Colorado legislators are considering a special session to cover a budget hole to the tune of hundreds of millions of dollars — a deficit Democrats said will result from spending changes Congress recently approved.

A Republican legislator, meanwhile, said the state already faced a deficit even before Congress passed the federal budget, effectively arguing that Colorado’s policymakers have only themselves to blame for the predicament the state is in.    

In a statement, Gov. Jared Polis said the “sad reality” is that the state government can’t make up for the funding loss he and others expect arising out of the budget bill that President Donald Trump signed last week.  

“The Governor has previously indicated we may need to reconvene the General Assembly to deal with the terrible impacts from the bill, and we are still reviewing the impacts of this new law to evaluate next steps, including a potential special session,” a spokesperson said. 

The federal budget could blow a hole of between $500 million and $600 million in Colorado’s current budget, according to analysts. 

The task of finding that amount — assuming the estimates are accurate — will first fall to the Joint Budget Committee and to the governor’s office and his budget director, Mark Ferrandino.

It’s unlikely that the six members of the Joint Budget Committee will be unified on just how to tackle that hole.

The $600 million figure comes from two places: changes in tax policy that apply to the 2024-25 year but that will have to be accounted for in the 2025-26 budget. That’s the largest change — and it’s what the state will lose in revenue that has to be made up, analysts said. 

The second source of the expected deficit is funding cuts to the Supplemental Nutrition Assistant Program, the food stamps program. 

Under the federal budget, states are required to cover 10% of the cost of the program, which translates to about $125 million for Colorado. Also, administrative costs are going up from 50% to 75%, adding $50 million to the tab.

Changes to Medicaid, including enhanced work requirements, don’t go into effect until Jan. 1, 2027.

So, where will lawmakers and the governor’s office look for that $600 million?

The Office of State Planning and Budgeting, the budget arm of the governor’s office, noted in a statement last week that even without passage of the budget bill — or an economic downturn, for example — economic forecasters already estimated that Colorado will face a nearly $700 million deficit and that revenues could drop below the Taxpayer’s Bill of Rights cap in each of the three years in the forecast window.

“Under these conditions, the state will not be able to replace the loss of federal funding under the GOP megabill and will be forced to consider difficult trade offs and cuts to core services,” the office said. 

A letter from Colorado House Democrats to Colorado’s GOP congressional delegation last week also said that, in order to maintain SNAP benefits, the state would need to replace $180 million each year in lost funding.

That’s money “we simply do not have,” the legislators said.

Medicaid cuts, the Democrats added, could result in Colorado losing as much as $1 billion in health care funding.

Trump and his allies earlier lauded the federal budget bill’s passage, saying it will unleash unleash economic growth by cutting taxes, boosting spending for defense and more money for cracking down on illegal immigration. 

Sources at the state Capitol said lawmakers might look at pulling back increases in general fund spending in the 2025-26 budget. The largest increases went to the Department of Health Care Policy and Financing for Medicaid and to K-12 education. 

The latter two represent two-thirds of the state budget, and between them took in more than $550 million more in their 2025-26 general fund appropriations. 

Those are areas lawmakers will also look to protect to avoid restarting an obligation to K-12 education or cutting Medicaid, including reductions in provider rates.

They could also look at spending in the judicial branch, which won a larger appropriation for adding judges, though at a much smaller number than court administrators sought. The courts received a $33 million general fund boost this year.

The state’s general fund reserve could also be part of the discussion, but it’s a source that lawmakers would prefer to hang onto in case of a recession. State economists last month raised the likelihood of a recession, largely because of the Trump tariffs, to 50%.

In a statement last week following the House’s passage of the budget bill, JBC Chair Sen. Jeff Bridges, D-Greenwood Village, said the bill “will almost certainly force us into a special session to make deep cuts to Colorado’s already tight budget.”

Like other Democrats, Bridges blamed Trump and Colorado’s congressional delegates for passing the federal budget bill. 

Meanwhile, Sen. Barbara Kirkmeyer, a Republican, said the state was already in a structural deficit even before the federal budget bill was adopted and scoffed at Democrats for now blaming the federal government — or even the Taxpayer’s Bill of Rights — for the state’s fiscal problems. 

“We will have to look at every department,” said the Republican from Brighton and ranking GOP member on the JBC.

Her idea is a 10% across-the-board cut in every department except for the Department of Health Care Policy and Financing, and education. That option could raise $500 million, she adding, adding Democrats and the governor will likely claim it will lead to layoffs.

It’s an idea she floated during the 2025-26 budget negotiations that failed to win support. 

“I’m very clear on my priorities,” Kirkmeyer said, which are education, Medicaid and child welfare. “I hope my colleagues on the JBC and the governor come in with their priorities set.”

She said lawmakers will have to look for duplicative programs or cash funds that take in general fund dollars, as well as initiatives that may be unnecessary.

“We already know some departments won’t (or can’t) do 10%,” but she noted other agencies are growing by leaps and bounds, including the Department of Public Health and Environment. 

Kirkmeyer said the department has grown substantially in numbers of employees and in administrative costs. Since 2022-23, the department has added close to 300 employees, a nearly 20% increase. Kirkmeyer also noted the department is “overpreparing” for the next pandemic.

“That’s not how you normally prepare for emergencies,” she said.

She also plans to ask, once again, for a bill to put a sunset, or expiration date, on cash funds, which are generally used for specific programs. The state has more than 1,000 of them, and during the 2025 budget process, the JBC ran a bill to clean out cash funds that had been inactive for the last two years.

But there’s far more that can be looked at, she said.

“Programs will have to be cut in every department,” she said.

One other item that could show up in a special session call is artificial intelligence regulation.

Part of the negotiations around the federal budget bill called for a 10-year moratorium on state regulations on AI, but it failed to make it into the final version.

Colorado lawmakers passed an AI regulation bill in the 2024 session that is expected to go into effect in early 2026. While Polis signed it, he called on lawmakers to address several concerns raised by the tech industry.

That fix was introduced in the session’s final days but failed to make it past its first committee, and the sponsor rejected a proposal to delay implementation of the 2024 law for up to another year.