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Economic & Revenue Forecast September 2025

Legislative Council Staff

Nonpartisan Services for Colorado’s Legislature

September 2025 | Economic & Revenue Forecast

Contents Executive Summary ........................................................................................................................................................ 3 General Fund Budget Overview ................................................................................................................................. 7 School Finance Outlook..............................................................................................................................................23 TABOR Outlook ..............................................................................................................................................................29 General Fund Revenue ................................................................................................................................................35 Cash Fund Revenue ......................................................................................................................................................45 Economic Outlook ........................................................................................................................................................63 Colorado Economic Regions.....................................................................................................................................99 Appendix: Historical Data........................................................................................................................................ 109

Contributors Greg Sobetski, Chief Economist Marc Carey Louis Pino Elizabeth Ramey David Hansen Emily Dohrman Amanda Liddle Anna Gerstle Thomas Rosa Debbie Grunlien

Special thanks to David Williams, Dan Phillips, Kent Parker, Katie Kolupke, Annabelle Tracy, Logan Jacobson, and Thinh Dinh.

Legislative Council Staff • State Capitol Building • Denver, Colorado 80203 (303) 866-3521 • LCS.Economist@coleg.gov • http://leg.colorado.gov/EconomicForecasts Legislative Council Staff is the nonpartisan service agency of the Colorado General Assembly.

Executive Summary This report presents the budget outlook based on current law and the September 2025 forecast for General Fund revenue, cash fund revenue, and the state TABOR outlook. It also provides a preview of the school finance outlook, which is presented in full in the December forecast. Finally, it summarizes expectations for the U.S. and Colorado economies and provides economic indicators for nine regions of the state.

General Fund Budget Outlook FY 2024-25 The General Fund is estimated to have ended FY 2024-25 with a 14.5 percent reserve, $94.8 million below the statutory reserve requirement. General Fund revenue fell by 0.4 percent and totaled $17.18 billion. The State Controller certified a state TABOR surplus of $296.1 million, triggering a TABOR refund obligation of $293.3 million after accounting for overrefunds of prior year surpluses. FY 2025-26 The forecast incorporates all 2025 legislation, including legislation enacted during the August 2025 special session, and the federal H.R. 1 - the One Big Beautiful Bill Act (OBBBA). The General Fund is expected to end FY 2025-26 with a 12.9 percent reserve, $306.7 million below the statutory reserve requirement. This amount may change based on ballot measures approved at the November 2025 election and legislation enacted during the 2026 legislative session. State revenue subject to TABOR is expected to fall below the Referendum C cap for the first time since FY 2019-20. Revenue is expected to remain flat and total $17.17 billion. Revenue expectations were revised down for the July forecast update, which incorporated the estimated tax revenue impacts of the OBBBA. Relative to July expectations, this forecast increases the expected revenue forecast to incorporate special session legislation expected to affect income tax, sales tax, and insurance premium tax receipts. It also incorporates expected reversions of General Fund appropriations following Executive Order D 2025 014, which directed spending reductions in executive branch agencies. FY 2026-27 General Fund revenue is expected to grow 7.4 percent and total $18.44 billion as impacts from the OBBBA become less pronounced. State revenue subject to TABOR is estimated to exceed the Referendum C cap by $705.8 million. The General Fund is projected to have $116.3 million, or 0.6 percent, less available to spend or save than what is budgeted to be spent in FY 2025-26, after current law transfers and the statutory reserve requirement are fulfilled. This amount does not incorporate caseload growth, inflation, or other budgetary pressures. The General Fund Budget Overview section presents an alternative scenario that incorporates the Governor’s proposed FY 2025-26 balancing actions and projects additional FY 2026-27 budget obligations based on current law. Under this scenario (“Scenario B”), the year-end September 2025

Executive Summary

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General Fund reserve would fall short of the reserve requirement by $160.2 million in FY 2025-26, an improvement from the current law Scenario A, and would fall short of the reserve requirement by $841.1 million in FY 2026-27. Additional explanation can be found in the discussion of the budget Scenario B (see Table 2 on page 12). FY 2027-28 General Fund revenue is expected to grow 5.5 percent and total $19.46 billion. State revenue subject to TABOR is expected to exceed the Referendum C cap by nearly $1 billion. The state’s budget situation for FY 2027-28 will depend on budget decisions made for FY 2026-27.

Risks to the Budget Outlook The budget outlook is unusually sensitive to the revenue forecast. Because current year revenue is expected to fall short of the Referendum C cap, variation in the General Fund revenue forecast will translate to equivalent variation in the amount available for the current year General Fund budget. Recession risk is high. The forecast does not assume a recession; however, economic indicators suggest that a near-term recession is possible. A recession would both reduce revenue and heighten demand for state services. Finally, significant recent changes to federal and state fiscal policy are likely to impact forecast accuracy, with bidirectional possible impacts to the state’s budget outlook.

School Finance Outlook An update to the school finance outlook begins on page 23. FY 2025-26. For FY 2025-26, total program is expected to increase by $252.7 million. The state share will decline by $124.0 million from the FY 2024-25 level based on expected inflation and the rising local share. FY 2026-27. The state aid requirement is expected to increase $334.0 million from the FY 2025-26 level. This assumes total program requirements increase by $294.5 million and the local share decreases by $40.0 million. Total program increases assume a funded pupil count decrease of 8,000, a projected inflation rate of 2.8 percent, and the continued phase-in of the new school finance formula as scheduled in current law. Local share decreases assume that assessed values decrease by $1.8 billion (0.9 percent) and specific ownership tax revenue increases by 3 percent. Phase-in of new formula and State Education Fund ending balance. Current projections for transfers to the State Education Fund are not expected to pause implementation of the new formula in FY 2026-27. Annual increases in the General Fund contribution to school finance of about 6.2 percent are required to achieve State Education Fund ending balances of $200 million in FY 2027-28 and $100 million in FY 2029-30.

September 2025

Executive Summary

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Cash Fund Revenue Preliminary figures from the Office of the State Controller indicate cash fund revenue subject to TABOR totaled just under $2.8 billion in FY 2024-25, a decrease of 1.0 percent from the prior fiscal year. The decrease is mostly attributable to falling severance tax revenue and to House Bill 24-1434, which lowered the amount of sales tax revenue credited to the Housing Development Grant Fund. In the current budget year, cash fund revenue subject to TABOR is expected to increase 11.3 percent from the prior fiscal year to total almost $3.1 billion. The expected increase is mostly attributable to other cash funds, primarily a result of House Bill 25B-1006. Cash fund revenue is expected to increase 5.2 percent and total just over $3.2 billion in FY 2026-27. By FY 2027-28, cash fund revenue is expected to be just over $3.3 billion, a 2.2 percent increase. Discussion of the cash fund revenue outlook begins on page 45.

Economic Outlook More than halfway through the year, the current economic situation for the U.S and Colorado economies is fluid, but most indicators remain stable. Economic output has maintained a moderate pace of growth, unemployment rates remain relatively low, and incomes continue to improve. Though consumer sentiment has weakened over the past few months, spending has been sufficient to keep the economy moving. However, inflation expectations and rapid shifts in federal policy remain top concerns for consumers and businesses. Businesses, faced with the uncertainty of the changing environment and still having to contend with high lending costs, have pulled back their investments and slowed their rates of hiring. While this forecast anticipates the U.S. and Colorado economies will expand though the forecast period, recent weakening in several economic indicators has heightened risks and narrowed the path for continued economic expansion. A near-term recession is possible, though not necessarily imminent and not assumed here. This forecast expects variable federal policies to continue to create uncertainty for consumers and businesses, influencing their behavior, which will have downstream economic impacts. Over the rest of the year, tariffs are likely to reduce trade volumes, put upward pressure on prices, and dampen consumer spending and business investment. Discussion of the economic outlook begins on page 63, and summaries of expectations for the U.S. and Colorado economies are presented, respectively, in Tables 21 and 22 on pages 97 and 98.

September 2025

Executive Summary

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General Fund Budget Overview This section presents the General Fund overview based on current law. The General Fund overview is shown in Table 1. This section also presents the following: 

a budget scenario for FY 2026-27 that incorporates the Governor’s proposed FY 2025-26 balancing actions and General Fund obligations expected under current law (Table 2);



a summary of changes in expectations relative to the July forecast update (Table 3);



a summary of transfers to and from the General Fund (Table 4);



transfers to transportation and capital construction funds (Table 5);



the disposition of fiscal policies dependent on revenue conditions;



General Fund rebates and expenditures (Table 6); and



a complete list of transfers to and from the General Fund (Table 7), other than those included in Table 5.

Legislative Assumptions This forecast is based on current law and incorporates all 2025 legislation that became law, including legislation enacted during the August 2025 special session. The forecast does not account for provisions that would only take effect if voters approve ballot measures at the November election. The forecast incorporates executive action to reduce current year spending through Executive Order D 2025 014, but does not incorporate other budgetary actions requested by the Governor that would require legislation in order to occur.

