January 2026 Newsletter

WHAT THE LAST FEW WEEKS HAVE

LOOKED LIKE...

• Over the last several weeks at the Capitol, much of the focus has been on budget briefings, supplemental hearings, and updated revenue forecasts as the state confronts a significant budget shortfall for both FY 2025–26 and FY 2026–27. A substantial portion of these discussions have centered on rising caseload costs, particularly within Medicaid, the Department of Corrections, and Human Services.

• Updated revenue forecasts from the Office of State Planning and Budgeting indicate a tighter fiscal outlook (revenue versus expenditures) than what was predicted earlier in the year, requiring careful consideration of both immediate budget pressures and longer-term fiscal sustainability.

JBC SUPPLEMENTAL

REQUESTS OVERVIEW

• Colorado faces a significant budget shortfall. Updated December forecasts show the General Fund falling more than $350 million below the 15% statutory reserve requirement for FY 2025-26, with a structural deficit projected to continue into the next two fiscal years, at a minimum.

• Revenues are coming in lower than expected. The Office of State Planning and Budgeting now projects $1.05 billion less in General Fund revenue for FY 2025-26 than what was planned when we balanced the budget last April. Increased caseloads in Medicaid, Corrections, and Human Services are driving additional costs to the FY 25/26 budget. Case load growth has created supplemental budget requests creating a $170 million General Fund increase, placing further pressure on the already strained 25/26

  budget.

LOOKING AHEAD ON THE JBC (FIGURE

SETTING...)

To balance the budget for FY 2026-27 we have to cut spending by $850 million to $1 billion. To address this and balance the FY 2026– 27 budget, the JBC will be looking closely at the structural deficit that has been created over many years. Updated Medicaid forecasts in February and revenue forecasts in March will play a major role in shaping final budget decisions. On going discussions and debate within the JBC will be centered around the prioritization of what is essential to the citizens of Colorado versus non-essential priorities.