serve as a wake-up call for state leaders.

“Instead of expanding government programs and spending every available dollar, we should be strengthening our reserves, reducing the tax burden on families, and focusing on policies that grow Colorado’s economy,” Assistant Minority Leader Lisa Frizell said. “Responsible budgeting today will protect taxpayers and ensure Colorado can weather future economic challenges.”

Republicans are calling for greater fiscal discipline in the state budget, including stronger reserve levels, limits on new spending commitments, and policies designed to promote job growth and economic opportunity across all sectors.

“The state is nearly $1 billion in the hole in the current year, and JBC budget actions have now pushed that shortfall to almost $1.5 billion for next year,” Senator Barb Kirkmeyer said. “You cannot spend recklessly, ignore the warning signs, and then expect taxpayers to clean up the mess.”

Note: This press release uses numbers from the Governor’s Office’s forecast, which does not account for the legislature’s ongoing budget decisions, including increases for Medicaid and education. When Republican members cite a $1.5 billion deficit, they are referring to the LCS forecast, which accounts for these increases.