FY 2024-25 Preliminary reports from the Office of the State Controller were not available in time to incorporate full accounting for the completed fiscal year in the forecast document. Based on available cash accounting data and expected forthcoming accrual adjustments, the General Fund is estimated to have ended FY 2024-25 with a 14.5 percent reserve, $94.8 million below the statutory reserve requirement (Table 1, line 22). General Fund revenue fell by 0.4 percent and totaled $17.18 billion. General Fund revenue was $5.5 million above the estimate in the July forecast update. On August 29, 2025, the State Controller certified a state TABOR surplus of $296.1 million for FY 2024-25. The Controller’s certification also indicated that prior year TABOR refund obligations had been overrefunded as of the end of the fiscal year, such that prior year overrefunds will subtract $2.7 million from the current year obligation. After accounting for prior year overrefunds, the Controller certified a total refund obligation of $293.3 million to be paid in FY 2025-26. The General Fund reserve is now estimated to have fallen short of the statutory reserve requirement by $67.8 million more than anticipated in the July forecast update, mostly due to reported overexpenditures in the Department of Health Care Policy & Financing (see Table 3 on page 15). September 2025

General Fund Budget Overview

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Table 1A Funds Available in the General Fund Dollars in Millions Line 1 2 3 4 5

Funds Available Beginning Reserve General Fund Revenue (Table 12) Transfers from Other Funds (Table 7A) Total Funds Available Percent Change in Funds Available

FY 2024-25 Preliminary

FY 2025-26 Estimate

FY 2026-27 Estimate

FY 2027-28 Estimate

$3,153.5 $17,181.3 $520.0 $20,854.7 5.5%

$2,263.7 $17,174.7 $123.1 $19,561.6 -6.2%

$1,632.8 $18,444.5 $58.9 $20,136.2 2.9%

* $19,461.2 $31.6 * *

Table 1B General Fund Expenditures Dollars in Millions Line

FY 2024-25 Preliminary

Expenditures

FY 2025-26 Budgeted

FY 2026-27 Estimate

FY 2027-28 Estimate

6 General Fund Appropriations Subject to the Limit $15,621.8 $16,537.9 * * 7 Overexpenditure from General Fund $68.6 8 TABOR Refund Obligation (Table 10) $293.3 $0.0 $705.8 $965.8 9 Rebates and Expenditures (Table 6) $187.4 $834.1 $529.5 $304.3 10 Transfers to Other Funds (Table 7B) $1,884.8 $446.5 $458.8 $478.3 11 Transfers to the State Education Fund $146.0 $0.0 $0.0 $0.0 12 Transfers to Transportation Funds (Table 5A) $117.5 $42.7 $61.0 $110.5 13 Transfers to Capital Construction Funds (Table 5B) $254.1 $170.6 $20.0 $20.0 14 Total Expenditures $18,573.5 $18,031.8 * * 15 Percent Change In Funds Available 10.1% -2.9% * * 16 Reversions and Accounting Adjustments -$17.5 $103.0 * * Asterisks ("*") indicate values that are not estimated. Line 11, "Transfers to the State Education Fund," includes transfer pursuant to SB 23B-001. Does not include transfers to the SEF under Amendment 23, which are shown on line 30. Line 16, "Reversions and Accounting Adjustments," indicates reversions of appropriated amounts and other accounting adjustments to arrive at the year-end balance published in the Annual Comprehensive Financial Report. FY 2024-25 includes $2.7 million overrefunded with prior TABOR refund obligations, $15.0 million in revised accrual adjustments for FY 2023-24 Proposition FF revenue, and a $0.2 million reversion required by SB 25-243. FY 2025-26 reflects expected reversions based on the Governor's executive order reducing spending relative to current law appropriations.

Table 1C General Fund Reserve Dollars in Millions Line

Reserve

17 18 19 20 21 22 23

Year-End Reserve in General Fund Year-End Reserve in PERA Total Year-End Reserve Year-End Reserve as a Percent of Appropriations Statutorily Required Reserve Amount in Excess or (Deficit) of Statutory Reserve Excess Reserve as a Percent of Expenditures

FY 2024-25 Preliminary

FY 2025-26 Estimate

FY 2026-27 Estimate

FY 2027-28 Estimate

$2,263.7 $0.0 $2,263.7 14.5% $2,358.5 -$94.8 -0.5%

$1,632.8 $500.0 $2,132.8 12.9% $2,439.4 -$306.7 -1.7%

* * * * * * *

Asterisks ("*") indicate values that are not estimated. Line 21, "Statutorily Required Reserve," calculates the reserve as 15 percent of operating appropriations, minus $41.25 million (beginning in FY 2023-24), plus $56.5 million (for FY 2024-25 only).

September 2025

General Fund Budget Overview

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Table 1D Budget Scenario A: Holds FY 2025-26 Appropriations Constant Dollars in Millions Line 24 25

FY 2024-25 Preliminary

Projected Reserve Under Scenario Amount in Excess or (Deficit) of 15% Reserve Requirement As a Percent of Prior-Year Expenditures

FY 2025-26 Estimate

FY 2026-27 Estimate

FY 2027-28 Estimate

-$116.3 -0.6%

This scenario holds appropriations in FY 2026-27 equal to appropriations in FY 2024-25 (line 6) to determine the total amount of money available relative to FY 2025-26 expenditures, net of the obligations in lines 8 through 13. Line 24 includes the year-end reserve amounts held in the both the General Fund and in PERA.

Table 1E Budget Scenario B: Governor's Proposed FY 2025-26 Balancing Actions and Projected FY 2026-27 Obligations Based on Current Law Dollars in Millions Line 26 27

FY 2024-25 Preliminary

Projected Reserve Under Scenario Amount in Excess or (Deficit) of 15% Reserve Requirement As a Percent of Current-Year Expenditures

FY 2025-26 Estimate

FY 2026-27 Estimate

-$160.2

-$841.1

-0.9%

-4.7%

FY 2027-28 Estimate

For FY 2025-26, this scenario includes the Governor's requested transfers and proposed 1331 supplemental appropriations. For FY 2026-27, this scenario includes annualized costs for 2025 legislation; assumed increases for Medicaid, higher education, community provider rates, and state employee compensation; capital construction and IT capital projects approved to date; and State Architect recommendations for controlled maintenance. See Table 2. Line 26 includes the year-end reserve amounts held in the both the General Fund and in PERA.

Table 1F General Fund Overview Addenda Dollars in Millions Line

Addendum Items

Percent Change in General Fund Appropriations

5% of Colorado Personal Income Appropriations Limit

Transfers to State Education Fund per Amendment 23 Asterisks ("*") indicate values that are not estimated. 30

September 2025

FY 2024-25 Preliminary

FY 2025-26 Estimate

FY 2026-27 Estimate

FY 2027-28 Estimate

13.0%

5.9%

$22,392.7

$23,530.3

$24,659.7

$25,843.4

$1,060.6

$1,036.5

$1,110.8

$1,176.4

General Fund Budget Overview

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FY 2025-26 Incorporating appropriations adopted in the Long Bill and other 2025 regular session and special session legislation, as well as forecast expectations for revenue, transfers, and rebates and expenditures, the General Fund is expected to end FY 2025-26 with a 12.9 percent reserve, $306.7 million below the 15 percent reserve requirement (Table 1, line 22). In addition to normal forecast revisions, any ballot measures approved at the November 2025 election, supplemental appropriations adopted during the 2026 legislative session, and other legislative changes to appropriations and transfers will affect this amount. General Fund revenue collections are expected to remain flat, with increased sales tax, individual income tax, and insurance premium tax offsetting a large decrease in corporate income taxes. After incorporating the fiscal impacts of the federal One Big Beautiful Bill Act (OBBBA), state revenue subject to TABOR is expected to fall short of the Referendum C cap by $215.0 million. Relative to the July forecast update, revenue expectations were increased by $346.7 million, mostly reflecting legislation enacted during the 2025 special session. Error in the General Fund revenue forecast will correspondingly increase or decrease revenue available for the current year General Fund budget, and revenue collections above the forecast could cause the state to incur a TABOR refund obligation.

FY 2026-27 (Unbudgeted) General Fund revenue in FY 2026-27 is expected to grow 7.4 percent, primarily driven by rebounding income tax collections as negative impacts from the OBBBA become less pronounced. State revenue subject to TABOR is expected to exceed the Referendum C cap by $705.8 million. Because a budget has not yet been enacted for FY 2026-27, this forecast presents two scenarios for the General Fund budget outlook. Scenario A: Holds appropriations constant in FY 2026-27. Scenario A, shown in Table 1D, presents the amount of revenue available to be spent or saved in FY 2026-27 assuming that appropriations equal the amount appropriated in FY 2025-26. Based on this forecast, the General Fund will have $116.3 million, or 0.6 percent, less available to spend or save than in FY 2025-26. This amount assumes current law obligations for FY 2026-27, including transfers, rebates, and expenditures (Table 1, lines 9 through 13), as well as the current law reserve requirement and the projected TABOR refund obligation. The estimate is a cumulative amount that reflects the FY 2025-26 budget situation and projected year-end balance. Any changes in revenue or adjustments made to the budget for FY 2025-26 will carry forward into FY 2026-27. This amount holds FY 2025-26 appropriations constant and therefore does not reflect any caseload, inflationary, or other budget pressures. This scenario does not include annualizations of 2025 legislation. It includes Executive Order D 2025 014, which directs executive branch agencies to reduce expenditures for the current year, but does not include other transfers of cash fund revenue to the General Fund, as these require legislation. Scenario B: Proposed FY 2025-26 balancing actions and projected FY 2026-27 obligations. Scenario B, shown in Table 1E, presents the amount of revenue in excess or deficit of the statutory reserve requirement based on the Governor’s proposed FY 2025-26 budget balancing actions and a set of projected changes to appropriations and transfers to accommodate current law budget pressures. The inclusion of Scenario B is illustrative and is not an endorsement of any September 2025

General Fund Budget Overview

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of the listed actions by Legislative Council Staff. Under Scenario B, the General Fund would end FY 2025-26 with a 13.8 percent reserve, $160.2 million below the statutory reserve requirement, and would end FY 2026-27 with a 9.8 percent reserve, $841.1 million below the statutory reserve requirement. Table 2 details the assumptions used to calculate Scenario B. Some additional explanation is provided below. Changes in FY 2025-26 budget. Scenario B includes changes to transfers and appropriations as requested in the Governor’s August 28, 2025, letter to members of the Joint Budget Committee, as well as interim emergency supplemental appropriations (“1331 supplementals”) requested by state agencies. The Governor’s letter identifies $149.2 million in requested one-time transfers from cash funds to the General Fund (Table 2, line 2). Scenario B assumes that spending reductions directed by Executive Order D 2025 014 would be adopted as negative supplemental appropriations (Table 2, line 6), which would also reduce the reserve requirement (Table 2, line 19). Accounting for these reductions as reduced appropriations—as opposed to accounting for them as reversions, as in Scenario A (Table 1, line 16)—results in $100.0 million decrease in projected reversions relative to Scenario A (Table 2, line 21). Finally, Scenario B (Table 2, line 5) incorporates 1331 supplementals requested by the Departments of Personnel ($9.8 million), Public Health and Environment ($2.8 million), and Corrections ($2.8 million). Change in FY 2026-27 beginning balance. Incorporating the changes listed for FY 2025-26, the General Fund would be expected to begin FY 2026-27 with a $133.8 million higher balance than under Scenario A (Table 2, line 3). Changes in FY 2026-27 General Fund appropriations. Scenario B shows how appropriations for the largest areas of General Fund expenditure may change in FY 2026-27. Table 2 shows expenditure assumptions based on JBC Staff analysis of prior year budget actions. Please note that these assumptions may overstate or understate needed cost increases for FY 2026-27. Specifically, these assumptions include:  



   

no increase in General Fund appropriations for school finance as a result of the new diversion to the Kids Matter Account under House Bill 25-1320; $349.0 million in increased General Fund appropriations for the Department of Health Care Policy and Financing for medical services premiums, behavioral health, and the Medicare Modernization Act, among others (Table 2, line 8); $44.8 million in increased General Fund appropriations for higher education institutions, representing a 2.8 percent inflationary increase on the FY 2025-26 base for governing boards and financial aid (Table 2, line 9); $52.6 million in increased General Fund appropriations for community providers, representing the same growth as seen in FY 2025-26 (Table 2, line 10); $95.1 million in increased General Fund appropriations for state employee salaries, representing a 4.0 percent increase (Table 2, line 11); $5.4 million in annualizations of FY 2025-26 decision items for all other departments (Table 2, line 12); and $10.7 million in increased General Fund appropriations for administrative expenses for SNAP benefits as a result of an increased state share of total expenses beginning in Federal Fiscal Year 2027 under the OBBBA (Table 2, line 13).

