{"id":12608,"date":"2025-08-25T20:02:19","date_gmt":"2025-08-25T20:02:19","guid":{"rendered":"https:\/\/bluelightnews.com\/category\/politics\/this-blue-state-is-the-first-to-grapple-with-megabill-response\/"},"modified":"2025-08-25T20:02:19","modified_gmt":"2025-08-25T20:02:19","slug":"this-blue-state-is-the-first-to-grapple-with-megabill-response","status":"publish","type":"post","link":"https:\/\/bluelightnews.com\/category\/politics\/this-blue-state-is-the-first-to-grapple-with-megabill-response\/","title":{"rendered":"This blue state is the first to grapple with megabill response"},"content":{"rendered":"
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Democrats have been warning for months that President Donald Trump\u2019s \u201cbig, beautiful bill\u201d would wreak havoc on state budgets.<\/p>\n

But Colorado is the first state to call lawmakers back to the Capitol to grapple with the ramifications of the massive federal tax and spending bill.<\/p>\n

In a special session that began Thursday, the Democratic-led state Legislature is considering bills to cover a budget gap of roughly $1 billion by increasing taxes, reallocating funding and tapping the state\u2019s reserves \u2014 as well as set the stage for future cuts. The session \u2014 which is also attempting to address artificial intelligence policy \u2014 is expected to continue at least through Tuesday.<\/p>\n

\u201cThe only reason we’re even talking about this is because HR1 passed,\u201d Democratic Gov. Jared Polis told Blue Light News on Thursday, referring to the GOP megabill. \u201c[It] not only increased the federal deficit by trillions of dollars, but also increased the state deficit by hundreds of millions of dollars.\u201d<\/p>\n

Republicans top legislative priority \u2014 or HR1, passed in July<\/u><\/a> \u2014 extended Trump\u2019s 2017 tax cuts and made major cuts to social safety net programs. The bill\u2019s passage came after most states had already set their budgets for the current fiscal year, and now many have been scrambling to sort out how it impacts their finances this year and down the road.<\/p>\n

Colorado\u2019s response will likely serve as a preview of how other states will address the financial ramifications in the coming months.<\/p>\n

The financial adjustments being made by Colorado lawmakers in the special session only address the short-term impacts of the bill, and legislators say they are only the first of many changes their state will undergo as a result of the legislation.<\/p>\n

Colorado legislators and the governor told Blue Light News that the special session was necessary because changes to the federal tax code \u2014 which the state\u2019s tax code is tied to \u2014 are estimated<\/u><\/a> to reduce the state\u2019s income tax revenue by as much as $1.2 billion. That could create a deficit of about $750 million in the budget passed in April. Add on funds to fill in cuts to school lunch programs and to soften the looming rise of health insurance premiums due to smaller federal subsidies and it\u2019s estimated that Colorado faces a financial gap of more than $1 billion.<\/p>\n

To address the shortfall, legislators are proposing a range of solutions: selling tax credits<\/u><\/a> to increase funds for health care, raising taxes on the state\u2019s highest earners, ending some tax incentives and reallocating funds<\/u><\/a> from less critical programs like the reintroduction of gray wolves.<\/p>\n

\u201cCan we fix it 100 percent? No,\u201d House Majority Leader Monica Duran said in an interview on Thursday. \u201cBut we’re trying to make it less painful for everyone.\u201d<\/p>\n

Sarah Mercer of Denver-based lobbying firm Brownstein Hyatt Farber Schreck describes the funding strategy as \u201ca third, a third, a third\u201d \u2014 filling equal portions of the budget hole by closing tax exemptions, tapping the state\u2019s reserves and cutting costs.<\/p>\n

The budget cuts, however, would come later, through a bill already advancing through the Legislature that would allow Polis to propose mid-year cuts if the state cannot meet its fiscal obligations. The governor would still need to work with the legislature\u2019s Joint Budget Committee to enact those cuts.<\/p>\n

\u201cIt gives the governor some pretty unusual powers that the governor has not had before,\u201d Mercer explained. \u201cWhat is really the full scope of this new power, and when else might it be used in the future?\u201d<\/p>\n

Colorado Republicans, meanwhile, are accusing Democrats \u2014 who hold a trifecta in the state government \u2014 of mishandling the state budget and then trying to pass the blame onto Washington.<\/p>\n

\u201cFor years, Democrats at the Capitol have spent beyond their means and ignored Republican solutions. Now, they want taxpayers to bail them out,\u201d House Minority Leader Rose Pugliese said in a press release<\/u><\/a>. Colorado House Republicans\u2019 communications team did not respond to an interview request.<\/p>\n

Mercer said some of the shortfall may stem from funding that states like Colorado received from Biden\u2019s Inflation Reduction Act \u2014 which was used to fund some programs and has since run out.<\/p>\n

