Colorado has taken the initiative by holding a special legislative session to address the financial consequences of the federal ‘Big, Beautiful Bill’ (HR1), which was passed in July. This move has placed the state at the forefront of efforts to navigate the budgetary challenges stemming from the bill. The state is facing a significant budget shortfall of approximately $1 billion, a result of the bill’s impact on federal subsidies and state revenue.
The special session, which began on Thursday, is focused on identifying ways to address this financial gap. The legislative body has proposed a range of measures, including increasing taxes, reallocation of existing funds, and the use of state reserves. The session is expected to continue through Tuesday as lawmakers also deliberate on artificial intelligence policy. Democratic Governor Jared Polis has been vocal about the implications of HR1, noting that it has significantly affected the state’s budget, increasing the deficit by hundreds of millions of dollars.
HR1, which was passed by the Republican-led Senate, extended the 2017 tax cuts and made substantial cuts to social safety net programs. The passage of this bill occurred after most states had already finalized their budgets for the current fiscal year, leaving many in a difficult position as they try to reconcile its financial implications. Colorado’s response to this situation is likely to serve as a model for other states as they confront similar challenges in the coming months.
The financial adjustments being made by Colorado lawmakers in the special session are primarily aimed at addressing the short-term impacts of HR1. Legislators have expressed that these measures are only the first in a series of changes their state will have to implement due to the bill. The state’s tax code is closely tied to the federal tax code, with any changes in the federal system automatically affecting state finances. As a result, the state’s income tax revenue is expected to decrease by up to $1.2 billion, contributing to a potential deficit of around $750 million in the budget passed in April.