September 2025

General Fund Budget Overview

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Scenario B also includes out-year cost annualizations for 2025 legislation. Based on LCS final fiscal notes, FY 2026-27 General Fund expenditures for 2025 legislation are expected to be $15.6 million less than FY 2025-26 expenditures (Table 2, line 7). In total, Scenario B shows the budget impact of $542.1 million in additional appropriations in FY 2026-27 compared with Scenario A (Table 2, line 14). With this increase, the scenario also estimates an $81.3 million increase in the statutory reserve requirement (Table 2, line 19). Scenario B does not incorporate the costs for any new state programs receiving General Fund appropriations, which would further reduce the available amount. Table 2 Budget Scenario B: Governor’s Proposed FY 2025-26 Balancing Actions and Projected FY 2026-27 Obligations Based on Current Law Dollars in Millions Line 1

Component Excess Reserve Under Scenario A

Governor’s Proposed FY 2025-26 Transfers In

Change in FY 2026-27 Beginning Balance

Change in Funds Available

FY 2025-26 -$306.7

FY 2026-27 -$116.3

$149.2 $133.8 $149.2

$133.8

5 6

Requested 1331 Supplementals for FY 2025-26 Negative Supplementals for Exec. Order Spending Reductions

$15.4 -$100.0

2025 Legislation Out-Year Cost Annualizations

-$15.6

HCPF (all decision items)

$349.0

Higher Ed. Institutions (2.8% increase based on inflation)

$44.8

Community Providers (same increase as FY 2025-26)

$52.6

Salary Survey (4.0% increase)

$95.1

Estimated Other FY 2025-26 Decision Items Annualizations

$5.4

SNAP Administration Expenses

$10.7

Total Change in Appropriations

-$84.6

$542.1

Out-Year Cost of FY 2025-26 Funded Capital Const. Projects

$25.8

Out-Year Cost of FY 2025-26 IT Capital Projects

$6.7

State Architect Recommendation for Controlled Maintenance

Total Change in Capital Transfers

Change in Required Reserve (15% of Line 14)

20 21 22

Total Change in General Fund Obligations (Line 14 plus Line 18 plus Line 19) Change in Accounting Adjustment: FY 2025-26 reversions (Table 1, Line 16) accounted as reduced appropriations (Table 2, Line 6) Excess Reserve Under Scenario B (Line 1 plus Line 4 minus Line 20 plus Line 21)

$202.6 $0

$235.2

-$12.7

$81.3

-$97.3

$858.5

-$100.0

-$160.2

-$841.1

Source: September 2025 LCS Forecast and Joint Budget Committee Staff.

September 2025

General Fund Budget Overview

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Changes in General Fund transfers for capital projects. Scenario B shows a total of $235.2 million in additional General Fund obligations for transfers to the Capital Construction Fund (Table 2, line 18). The amount includes out-year costs for capital construction (line 15) and IT capital (line 16) projects funded in FY 2025-26, alongside the State Architect’s recommended annual allocation for controlled maintenance spending (line 17), equal to one percent of the current replacement value of state buildings. The costs for new projects funded with General Fund transfers in FY 2026-27 would add to the total amount.

FY 2027-28 (Unbudgeted) Expectations for FY 2027-28 debut with this September forecast. General Fund revenue is projected to increase 5.5 percent and total $19.46 billion, with moderate growth across all revenue streams. State revenue subject to TABOR is expected to exceed the Referendum C cap by just under $1 billion. The amount available for the budget depends on the FY 2026-27 year-end reserve, which will depend on budget decisions made for FY 2026-27.

Risks to the General Fund Budget Outlook The budget outlook is unusually sensitive to the revenue forecast. FY 2025-26 revenue is expected to fall short of the Referendum C cap for the first time since FY 2019-20. In years when state revenue is below the Referendum C cap, variation in the General Fund revenue forecast translates, dollar-for-dollar, into variation in the amount available for the General Fund budget. For reference, the FY 2024-25 revenue was $247.2 million, or 1.5 percent, higher than estimated in the September 2024 LCS forecast. Normal forecast errors of this amount or greater could change the current year budget environment. Recession risk is high. This forecast does not assume a recession, but a weak national labor market, poor construction activity, and rising household debt all signal that the economy is in a precarious position. A recession would both reduce revenue and heighten demand for state services, pinching the budget from multiple angles. OBBBA impacts on revenue are uncertain. This forecast incorporates expected decreases in individual and corporate income tax attributable to new and expanded federal income tax deductions in the OBBBA. The estimates are based on Congressional estimates produced by the Joint Committee on Taxation (JCT), adjusted for Colorado’s share of the U.S. economy and the state’s income tax structure. However, both the adjustment methodology and the underlying JCT estimates likely contain errors of an unknown direction and magnitude. These could affect the budget significantly, especially given the size of the OBBBA adjustments.

Changes Between the July Forecast Update and the September Forecast Table 3 presents revisions to the General Fund budget outlook relative to the July forecast update. These changes are explained below. FY 2024-25. As shown in Table 3, the expected amount of the year-end balance was downgraded by $67.8 million, mostly a result of overexpenditures in the Department of Health Care Policy and Financing (HCPF). The certified TABOR refund obligation was lower than expected, while expenditures for the Old Age Pension program were higher than had been reported in July due to late accounting of a year-end accrual adjustment. September 2025

General Fund Budget Overview

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FY 2025-26. The July forecast update anticipated that the General Fund would end FY 2025-26 with a deficit of $691.9 million relative to the reserve requirement. The outlook for the year-end balance has improved by $385.3 million, such that this September forecast now anticipates a year-end deficit of $306.7 million relative to the reserve requirement. The largest changes are: 

a $67.8 million downgrade to the expected beginning balance, mostly due to HCPF overexpenditures during FY 2024-25;



a $346.7 million upgrade to the General Fund revenue forecast, mostly due to special session legislation anticipated to increase collections from individual income tax, corporate income tax, sales tax, and insurance premium tax; and



a $103.0 million anticipated reversion due to spending reductions directed by Executive Order D 2025 014.

FY 2026-27. Table 3 presents a like-to-like comparison between the FY 2026-27 General Fund budget outlook under Scenario A in the July forecast update and the September forecast. Expectations for revenue available to be spent or saved were increased by $415.8 million, largely as a result of carrying forward a higher expected FY 2025-26 ending balance. Downgrades to the General Fund revenue forecast were mostly offset by a lower expectation for the TABOR refund obligation. Notably, since the forecast does not expect a TABOR surplus for the current FY 2025-26, FY 2026-27 reimbursements for the homestead exemption and for assessed value reductions under Senate Bill 24-111 will be paid from the FY 2026-27 General Fund budget, rather than the FY 2025-26 TABOR refund obligation. For this reason, a reduced forecast for reimbursements for assessed value reductions under SB 24-111 increases the amount of revenue available to be spent or saved in FY 2026-27.

September 2025

General Fund Budget Overview

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Table 3 Changes in the General Fund Budget Relative to the July 2025 Forecast Update (Scenario A) Dollars in Millions, Positive Amounts Reflect an Increase Relative to July Components of Change Funds Available Beginning Reserve General Fund Revenue Transfers from Other Funds

FY 2024-25

FY 2025-26

FY 2026-27

$4.3 $0.0 $5.5

$276.2 -$67.8 $346.7

$327.0 $385.3 -$59.5

-$1.2 $69.4

-$2.8 -$6.1

$1.2 -$88.8

Operating Appropriations and Overexpenditures

$68.6

-$0.1

FY 2024-25 overexpenditure for Health Care Policy and Financing.

TABOR Refund Obligation

-$17.8

$0.0

-$53.0

See Table 10. Reflects Controller’s certification of FY 2024-25 revenue and changes to revenue forecast. See Table 6. Upward revision to Old Age Pension for FY 2024-25. Downward revision to property tax assessed value reductions for FY 2026-27.

Expenditures

Description of Changes Carries forward anticipated year-end balances. See Table 12. Reflects special session legislation. See Table 7.

Rebates and Expenditures

$17.7

$1.3

-$36.4

SEF Transfers Transportation Transfers Capital Const. Transfers Other Cash Fund Transfers Required Reserve

$0.0 $0.0 $0.0 $0.9 $0.0

$0.0 $0.0 $0.0 -$7.3 $0.0

$0.0 $0.0 $0.0 $0.7 $0.0

See Table 5. See Table 5. See Table 7.

Accounting Adjustment

-$2.7

$103.0

$0.0

FY 2024-25 reflects TABOR overrefunds. FY 2025-26 reflects anticipated reversions due to spending reductions directed by executive order.

-$67.8

$385.3

$415.8

Surplus Relative to Required Reserve

September 2025

Nets the above changes.

