The Colorado Balanced Budget Requirement

Raising the federal debt limit has become a controversial and repetitive topic in our nation. Congress, our federal legislature, has the power to set that debt limit. When the federal government spends more than it has during fiscal year, it can borrow money to make up the difference, which is referred to as a “deficit”. 

Each annual deficit is then added to an aggregate amount of all remaining federal deficits, which is known as the “federal debt”. In recent decades, when federal debt has reached the federal debt limit, Congress has responded by raising that debt limit, which then allows more borrowing.

Colorado state government doesn’t work that way. Each year, the General Assembly must pass a budget and each budget must be balanced. Our state government cannot spend in excess of the amount of tax and fee revenue that it actually collects or saves. You can learn more about Colorado Budget Basics here. 

Article X, Section 20 of the Colorado Constitution, known as The Taxpayer’s Bill of Rights (“TABOR”), was added to the state constitution by a vote of the people in 1992. TABOR limits the amount of increase that is allowed to occur in state government spending from one fiscal year to the next. That way, if state revenues increase sharply during a given year, the state government is further limited as to how much of that increase it can use in the next fiscal year budget. Under TABOR, state fiscal year spending can increase no more than the rate of inflation, plus the percentage change in state population during the prior calendar year, adjusted for revenue changes approved by voters after 1991.

TABOR also removed the power from the state legislature to create a new tax or to increase the rate of an existing tax. Under TABOR, a proposal to create a new tax or to increase the rate of an existing tax must be directed to Colorado voters.

Colorado operates on a fiscal year that begins July 1 and ends June 30 the following year. The Colorado Constitution limits the General Assembly to no more than 120-days of general session time each year and that each general session convene on or before the second Wednesday of the year. Thus, during each annual general session, which occurs between January and May, the General Assembly must approve a state budget in advance of the next fiscal year, which would begin on July 1.

The state budget is established by an annual “general appropriations bill”, which is referred to at the Colorado Capitol as the “Long Bill” due to its length. Furthermore, Article X, Section 20 of the Colorado Constitution establishes the single subject requirement for bills considered by the General Assembly. That Section exempts the “general appropriations bill” from the single-subject requirement. The reason is that each of those bills must include all appropriations made for all programs and policies within Colorado state government.

Conversely, a Long Bill cannot propose or create new policy. Thus, each year, the Long Bill might be accompanied by one or more “Orbital Bills”, which propose policy changes necessary to enable that budget to balance and align with statute.

During the early weeks of each annual general session, the General Assembly will consider an assortment of “Supplemental Bills”. The purpose of those bills is to rebalance the current fiscal year state budget during the second half of that fiscal year.

Each supplemental bill addresses a specific department or division within state government. A supplemental bill might seek to change policy (state law) or to increase or decrease the allocation of money to that department, as previously approved by the General Assembly during the prior general session.

In Colorado, there is an ongoing and complicated annual process of projecting tax and fee revenues for the next fiscal year, approving a balanced budget for the next fiscal year based on those projected revenues, finishing the current fiscal year in a balanced position, collecting actual tax and fee revenues during that next fiscal year, comparing those actual revenue amounts to the previously projected amounts, approving bills during the second half of a fiscal year to rebalance the budget based on those actual revenues, starting to project revenues for the next fiscal year, approving the next balanced budget based on those projections, and ending the current fiscal year in a balanced position.

That process is completely different from how budgeting and spending work within our federal government. It works in those complex and ongoing ways here in Colorado because that’s how the people of Colorado wanted it to work.

** The information provided herein is intended for general educational purposes only and is not legal advice. If you have questions of a legal nature, please consult with an attorney.

** Civics Corner content was written with the help of former Senate Majority Leader Chris Holbert.

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