\u201cI think [lawmakers] did try to think through and craft programs that were limited,\u201d Mercer said. \u201c[But] I think our government and our budget did grow a little bit as well during that time.\u201d<\/p>\n

State Rep. Shannon Bird, vice chair of the Joint Budget Committee who is vying for the congressional seat currently held by GOP Rep. Gabe Evans, pushed back on the notion that one-time federal dollars led to this problem.<\/p>\n

\u201cTo the extent that we understood funds to be one time \u2026 Colorado, I believe, did a very fair job of using that money either for infrastructure investment or just to fund one time grants,\u201d Bird said, pointing the finger instead at withheld funding that the state expected to be ongoing, like school grants and Medicaid dollars.<\/p>\n

Why Colorado faces this financial dilemma<\/h5>\n
<\/h5>\n

The Colorado tax code\u2019s direct relationship to the federal tax code led it to this point. The state automatically adopts any changes to federal tax code, and also is one of just a handful of states that uses federal tax rates for state taxes. That means the minute the federal tax code changes, so do Colorado\u2019s taxes \u2014 leaving a shortfall where the state expected a surplus.<\/p>\n

To make matters more complicated, in 1992 Colorado passed the taxpayer bill of rights. It requires the state to ask permission from the voters for any tax changes via ballot measure. When the state increased taxes on cigarettes and other tobacco products to pay for universal preschool in 2020, for example, voters had to approve the proposal via ballot measure before it became law.<\/p>\n

To that end, the Legislature over the weekend approved a bill<\/u><\/a> that would allow leftover revenue from a ballot measure already approved for November \u2014 which would increase taxes on residents with taxable incomes over $300,000 \u2014 to be used<\/u><\/a> for school meals. If approved by voters, it could provide an additional $95 million annually to the state\u2019s healthy school meals program, Healthy School Meals For All. The legislature on Friday also approved<\/u><\/a> a bill to fund Medicaid reimbursements for Planned Parenthood.<\/p>\n

The state is also concerned about a possible increase to health insurance premiums. Because Congress has yet to renew higher federal health care subsidies for Obamacare plans<\/u><\/a> that expire at the end of this year, the costs for consumers are expected to substantially increase. Colorado\u2019s insurance division estimated in July<\/u><\/a> that premiums would rise 28 percent on average in the state and as much as 38 percent in the state\u2019s more rural western slope.<\/p>\n

\u201cI’m hopeful that the United States Congress takes action and renews the [health care] tax credits,\u201d Polis said. There has been some talk on Capitol Hill<\/u><\/a> of finding another vehicle for the subsidies, but it\u2019s unclear if Congress will act before the year\u2019s end, and Colorado lawmakers are looking to soften the blow by selling tax credits<\/u><\/a>.<\/p>\n

\u201cWe\u2019ll do what we can,\u201d Polis added. \u201cIt’s not going to negate those huge increases, but it’ll at least reduce them.\u201d<\/p>\n

The Legislature is also considering removing some tax incentives, including breaks for companies that employ a certain percentage of Coloradans and deductions that allow retailers to cover the cost of collecting taxes, to increase the state\u2019s revenues.<\/p>\n

But there are many more details that Colorado will need to iron out in the months and years to come.<\/p>\n

\u201cA lot of these cuts will likely need to be ongoing cuts, not just for the current year,\u201d Polis said, explaining that they couldn\u2019t continue to dip into the reserve indefinitely. \u201cThe reserve is there for a recession. And this is not a recession. This is caused by HR1.\u201d<\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

Democrats have been warning for months that President Donald Trump\u2019s \u201cbig, beautiful bill\u201d would wreak havoc on state budgets. But Colorado is the first state to call lawmakers back to the Capitol to grapple with the ramifications of the massive federal tax and spending bill. In a special session that began Thursday, the Democratic-led state […]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[2],"tags":[],"class_list":["post-12608","post","type-post","status-publish","format-standard","hentry","category-politics"],"amp_enabled":true,"_links":{"self":[{"href":"https:\/\/bluelightnews.com\/category\/politics\/wp-json\/wp\/v2\/posts\/12608","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/bluelightnews.com\/category\/politics\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/bluelightnews.com\/category\/politics\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/bluelightnews.com\/category\/politics\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/bluelightnews.com\/category\/politics\/wp-json\/wp\/v2\/comments?post=12608"}],"version-history":[{"count":0,"href":"https:\/\/bluelightnews.com\/category\/politics\/wp-json\/wp\/v2\/posts\/12608\/revisions"}],"wp:attachment":[{"href":"https:\/\/bluelightnews.com\/category\/politics\/wp-json\/wp\/v2\/media?parent=12608"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/bluelightnews.com\/category\/politics\/wp-json\/wp\/v2\/categories?post=12608"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/bluelightnews.com\/category\/politics\/wp-json\/wp\/v2\/tags?post=12608"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}