General Fund Budget Overview

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Summary of Net Transfers Between the General Fund and Cash Funds Statutory transfers to and from the General Fund are presented in lines 3 and 10 through 13 of Table 1. Table 4 groups these transfers and summarizes their impact on the net General Fund position. Detailed General Fund transfers for infrastructure are presented in Table 5. Detailed transfers not included in Table 5 are presented in Table 7 on pages 21 through 22. Table 4 Net Transfers Between the General Fund and Cash Funds Dollars in Millions Transfer Category

Cash Fund Transfers to the General Fund (Table 7A) General Fund Transfers to the State Education Fund (Table 1, Line 12) General Fund Transfers to Transportation Funds (Table 5A) General Fund Transfers to Capital Funds (Table 5B) General Fund Transfers to Other Cash Funds (Table 7B) Net General Fund Transfers

2024-25

2025-26

2026-27

2027-28

$520.0

$123.1

$58.9

$31.6

-$146.0

$0.0

-$117.5

-$42.7

-$61.0

-$110.5

-$254.1

-$170.6

-$20.0

-$1,884.8

-$446.5

-$458.8

-$478.3

-$1,882.4

-$536.6

-$480.9

-$577.3

General Fund Transfers for Transportation and Capital Construction Statutory transfers from the General Fund to transportation and capital construction funds are shown in Table 5. In the General Fund overview shown in Table 1, these transfers are included on lines 12 and 13. Table 5A General Fund Transfers to Transportation Funds Dollars in Millions Bill Number SB 21-260 Total Transfers to Transportation Funds

2024-25 $117.5 $117.5

2025-26 $42.7 $42.7

2026-27 $61.0 $61.0

2027-28 $110.5 $110.5

Table 5B General Fund Transfers to Capital Funds Dollars in Millions Bill Number HB 15-1344 HB 24-1425 SB 24-222 SB 25-262 Total Transfers to Capital Funds

2024-25

2025-26

2026-27

2027-28

$20.0 $232.2 $1.9

$20.0

$150.6 $170.6

$20.0

$254.1

HB 15-1344 transfers are contingent upon requests made by the Capital Development Committee.

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General Fund transfers for transportation. Senate Bill 21-260 directed annual transfers from the General Fund to the State Highway Fund ($107.0 million) and the Multimodal Transportation and Mitigation Options Fund ($10.5 million) beginning in FY 2024-25. Senate Bill 25-257 reduced the State Highway Fund portions of these transfers, such that the total transfer is $42.7 million in FY 2025-26 and $61.0 million in FY 2026-27. Transfers will again total $110.5 million annually beginning in FY 2027-28. General Fund transfers for capital projects. Senate Bill 25-262 makes a one-time, $150.6 million transfer to fund capital projects in FY 2025-26. Ongoing $20.0 million transfers under House Bill 15-1344 occur annually upon requests made by the Capital Development Committee.

Rebates and Expenditures Table 6 on page 18 presents the outlook for rebates and expenditures, which are amounts paid from the General Fund to meet specific constitutional or statutory requirements. While many of these amounts appear in the Long Bill, they are included there for informational purposes only, since state agencies are required by the constitution or statute to pay the full amount of the required expenditure regardless of the budgeted amount. These Long Bill amounts for these items do not contribute to the General Fund reserve requirement as they are not technically appropriations. Table 6 identifies General Fund expenditures to reimburse local governments for property taxes not collected as a result of the homestead exemption and assessed value reductions for qualified senior primary residence property under Senate Bill 24-111. In years when the state pays TABOR refunds, these reimbursements are accounted as TABOR refund mechanism. Because the forecast anticipates that state revenue will fall below the Referendum C cap for FY 2025-26, expenditures for FY 2026-27 will be paid from that year’s General Fund budget, and not the prior year TABOR refund obligation. This forecast also includes a significant downward revision to reimbursements to local governments under SB 24-111, based on preliminary data showing much lower utilization of the program than previously forecast.

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Table 6 General Fund Rebates and Expenditures Dollars in Millions Estimate FY 2025-26 $180.8 -$180.8 4.4%

Estimate FY 2026-27 $194.5 $0.0 7.6%

Property Tax Assessed Value Reductions Portion Accounted as TABOR Refund Mechanism Percent Change in Assessed Value Reductions

$1.3 -$1.3 N/A

$3.5 $0.0 161.4%

Direct Distributions to PERA Percent Change in Direct Distribution to PERA

$664.6 N/A

$165.4 -75.1%

$147.0 -11.1%

Category Senior and Veterans Property Tax Exemptions Portion Accounted as TABOR Refund Mechanism Percent Change in Property Tax Exemptions

Preliminary FY 2024-25 $173.1 -$173.1 7.4%

Estimate FY 2027-28 $201.1 -$201.1 3.4%

Cigarette Rebate Percent Change in Cigarette Rebate

$6.4 -6.4%

$5.1 -19.7%

$5.0 -3.4%

$4.5 -10.0%

Old Age Pension Fund Percent Change in Old Age Pension Fund

$89.7 -3.5%

$90.3 0.7%

$88.5 -2.0%

$85.5 -3.4%

Aged Property Tax and Heat Credit Percent Change in Aged Property Tax and Heat Credit

$16.4 35.5%

$12.8 -22.4%

$13.2 3.7%

$13.5 2.1%

Older Coloradans Fund Percent Change in Older Coloradans Fund

$10.0 0.0%

Interest Payments for School Loans Percent Change in Interest for School Loans

$22.2 -15.3%

$20.9 -5.9%

$19.7 -5.9%

$18.5 -5.9%

Firefighter Pensions Percent Change in Firefighter Pensions

$4.0 -2.6%

$4.1 1.7%

$4.1 0.0%

Amendment 35 Distributions Percent Change in Amendment 35 Distributions

$0.6 -4.9%

$0.6 -4.8%

$0.6 -1.5%

$0.5 -5.8%

Marijuana Sales Tax Transfer to Local Governments Percent Change in Marijuana Tax to Local Gov'ts

$18.6 -4.4%

$6.1 -67.3%

$5.9 -2.8%

$5.9 0.4%

Business Personal Property Exemptions Percent Change in Business Personal Prop. Exemptions

$19.5 18.5%

$19.6 0.5%

$19.2 -2.0%

$18.9 -1.5%

Total Rebates and Expenditures

$187.4

$834.1

$529.5

$304.3

Percent Change in Total Rebates and Expenditures

-22.5%

345.0%

-36.5%

-42.5%

Totals may not sum due to rounding. N/A = Not applicable. Local government reimbursements for property tax exemptions and property tax assessed value reductions are the first and second TABOR refund mechanisms, respectively, used to meet the prior year's refund obligation. Direct distributions to PERA were removed from the General Fund reserve requirement and are first accounted as a rebate and expenditure in FY 2025-26. This line also includes a $500 million warrant in FY 2025-26 only.

Fiscal Policies Dependent on Revenue Conditions Certain fiscal policies are dependent upon forecast revenue conditions. These policies are summarized below. Tax Credit Availability and Amounts In 2023 and 2024, the General Assembly adopted four bills that create income tax credits for which availability and amounts depend on revenue forecasts. Under this September forecast, the tax credits from all four bills are expected to be reduced in tax year 2026 as a result of reduced revenue expectations. The availability and amounts of each tax credit are determined by expectations for growth in revenue subject to TABOR. At the same time, the availability and amounts of these tax credits September 2025

General Fund Budget Overview

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also influence expectations for revenue subject to TABOR by impacting individual income tax revenue. As a result, the order in which the tax credits are evaluated to determine whether revenue conditions are satisfactory to allow the credit to be offered in full can be significant. This forecast evaluates the revenue growth criteria for each tax credit in the order that the actual amounts of the tax credits will be determined throughout the year. For example, the decarbonization tax credits in House Bill 23-1272 were evaluated before the workforce shortage tax credit in House Bill 24-1365 because the actual amounts of the decarbonization tax credits are determined by the June forecast, while the actual amounts of the workforce shortage tax credits are determined by the September forecast. Forecast assumptions for each credit are described in more detail below. Tax credits related to decarbonization in House Bill 23-1272. The bill extends pre-existing income tax credits for electric and plug-in hybrid electric passenger vehicles (through 2028) and trucks (through 2032). It also creates new income tax credits for installation of heat pumps or sales of electric bicycles, both through 2032. Beginning in tax year 2026, credit amounts are reduced by half in tax years where the preceding June forecast from either Legislative Council Staff (LCS) or the Office of State Planning and Budgeting (OSPB) anticipates that state revenue subject to TABOR will grow by less than 4 percent. Based on the growth expectation from the June 2025 LCS forecast, the credit amounts for electric motor vehicles, heat pumps, and electric bicycles will be reduced by half in 2026. Based on this September forecast, the credits are expected to return to the full amounts in tax years 2027 and 2028. Workforce shortage tax credit in House Bill 24-1365. The bill creates a tax credit for tax years 2026 through 2032 for facility improvement and equipment acquisition costs associated with training programs to alleviate worker shortages. Total credit certificates issued for each tax year may not exceed $15 million. This amount is reduced to $7.5 million in tax years where the preceding September forecast from either LCS or OSPB anticipates that state revenue subject to TABOR will grow by less than 4 percent. The trigger first applies based on this September 2025 forecast of revenue for FY 2025-26. Based on this forecast, the revenue cap for the tax credit will be reduced to $7.5 million in tax year 2026. It is expected to return to $15 million in tax years 2027 and 2028. Expanded earned income tax credit in House Bill 24-1134 and family affordability tax credit in House Bill 24-1311. These bills expand the state earned income tax credit (HB 24-1134) and create a family affordability income tax credit (HB 24-1311). Both credits applied unconditionally in tax year 2024. For tax year 2025 and later tax years, the credits in the bills may be reduced based on revenue projections for the fiscal year that begins during the tax year, as projected in the December forecast that is prepared by the agency whose forecast was selected by the Joint Budget Committee (JBC) to balance that fiscal year’s budget. Based on the December 2024 OSPB forecast, both credits are allowed in full for tax year 2025. The availability and amounts of these two credits are determined by the forecasted compound annual growth of state revenue subject to TABOR in any fiscal year assuming that both credits are available in full, in relation to the March 2024 OSPB forecast for FY 2024-25 revenue. Based on that calculation, this forecast expects that both tax credits will be unavailable for tax year 2026. Since the JBC selected the March 2025 OSPB forecast to balance the FY 2025-26 budget, the actual availability of credits for tax year 2026 will depend on the December 2025 OSPB September 2025

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forecast for FY 2026-27 revenue subject to TABOR. Both tax credits are assumed to be available at a reduced level for tax year 2027 (31 percent of the full credit value) and tax year 2028 (13 percent of the full credit value), though actual amounts will depend on future December forecast expectations. Contingent Transfers for Affordable Housing House Bill 19-1322 created conditional transfers from the Unclaimed Property Trust Fund (UPTF) to the Housing Development Grant Fund for affordable housing projects for three fiscal years. House Bill 20-1370 delayed the start of these contingent transfers until FY 2022-23. The transfers are contingent based on the balance in the UPTF as of June 1 and the Legislative Council Staff June 2023 forecast and subsequent June forecasts. For the fiscal year in which the June forecast is published, if revenue subject to TABOR is projected to fall below a “cutoff” amount, equal to the projected Referendum C cap minus $30 million dollars, a transfer will be made. The transfer is equal to the lesser of $30 million or the UPTF fund balance. Based on the June 2023, June 2024, and June 2025 LCS forecasts, no transfers were made for FY 2022-23 through FY 2024-25. Based on this forecast, revenue for FY 2025-26 is expected to be below the cutoff amount, and the full $30 million transfer is expected to be made in June 2026. The actual transfer amount will depend on the June 2026 LCS forecast. If a transfer is made, it will increase cash fund revenue subject to TABOR and bring state revenue closer to the TABOR limit. If revenue does not exceed the TABOR limit, then there is no net impact on the General Fund budget. No transfer is expected for FY 2026-27 or FY 2027-28, as revenue subject to TABOR is expected to come in above the cutoff amount in both years. Partial Refundability of the Conservation Easement Tax Credit Through tax year 2026, the conservation easement income tax credit is available as a nonrefundable credit in tax years when the state does not refund a TABOR surplus. In tax years when the state refunds a TABOR surplus, taxpayers may claim an amount up to $50,000, less their income tax liability, as a refundable credit. The state collected a TABOR surplus in FY 2024-25; therefore, partial refundability of the credit will be available for tax year 2025. The state is not expected to collect a TABOR surplus in FY 2025-26; therefore, partial refundability of the credit is not expected to be available for tax year 2026. Beginning for tax year 2027, the credit is partially refundable in all years under Senate Bill 24-126, and the refundable amount will increase to $200,000 per taxpayer per year.

