Like sunburns and mosquito swarms, the Special Legislative Session has become an unpleasant seasonal tradition in Colorado, courtesy of Gov. Jared Polis’ restless pen. For the third year in a row, the Colorado General Assembly will be meeting outside its usual 120-day session to mop up an entirely preventable mess created by Polis and the legislators in his party.
This year’s special session, due to convene this Thursday, was called to address multiple issues ranging from food security to artificial intelligence regulations. The most impactful item specified in the governor’s call, however, is related to impacts our state budget will receive following Congress’ passage of the Reconciliation Law, H.R. 1. Since this bill’s proposal and eventual passage earlier this year, there has been an abundance of uncertainty relating to its impact, and even more questions raised regarding how the state government should respond.
Today I will focus my thoughts on these impacts, and highlight exactly what this Legislature must do when it reconvenes beneath the Gold Dome later this week. Economists from the governor's office and from Legislative Council staff members have both reached the conclusion that there will in fact be a reduction in available revenue this fiscal year 2025-2026 as a result of the reduced individual and corporate tax burdens levied on Coloradans. It’s important to recognize that the estimates of this impact are uncertain, but they do suggest we could see a reduction of $1.2 billion in revenue from taxes this year. Legislative Council estimates of these new tax reductions, individual income tax filers account for 71% of the total, and corporate income tax filers account for 29% of the total.
Changes to federal tax policy mean a reduction of $745 million in General Fund revenue this fiscal year. On the heels of five consecutive years of TABOR surpluses, we will finally experience a year of tax collection in line with state growth, before returning to a surplus next year.
This begs the question as to how the General Assembly and the governor’s office should address the revenue shortfall?
One pathway to address this issue that my Democrats’ colleagues are likely to pursue is to raise taxes on the Coloradans who are due to experience a reduction in their tax obligation as a result of H.R.1. I, and my Republican colleagues, are adamantly opposed to raising taxes. Noteworthy is the impact of H.R. 1 on overtime and its taxation. Colorado will follow the course outlined by H.R. 1 this year and not tax overtime income, but the Democrats passed legislation last session to tax overtime wages. Starting in 2026, Colorado will tax your overtime wages even though the federal government doesn’t.
An avenue I believe is worth exploring is to review the effectiveness of the 71 income tax credits Colorado offers, which total just over $700 million this year and $1.4 billion next year. An in-depth review of each of those credits and their impacts to Coloradans should have already occurred and prioritized for circumstances like this where revenue estimates fall short.
A second solution is for the governor to review and prioritize spending for the balance of the year to focus on delivering critical services without legislative review, coupled with an immediate hiring freeze with an undetermined end date. The state government has grown excessively over the past several years. We have created almost 200 new programs and offices since 2010, and the General Fund has increased by 40% since the 2019-2020 fiscal year. Much like the income tax credits, all the new Democrat-created programs should be reviewed for their effectiveness and how each has or has not helped Colorado be more affordable, safer or better educated.
When the Legislature reconvenes later this week, rest assured that my Republican colleagues and I will continue to fight for responsible governance, and a disciplined approach to government spending. This special session should never have been necessary, but now that it is here, we have a choice: rein in the costly and unsustainable growth of government that put us in this position, or reach deeper into the pockets of everyday Coloradans to pay for it. One path protects taxpayers and restores fiscal restraint, while the other compounds the mistakes that brought us here. My Republican colleagues and I will tirelessly fight for the former.
Cleave Simpson (R-Alamosa) is the Colorado state senator representing District 6 that includes Alamosa, Archuleta, Conejos, Costilla, Dolores, La Plata, Mineral, Montezuma, Montrose, Ouray, Rio Grande, Saguache, San Juan and San Miguel counties.