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Table 7A Cash Fund Transfers to the General Fund Dollars in Millions Bill Number HB 92-1126 HB 05-1262 HB 08-1216 SB 13-133 & HB 20-1400 HB 20-1427 SB 21-213 HB 23-1041 HB 23-1272 HB 24-1413 HB 24-1414 HB 92-1126 HB 05-1262 HB 08-1216 HB 24-1426 SB 25-114 SB 25-260 SB 25-264 SB 25-293 SB 25-312 SB 25-317 All Bills

Transfers to the General Fund Land and Water Management Fund Amendment 35 Tobacco Tax Consumer Outreach and Education Program

2024-25 $0.0 $0.6 $0.0

2025-26 $0.0 $0.6 $0.0

2026-27 $0.0 $0.6 $0.0

2027-28 $0.0 $0.5 $0.0

Limited Gaming Fund

$22.4

$24.1

$28.9

$27.0

2020 Tax Holding Fund Use of Increased Medicaid Match Prohibit Greyhound Wagering Decarbonization Tax Credits Administration Severance Tax Cash Funds COVID Heroes Collaboration Fund Land and Water Management Fund Amendment 35 Tobacco Tax Consumer Outreach and Education Program Controlled Maintenance Trust Fund Financial Literacy and Exchange Fund Household Financial Recovery Pilot Program Various Cash Funds License Plate Cash Fund American Rescue Plan Act Funds Cash Fund Investment Earnings Total Transfers to the General Fund

$4.1 $7.4

$4.1 $1.2

$4.1 $0.0

$23.5 $69.3 $3.6 $0.0 $0.6 $0.0 $48.9 $0.6 $5.2 $171.3 $4.2 $96.8 $62.1 $520.0

$39.4

$4.1 $0.0 $0.1 $25.4

$0.0 $0.6 $0.0

$0.0 $0.5 $0.0

$58.9

$31.6

$53.9

$123.1

Table 7B General Fund Transfers to Other Cash Funds Dollars in Millions Bill Number

Transfers from the General Fund

2024-25

2025-26

2026-27

2027-28

SB 11-047 & HB 13-1001 & SB 23-066 & HB 24-1396

Bioscience Income Tax Transfer to OEDIT

$22.0

$23.0

$24.0

$25.0

SB 14-215 & SB 25-268

Marijuana Tax Cash Fund

$120.5

$121.4

$118.0

$118.4

SB 17-267

State Public School Fund

$21.1

$19.7

$19.2

HB 20-1116 & HB 24-1398

Procurement Technical Assistance Program

$0.2

$243.6

$238.0

$246.6

$250.0

$0.0

SB 22-195

2020 Tax Holding Fund Procurement of Information Technology Resources Conservation District Grant Fund

$0.1

HB 23-1041

Prohibit Greyhound Wagering

$0.03

$0.05

HB 20-1427 SB 22-191

HB 23-1305 Continue Health Benefits in Work-Related Death $0.2 $0.2 SB 23-005 Forestry and Wildfire Mitigation Workforce $1.0 $1.0 $1.0 SB 23-255 Wolf Depredation Compensation Fund $0.4 $0.4 $0.4 SB 22-191 directs transfers of unspent prior year General Fund appropriations for IT procurement. Any transfer amount is already included in General Fund appropriations and not counted again here.

September 2025

General Fund Budget Overview

$1.0 $0.4

Page 21

Table 7B General Fund Transfers to Other Cash Funds Dollars in Millions Bill Number Transfers from the General Fund 2024-25 2025-26 2026-27 2027-28 HB 24-1043 Death and Disability Payment Cash Fund $2.1 $2.1 $2.1 HB 24-1152 ADU Fee Reduction and Encouragement Program $8.0 HB 24-1176 Behavioral and Mental Health Cash Fund $4.0 HB 24-1237 Child Care Facility Development Cash Fund $0.3 HB 24-1280 Welcome, Reception, and Integration Cash Fund $2.5 HB 24-1313 Transit-Oriented Communities Infrastructure Fund $35.0 HB 24-1349 Firearms and Ammunition Excise Tax Cash Fund $3.0 $16.4 $24.3 $32.1 HB 24-1364 Longitudinal Data System Cash Fund $5.0 HB 24-1365 Opportunity Now Grants $4.0 HB 24-1379 Clean Water Cash Fund $0.2 $0.2 HB 24-1386 Broadband Infrastructure Cash Fund $4.6 HB 24-1390 Healthy School Meals for All Program Cash Fund $0.0 HB 24-1397 Creative Industries Cash Fund $0.5 HB 24-1420 Crime Victim Services Fund $4.0 HB 24-1421 Multidisciplinary Crime Prevention Crisis Intervention $3.0 HB 24-1439 Apprenticeship Programs $4.0 HB 24-1466 ARPA Recipient Cash Funds $1,394.6 SB 24-170 America 250 - Colorado 150 Cash Fund $0.3 SB 24-214 State Agency Sustainability Revolving Fund $0.4 SB 24-218 Lineworker Apprenticeship Grant Program Cash Fund $0.8 SB 24-221 Rural Hospital Cash Fund $1.7 HB 25-1209 Marijuana Entrepreneur Fund $0.3 $0.3 SB 25-007 Prescribed Fire Claims Cash Fund $0.3 SB 25-213 Broadband Infrastructure Cash Fund $0.8 SB 25-254 Stationary Sources Control Fund $5.0 SB 25-255 Hazardous Substance Response Fund $6.0 SB 25-268 Marijuana Cash Fund $2.6 $2.5 $2.5 SB 25-269 Infrastructure Investment & Jobs Act Cash Fund $4.0 SB 25-308 Health-Related Social Needs $0.0 $0.0 $0.0 SB 25-310 Death Benefit Fund $5.0 $5.0 $2.0 SB 25-310 Peace Officer Training and Support Fund $15.0 $25.0 All Bills Total General Fund Transfers to Other Cash Funds $1,884.8 $446.5 $458.8 $478.3 Under HB 24-1390, the balance of the Healthy School Meals for All General Fund Exempt Account is transferred to a new cash fund on July 1, 2024. The balance of the account was $0 on that date and no money was transferred. SB 24-214 increased the amount of a transfer to the Energy Fund that occurred in June 2022. The additional amount, $125,000, was deposited in the Energy Fund in FY 2023-24. SB 25-308 directs transfers of unspent General Fund appropriations for health-related social needs. Any transfer amount is already included in General Fund appropriations and not counted again here.

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School Finance Outlook This section presents information on the outlook for school finance for the upcoming budget year (FY 2026-27) and incorporates the following information: 

September 2025 forecasts for income tax diversions to the State Education Fund (SEF), federal mineral lease payments, marijuana tax revenue, and inflation; and



expectations for the continued phase-in of the new school finance formula in FY 2026-27, as passed in House Bill 24-1448 and amended in House Bill 25-1320 and Senate Bill 25-315.

Figure 1 illustrates state and local shares for school funding for FY 2024-25 (actual), FY 2025-26 (budgeted), and FY 2026-27 (projected). Figure 1 Expectations for School Finance Funding Dollars in Millions Total Program: +$253 million Total Program: +$295 million

$7,000 $6,000

State Share

$5,000

$5,592

$4,000

Local Share $4,187

State Share -$124 million $5,468 Local Share +$377 million

$4,563

State Share +$334 million $5,802

Local Share -$40 million $4,524

$3,000 $2,000 $1,000 $0

Actual FY 2024-25

Budgeted FY 2025-26

Projected FY 2026-27

Summary For FY 2025-26, total program is expected to increase by $252.7 million. The state share will decline by $124.0 million on a year-over-year basis as a result of the inflationary increase in total program and the expected increase in the local share. For FY 2026-27, the state share requirement is expected to increase by about $334.0 million on a year-over-year basis, due to the following factors: 

Total program requirements will increase by $294.5 million in FY 2026-27. This projection is based on an expected decrease in the funded pupil count of about 8,000, a projected inflation rate of 2.8 percent, and continued phase-in of the new school finance formula. The decrease in funded pupil count includes the repeal of the Accelerating Students Through Concurrent Enrollment (ASCENT) program through SB 25-315.

September 2025

School Finance Outlook

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

The local share will decrease by $40.0 million on a year-over-year basis. This assumes assessed values decrease by $1.8 billion (0.9 percent) relative to FY 2025-26, while specific ownership tax collections increase by 3 percent. Local share changes are discussed more below.

New School Finance Formula HB 24-1448 created a new school finance formula to distribute funding to school districts. It was amended by HB 25-1320 and SB 25-315. The first year of implementation of the new formula is FY 2025-26, and it will continue to be phased in over seven years until FY 2031-32. Implementation of the formula is paused if any of the following conditions are met: 

the change in local share of total program is less than inflation minus 2 percent over the prior year in a property tax assessment year;



the local share decreases by at least 2 percent in a property tax non-assessment year; or



the March revenue forecast used by the Joint Budget Committee for the budget predicts that the income tax diversion to the SEF will decrease by 5 percent or more in the current or next budget year, as long as that decrease is not the result of a correction to an error in the amount of income tax revenue deposited in the SEF.

Bills passed during the special session in August 2025 made several changes to state taxable income beginning in tax year 2025. Based on current forecasts, the year-over-year change in the income tax diversion to the SEF is expected to be -2.4 percent in FY 2025-26. As a result, these changes are not expected to pause the implementation of the new formula in FY 2026-27. In addition, HB 25-1320 specified that beginning in FY 2027-28, the new formula will use a threeyear averaging of student counts, except that if the SEF balance falls below $200 million, the formula will use a two-year averaging of student counts, or a smoothing factor. Whether this $200 million threshold is met depends on future General Fund contributions and other student count and formula implementation provisions in state law.

Enrollment Enrollment is a major determinant of required total program formula funding, as funding is allocated on a per pupil basis. This update assumes FY 2026-27 enrollment estimates from the December 2024 LCS forecast for K-12 enrollment, adjusted for the repeal of the ASCENT program. In addition, HB 25-1320 modified the averaging provision used in the calculation of a district’s funded pupil count, which is used to allocate funding. In FY 2025-26, a district’s pupil count includes a four-year averaging provision where a district may use the greater of the current year count, or a two-year, three-year, or four-year average of the October counts. Beginning in FY 2026-27, district pupil count will move to a three-year averaging provision, unless the new formula is not phased in to 30 percent, in which case the four-year averaging provision is maintained. The funded pupil count in FY 2026-27, is expected to be 837,957, a decrease of 8,000 FTE compared to FY 2025-26. These estimates assume three-year averaging will be utilized, and will be updated in December 2025. September 2025

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Local Share Assessed values on real property determine a school district’s property tax base, which, along with a school district’s total program mill levy, is the major determinant of the local share of school district funding, along with specific ownership taxes. This forecast assumes assessed value estimates from the December 2024 LCS forecast. Assessed values are expected to total $190.4 billion in FY 2026-27, a decrease of 0.9 percent from the prior year. In FY 2026-27, the local share is expected to be $4.5 billion. This represents a year-over-year decrease of $40 million, or 0.9 percent. Similar to K-12 enrollment, assumptions for assessed values will be updated in December 2025.

State Education Fund Revenue to the SEF The Colorado Constitution requires the SEF to receive one-third of one percent of taxable income. The SEF is expected to receive $1.0 billion in FY 2025-26 and $1.1 billion in FY 2026-27 from the requirement. Slightly higher amounts are expected in the following years of the forecast. In addition, HB 25-1320 added an annual contribution to the Kids Matter Account within the SEF of 65 percent of one-tenth of 1 percent of federal taxable income beginning in FY 2026-27. Figure 2 shows a history and forecast for revenue sources to the SEF through the end of the forecast period. Figure 2 Revenue to the State Education Fund Dollars in Millions

$1,600 $1,400

Transfer totals in bold Kids Matter Account Other Transfers Constitutionally Required $1,268

$429

$1,200

$992

$1,000 $800 $600 $400 $200

$1,496

$687

$1,209

$274

$1,327

$1,207 $146

$1,036

$217

$1,061

$1,036

$1,111

$1,406 $229

$118

$40

$647

$875

$994

$1,066

$1,209

$1,176

Source: Office of the State Controller and Legislative Council Staff forecast. p = Preliminary. f = Forecast. “Other transfers” includes transfers under SB 19-246 for FY 2019-20, HB 20-1420 for FY 2020-21 and FY 2021-22, HB 20-1427 for FY 2020-21 through FY 2022-23, SB 21-208 for FY 2021-22, HB 22-1390 for FY 2022-23, and SB 23B-001 for FY 2024-25. The constitutional transfers in FY 2023-24 include a one-time increase of $135.1 million to adjust for under-transfers in prior years.

September 2025

School Finance Outlook

Page 25

Expenditures from the SEF Historically, the General Assembly has increased the General Fund contribution each year, doing so in 10 of the last 13 years. In FY 2023-24 and FY 2024-25, the General Assembly held the General Fund contribution constant with the level from the prior year, largely due to the historically high balance in the SEF and the large increases in the local share. In FY 2025-26, the General Assembly increased the General Fund contribution by $150 million. Table 8 shows the projected SEF contributions to school finance and the associated ending balances in the SEF for FY 2025-26 through FY 2029-30, for each of the following General Fund contribution scenarios: 

Scenario 1: General Fund increases by a constant $150 million annually;



Scenario 2: General Fund grows proportionately to the historical growth in overall General Fund appropriations (about 5 percent annually);



Scenario 3: General Fund grows proportionately to the historical General Fund contribution to the state share of total program (4.2 percent annually); and



Scenario 4: General Fund grows at a rate necessary to maintain a $200 million ending balance in FY 2027-28 and a $100 million ending balance in FY 2029-30 (6.2 percent annually).

Estimates beyond FY 2026-27 have significantly elevated uncertainty, which increases with each additional year. Additionally, these scenarios assume a contribution from the State Public School Fund of $167 million in FY 2026-27 and about $94 million after that through FY 2029-30. The elevated contribution amounts from the State Public School Fund are from revenue exceeding the Public School Capital Construction Assistance Fund revenue cap created in HB 25-1320. Table 8 State Education Fund End Balances Under Four Scenarios Based on varying General Fund contributions to school finance Scenario

FY 2025-26

Scenario 1 Constant GF Increase ($150M annually) $546 million

Scenario 2 Historical GF Appropriation Growth (5% Growth) $546 million

Scenario 3 Historical GF Contribution Growth (4.2% Growth) $546 million

Scenario 4 Needed to Maintain $100M SEF Balance (~6.2% Growth) $546 million

FY 2026-27

$222 million

$291 million

$256 million

$345 million

FY 2027-28

-$165 million

$55 million

-$54 million

$222 million

FY 2028-29

-$670 million

-$209 million

-$433 million

$139 million

FY 2029-30

-$1,309 million

-$502 million

-$886 million

$100 million

Description

As shown in Table 8, the four scenarios result in the following impact on the fund balance: 

Scenario 1: If the General Fund contribution consistently increases by $150 million annually, the existing balance in the SEF will be completely expended in three years.



Scenario 2: If the General Fund contribution grows proportionately to historical growth in overall GF appropriations (about 5 percent annually), the SEF balance is expended over a four-year period.

September 2025

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

Scenario 3: If the General Fund contribution grows proportionately with historical contributions (an average of 4.2 percent annually), the balance is expended in three years.



Scenario 4: If the General Fund contribution grows by 6.2 percent annually, the SEF hits the $200 million ending balance threshold in FY 2027-28 and maintains a balance of $100 million at the end of the forecast period.

It should be noted that the estimates for the first three options likely overstate the reduction in the SEF end balance that will actually occur as in the out years as they do not account for potential changes to student count averaging or the implementation of the smoothing factor contemplated under current law.

School Finance Appropriations The final appropriation for the state share of school finance in FY 2025-26 will be made through the passage of the mid-year supplemental bill for the Colorado Department of Education. The initial appropriation for state aid in FY 2026-27 will be made through the passage of the 2026 Long Bill and 2026 School Finance Act.

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TABOR Outlook The state TABOR outlook is presented in Table 10 and illustrated in Figure 3, which also provides a history of the TABOR limit base and the Referendum C cap. In FY 2024-25, state revenue subject to TABOR exceeded the Referendum C cap, creating a state obligation for TABOR refunds to taxpayers in FY 2025-26. Revenue is expected to fall short of the cap in FY 2025-26 before exceeding the cap once again in FY 2026-27 and FY 2027-28, creating a state obligation for TABOR refunds to be paid to taxpayers in each of FY 2027-28 and FY 2028-29. Figure 3 TABOR Revenue, TABOR Limit Base, and the Referendum C Cap Dollars in Billions $22 $21 $20 $19 $18 $17 $16 $15 $14 $13 $12 $11 $10 $9 $8 $7

Amounts Above/(Below) the Referendum C Cap: FY 2024-25: $296.1 million FY 2025-26: -$215.0 million FY 2026-27: $705.8 million FY 2027-28: $965.8 million Referendum C Cap

TABOR Surpluses

Bars Represent Revenue Subject to TABOR TABOR Limit Base

Source: Office of the State Controller and Legislative Council Staff. p = preliminary; f = Forecast. The refund amount for FY 2024-25 differs from the surplus amount because it includes $2.7 million in over-refunds from prior TABOR surpluses.

FY 2024-25 On September 1, 2024, the State Controller certified that state revenue subject to TABOR exceeded the Referendum C cap by $296.1 million in FY 2024-25. The state refund obligation totals $293.3 million in the current FY 2024-25 and includes an adjustment attributable to overrefunds of prior TABOR surpluses ($2.7 million). The FY 2024-25 surplus is expected to be refunded to taxpayers via the refund mechanisms in current law, which are explained in greater detail below.

Forecasts for FY 2025-26 through FY 2027-28 In FY 2025-26, state revenue subject to TABOR is projected to fall below the Referendum C cap by $215.0 million, and the state will not incur an obligation for TABOR refunds. As a result, no refunds to taxpayers are expected to be made via property tax exemptions and assessed value reductions, or refunds using the income tax form. The state obligation to reimburse counties for September 2025

TABOR Outlook

Page 29

homestead exemptions and assessed value reductions, an estimated $198 million, will be paid from General Fund revenue rather than TABOR surplus dollars in FY 2026-27. Revenue is projected to exceed the Referendum C cap by $705.8 million in FY 2026-27, and by $965.8 million in FY 2027-28. Refunds of those amounts are expected to be returned to taxpayers in the fiscal year following the collection of each surplus. The actual refund obligation in any given year will incorporate any over- or under-refund of prior year surpluses. Relative to the July forecast update, expectations for revenue subject to TABOR were increased by about $600 million in FY 2025-26, reflecting increased expectations for both cash fund and General Fund revenue subject to TABOR. General fund revenue was revised upward primarily as a result of upward revisions to corporate income tax revenue due to legislation passed during the 2025 special session. Expectations for revenue subject to TABOR were largely unchanged for FY 2026-27, and expectations for FY 2027-28 debut with this forecast. The forecast includes adjustments for qualification and disqualification of enterprises. The Front Range Waste Diversion Enterprise was repealed by House Bill 24-1449, and is therefore disqualified as a TABOR enterprise starting in FY 2024-25. The Waste Tire Management Enterprise is created as an enterprise starting in FY 2025-26 by Senate Bill 24-123, and moves the fees collected on the sale of new tires into the enterprise. The forecast assumes the disqualification of the Healthy Insurance Affordability Enterprise also for FY 2025-26, and its requalification for FY 2026-27. When an institution is disqualified as an enterprise, its fee revenue becomes subject to TABOR, and an upward adjustment is made to the TABOR limit base and the Referendum C cap. Likewise, when an institution is requalified or newly qualified as an enterprise, its existing fee revenue is subtracted from the TABOR limit base and the Referendum C cap. Enterprise qualification and disqualifications resulted in net adjustments of $13.1 million in FY 2024-25, $134.3 million in FY 2025-26, and -$143.0 million in FY 2026-27. The amounts presented above do not include the TABOR (3)(c) refund obligation for Proposition FF revenue exceeding the 2022 Blue Book estimate in FY 2023-24. This amount is payable unless voters approve Proposition LL in November 2025, which would allow the state to retain this revenue. It is assumed that this refund obligation will be administered differently than the TABOR (7)(d) refund obligations that arise when state revenue exceeds the TABOR limit. There is no mechanism in current law to refund this excess to taxpayers.

Risks to the Forecast Estimates of the TABOR surplus and TABOR refund obligation represent the amount by which state revenue subject to TABOR is expected to exceed the Referendum C cap. Therefore, any error in the General Fund or cash funds revenue forecasts will result in an error of an equal amount in the TABOR refund forecast. Any forecast error for inflation or population growth will also impact the TABOR situation by resulting in higher or lower allowable growth in the Referendum C cap. TABOR surpluses mitigate risks to the General Fund budget from the impacts of lower-than-expected General Fund revenue. Currently projected TABOR surpluses in FY 2026-27 and FY 2027-28 range between 3.3 and 4.3 percent of revenue subject to TABOR, which is well within normal error for forecasts beyond the current fiscal year. A reduction in General Fund revenue relative to forecast expectations will result in a smaller obligation for TABOR refunds, September 2025

TABOR Outlook

Page 30

and will impact the budget if the error is great enough to erase the projected TABOR surplus. Likewise, error in the forecast for cash fund revenue subject to TABOR also poses a risk to the outlook for the General Fund budget. Greater-than-expected revenue from cash fund sources would increase the General Fund obligation for TABOR refunds, thereby reducing the amount available for the budget. As revenue subject to TABOR is currently projected to fall below the Referendum C cap in FY 2025-26, any reduction in General Fund revenue will impact the budget, while an increase in revenue from cash fund sources may not reduce available budget space, if total revenue remains below the Referendum C cap.

TABOR Refund Mechanisms TABOR refund mechanisms and expected refund amounts are shown in Figure 4. Current state law includes two ongoing refund mechanisms for FY 2024-25 and beyond. There are additionally two refund mechanisms established in Senate Bill 24-228 for FY 2023-24 through FY 2033-34, and one additional temporary refund mechanism established in Senate Bill 24-111 for FY 202425 and FY 2025-26. These refund mechanisms are discussed below. The first ongoing refund mechanism that applies for each year in the forecast period is the local government reimbursement for homestead property tax exemptions for seniors, veterans with a disability, and Gold Star spouses. Based on this forecast, this mechanism is expected to be used for tax years 2025, 2027, and 2028. Senate Bill 24-111 established a new refund mechanism used to refund the TABOR surplus collected for FY 2024-25 and FY 2025-26 through reductions in the assessed value of owner-occupied senior primary residences for those who have previously qualified for the existing senior homestead exemption but who are currently ineligible because they moved. Local governments’ foregone property tax revenue as a result of the bill is reimbursed by the state government. Figure 4 includes this mechanism with the “Property Tax Refunds” label. The mechanism is estimated to refund $1.3 million in property tax year 2025. As discussed above, revenue subject to TABOR is expected to fall below the Referendum C cap in FY 2025-26. This means that the homestead property tax reimbursements, which are expected to total $194.5 million, and the additional property tax reimbursements under SB 24-111, which are expected to total $3.5 million, will be paid from General Fund revenue rather than the TABOR refund obligation in property tax year 2026. The temporary income tax rate reduction is expected to apply for tax years 2027 and 2028 as the second TABOR refund mechanism after property tax refunds. The income tax rate will be reduced from 4.40 percent to 4.33 percent in tax year 2027 and to 4.29 percent in tax year 2028, based on the expected amounts of the TABOR surplus remaining after property tax refunds in FY 2026-27 and FY 2027-28. This forecast anticipates that the income tax rate reduction mechanism will not be triggered in tax years 2025 or 2026. In subsequent years, the amount of the income tax rate reduction that is triggered depends on the amount of the TABOR surplus remaining after reimbursements to local governments for property tax exemptions.

September 2025

TABOR Outlook

Page 31

The six-tier sales tax refund mechanism is expected to apply for tax years 2025, 2027 and 2028 with refund amounts based on taxpayer incomes, as average refunds per taxpayers are projected to exceed the $15 threshold to trigger identical sales tax refunds. While SB 24-228 established a higher threshold for triggering identical sales tax refunds, that change is contingent upon an Internal Revenue Service ruling that has not yet been made. Hence, this forecast assumes the current law threshold remains at $15 per person throughout the forecast period, pending further information. Table 9 on page 33 presents estimated six-tier sales tax refund amounts for tax years 2025, 2027, and 2028. Figure 4 Expected TABOR Refunds and Refund Mechanisms Dollars in Millions $1,200

$1,000 $800

Income Tax Rate Reduction: 4.33% in 2027 $705.8 4.29% in 2028

$600

$270.0

$400

$293.3

$200

$111.2

$0 Refunds for: In Tax Year:

$182.1 2024-25 2025

$234.7 $0.0

$0.0 2025-26 2026

$965.8 $376.4

Six-tier Sales Tax Refunds

$381.6

$201.1

$207.8

2026-27 2027

2027-28 2028

Property Tax Refunds

Source: Legislative Council Staff September 2025 forecast. ”Property tax refunds” includes the homestead exemption for seniors, veterans, and Gold Star Spouses, and, for FY 2024-25, property tax reimbursements to local governments under SB 24-111.

Refunds made via property tax reductions reduce obligations that would otherwise be paid from General Fund revenue. Refunds made via the income tax rate reduction or sales tax refunds are paid to taxpayers when they file their state income tax returns. TABOR refund mechanisms are accounted for as an offset against the amount of surplus revenue restricted to pay TABOR refunds, rather than as a revenue reduction. Therefore, the General Fund revenue forecast does not incorporate downward adjustments as a result of refund mechanisms being activated.

September 2025

TABOR Outlook

Page 32

Table 9 Projected TABOR Refunds via the Six-Tier or Identical Sales Tax Refund Mechanisms Tax Year 2025 Refunds from FY 2024-25 TABOR Refund Obligation Taxpayer Distribution by AGI up to $54,000 $54,001 to $110,000 $110,001 to $176,000 $176,001 to $250,000 $250,001 to $329,000 $329,001 and up

Single Filers $20 $26 $30 $36 $38 $62

Joint Filers $40 $52 $60 $72 $76 $124

Tax Year 2026 Refunds from FY 2025-26 TABOR Refund Obligation Taxpayer Distribution by AGI up to $56,000 $56,001 to $114,000 $114,001 to $182,000 $182,001 to $258,000 $258,001 to $340,000 $340,001 and up

Single Filers $0 $0 $0 $0 $0 $0

Joint Filers $0 $0 $0 $0 $0 $0

Tax Year 2027 Refunds from FY 2026-27 TABOR Refund Obligation Taxpayer Distribution by AGI up to $57,000 $57,001 to $117,000 $117,001 to $187,000 $187,001 to $265,000 $265,001 to $349,000 $349,001 and up

Single Filers $47 $62 $72 $85 $92 $148

Joint Filers $94 $124 $144 $170 $184 $296

Tax Year 2028 Refunds from FY 2027-28 TABOR Refund Obligation Taxpayer Distribution by AGI up to $59,000 $59,001 to $120,000 $120,001 to $192,000 $192,001 to $272,000 $272,001 to $358,000 $358,001 and up

Single Filers $65 $87 $100 $118 $127 $205

Joint Filers $130 $174 $200 $236 $254 $410

AGI = Adjusted gross income. Note: Amounts do not include estimates for reimbursements to local governments for property tax exemptions or for income tax rate reductions.

September 2025

TABOR Outlook

Page 33

Table 10A State Revenue Subject to TABOR Dollars in Millions Line 1 2

Preliminary FY 2024-25 $16,680.4 $2,769.1 $19,449.4

TABOR Revenue General Fund Revenue Cash Fund Revenue Total TABOR Revenue

Estimate FY 2025-26 $16,684.7 $3,082.3 $19,767.1

Estimate FY 2026-27 $17,958.1 $3,241.5 $21,199.6

Estimate FY 2027-28 $18,967.0 $3,312.4 $22,279.4

3 Line 1, General Fund Revenue, differs from the amount in the General Fund revenue summary because of accounting adjustments across TABOR boundaries.

Table 10B TABOR Revenue Limit Dollars in Millions Line 4

Revenue Limit

Preliminary FY 2024-25

Estimate FY 2025-26

Estimate FY 2026-27

Estimate FY 2027-28

5.9%

3.6%

3.3%

4.0%

Allowable TABOR Growth Rate Inflation (from Prior Calendar Year)

5.2%

2.3%

2.8%

3.4%

Population Growth (from Prior Calendar Year)

0.6%

1.4%

0.5%

0.6%

TABOR Limit Base

$15,462.7

$16,158.5

$16,544.0

$17,205.8

Voter Approved Revenue Change (Referendum C)

$3,690.7

$3,608.6

$3,949.8

$4,107.8

Total TABOR Limit / Referendum C Cap TABOR Revenue Above or Below Ref. C Cap

$19,153.4 $296.1

$19,982.1 -$215.0

$20,493.8 $705.8

$21,313.5 $965.8

Line 9, Total TABOR Limit, assumes that all enterprises will maintain enterprise status. If an enterprise is disqualified, both revenue subject to TABOR and the Referendum C cap will have equal upward adjustments.

Table 10C Revenue Retained and Refunded Under TABOR Dollars in Millions Preliminary FY 2024-25

Estimate FY 2025-26

Estimate FY 2026-27

Estimate FY 2027-28

Line

Retained/Refunded Revenue

Revenue Retained under Referendum C

$3,690.7

$3,608.6

$3,949.8

$4,107.8

Fiscal Year Spending

$19,153.4

$19,767.1

$20,493.8

$21,313.5

Prior Year Overrefund Amount

Revenue Refunded to Taxpayers

$0.0

$705.8

$965.8

-$2.7 $293.3

Line 11, "Revenue Retained under Referendum C", is referred to as "General Fund Exempt" in the budget. Line 13, "Outstanding Overrefund Amount," represents overrefunds from prior years.

Table 10D TABOR Reserve Requirement Dollars in Millions Line

Reserve Requirement

TABOR Reserve Requirement

September 2025

Preliminary FY 2024-25

Estimate FY 2025-26

Estimate FY 2026-27

Estimate FY 2027-28

$574.6

$593.0

$614.8

$639.4

TABOR Outlook

Page 34

General Fund Revenue This section presents the outlook for General Fund revenue, the state’s main source of funding for discretionary operating appropriations. The three primary sources of General Fund revenue are individual income tax, sales tax, and corporate income tax collections. Other sources of General Fund revenue include excise taxes (retail marijuana, tobacco, and liquor), insurance premium tax, pari-mutuel tax, court receipts, and investment income. Table 12 on pages 43 through 44 summarizes General Fund revenue collections for FY 2024-25 and projections for FY 2025-26 through FY 2027-28; these are also illustrated in Figure 5, below. The forecast incorporates adjustments to the forecast for legislation enacted during the 2025 regular session, H.R. 1 - the One Big Beautiful Bill Act (OBBBA), and legislation enacted in the 2025 special session. Figure 5 General Fund Revenue Sources $19.5

$18.4

$17.2

$18.0

$17.3

$14.3

$12.9

$12.6

$11.7

$10.3

$9.8

$9.0

$7.1 FY 2010-11

$8.5

$6.4 FY 2009-10

$7.7

$6.7 FY 2008-09

$7.7

$10

$7.5

$15

$10.0

$20

$17.7

Billions of Dollars

Other Corporate Income Sales

Individual Income

FY 2027-28f

FY 2026-27f

FY 2025-26f

FY 2024-25p

FY 2023-24

FY 2022-23

FY 2021-22

FY 2020-21

FY 2019-20

FY 2018-19

FY 2017-18

FY 2016-17

FY 2015-16

FY 2014-15

FY 2013-14

FY 2012-13

FY 2011-12

FY 2007-08

FY 2006-07

Amounts shown for FY 2025-26 through FY 2027-28 are forecasts. FY 2024-25 is preliminary. The segment labeled “Other” includes: use tax; retail marijuana special sales tax; cigarette, tobacco, and liquor excise taxes; Proposition EE tobacco taxes; firearms and ammunition tax; insurance premium tax; pari-mutuel wagering tax; court receipts; investment income; and miscellaneous small sources that are not forecasted independently. Source: Office of the State Controller and Legislative Council Staff September 2025 forecast.

Based on preliminary data, the state collected $17.18 billion in General Fund revenue, a 0.4 percent decline compared to the prior year. The drop in revenue was largely due to individual income tax revenue, the largest component of General Fund revenue, which fell slightly following the enactment of large income tax credits during the 2024 legislative session. Corporate income tax revenue also fell in FY 2024-25, declining 6.3 percent from record highs posted in the prior year. Sales tax revenue finished the year up 1.8 percent, a sluggish pace of growth compared to its historical average. General Fund revenue is projected to fall slightly by $6.5 million in FY 2025-26 compared to FY 2024-25 as the OBBBA takes effect, reducing total income tax revenue. Individual income tax September 2025

General Fund Revenue

Page 35

revenue is expected to increase modestly in FY 2025-26 and rebound to a faster pace of growth in FY 2026-27 and FY 2027-28, representing a small upward revision relative to the July forecast update. Corporate income taxes are expected to fall significantly in the current fiscal year following record highs, despite a $203.9 million upward revision due to legislation enacted in the 2025 special session. Sales tax revenue growth is expected to be modest in FY 2025-26 as consumer sentiment deteriorates, partially offset by revenue increases from House Bill 25B-1005. General Fund revenue is expected to reach $19.46 billion by the end of the forecast period in FY 2027-28. Risks to the General Fund revenue forecast are elevated as economic conditions and the revenue impacts of the OBBBA are highly uncertain. Income tax credits that depend on revenue conditions also represent risks to the forecast, with relatively small changes in projected growth potentially making significant changes to credit amounts and availability. Stronger-thanexpected wage gains due to lower interest rates could boost sales and income tax collections above the amounts projected in this forecast. Downside risks include a weak labor market and households pulling back on spending due to high uncertainty and poor household finances, each of which would result in lower General Fund collections.

Income Tax Taxable income earned by all Colorado individuals and corporations is taxed at one flat rate. Proposition 121 reduced the income tax rate from 4.55 percent to 4.40 percent beginning in tax year 2022. Income tax revenue is credited to the General Fund and is subject to TABOR, except that: 

an amount equal to one third of one percent of taxable income is transferred to the State Education Fund (SEF) and exempt from TABOR under Amendment 23, approved by voters in 2000;



an amount equal to one-tenth of one percent of taxable income is transferred to the State Affordable Housing Fund and exempt from TABOR under Proposition 123, approved by voters in 2022;



an amount equal to 65 percent of one-tenth of one percent of federal taxable income is diverted to the Kids Matter Account in the SEF under the School Finance Act in House Bill 25-1320, starting in FY 2026-27; and



non-corporate taxpayers with adjusted gross incomes over $300,000 are required to add back a portion of their federal standard or itemized deductions when computing their Colorado taxable income. Revenue attributable to this addition is deposited into the Healthy School Meals for All Cash Fund, exempt from TABOR, and required to be spent for the healthy school meals program created in Proposition FF, approved by voters in November 2022.

This section presents forecasts separately for income taxes paid by individuals and non-corporate businesses, and for income taxes paid by corporations.

September 2025

General Fund Revenue

Page 36

Individual Income Tax Individual income tax revenue is the largest source of General Fund revenue, accounting for about 53 percent of revenue to the General Fund in FY 2024-25, before accounting for the SEF and affordable housing transfers. FY 2024-25. Individual income tax collections declined by 0.5 percent in FY 2024-25, to total $10.00 billion before the SEF and affordable housing transfers. Revenue was $5.6 million less than expected in the July forecast update due to revisions of preliminary data. For most taxpayers, final payments for tax year 2024 were due in April 2025. While data on final payments are incomplete, available data suggest that net tax receipts for the 2024 tax year were up by 3 percent compared with 2023 net tax receipts. Table 11 presents net tax receipts for tax years 2023 and 2024, including forecast expectations for the remaining final payments for tax year 2024. As shown in Table 11, an increase in cash with returns, withholding, and estimated payments more than offset a significant increase in refunds, driven by the expanded earned income tax credit established in House Bill 24-1134, and the family affordability tax credit established in House Bill 24-1311. Both refunds and cash with returns are expected to remain elevated as state and federal tax policy changes continue to impact taxpayers’ ability to anticipate tax liability. Table 11 Individual Income Tax Receipts by Source, Tax Years 2023 and 2024 Dollars in Millions Actual TY 2023

Estimated TY 2024

Percent Change

Withholding

$9,559

$10,119

5.9%

Estimated Payments

$1,369

$1,547

13.0%

Cash With Returns

$1.458

$2,054

40.9%

Refunds

-$2,194

-$3,190

45.4%

Total

$10,192

$10,531

3.3%

Source: Office of the State Controller; Department of Revenue; and September 2025 Legislative Council Staff forecast. For illustrative purposes, withholding and estimated payments for a tax year show receipts between February of that year and January of the following year. Cash with returns and refunds for a tax year show transactions between January and December of the following year. Tax received during these time periods may be for the current or any prior tax year, but are assumed to be representative of the tax years indicated. Cash with returns and refunds for tax year 2024 include preliminary data for August 2025 and forecasted transactions for September through December 2025. TABOR refund amounts that reduced final payments are added to refunds.

Forecast for FY 2025-26. Individual income tax revenue is expected to increase by 2.8 percent in FY 2025-26, to total $10.28 billion before the SEF and affordable housing transfers. Expectations for revenue were increased by $46.4 million relative to the July forecast update. The upgrade primarily reflects the impacts of House Bill 25B-1001, which extends the state addback for federal income tax deductions for qualified business income starting in tax year 2025, and September 2025

General Fund Revenue

Page 37

increases expectations for estimated payments offsetting reduced expectations for withholding and cash with returns. Forecasts for FY 2026-27 and FY 2027-28. Individual income tax collections are expected to grow by 12.4 percent in FY 2026-27 to $11.55 billion, and by 5.8 percent in FY 2027-28 to $12.22 billion. Relative to the July forecast update, this represents an upward revision of $18.4 million in FY 2026-27, with expectations for FY 2027-28 debuting with this forecast. These revisions are driven largely by increased expectations for FY 2025-26 revenue, which carries forward into FY 2026-27 and FY 2027-28. In addition, this forecast incorporates tax year 2028 expectations for certain income tax credits that are conditional on revenue expectations. Neither the family affordability tax credit nor the expanded earned income tax credit are projected to be available in tax year 2026, and both credits are projected to be partially available in tax years 2027 and 2028. The July forecast update had anticipated that both of these tax credits would be unavailable in tax year 2027. Tax credits being partially rather than fully available results in smaller income tax refunds, which are a subtraction from total income tax revenue. Accordingly, expected growth in FY 2027-28 revenue is higher than would have been the case had conditional tax credits been expected to be available in their maximum amounts. The workforce shortage tax credit established in House Bill 24-1365 is required to be reduced by half in tax year 2026 based on this September forecast. Additionally, the innovative motor vehicle and innovative truck credit, the heat pump and thermal energy network tax credit, and the electric bicycle tax credit established in House Bill 23-1272 will only be partially available in tax year 2026, as determined by the June 2025 forecast. The forecast includes downward adjustments of $867.1 million in FY 2025-26, $508.1 million in FY 2026-27, and $520.1 million in FY 2027-28 to individual income tax revenue due to the OBBBA. The OBBBA is expected to impact income tax collections primarily through cash with returns for tax year 2025. The forecast also includes an adjustment for the federal Social Security Fairness Act, enacted in 2025, which increases Social Security payments for some public employees and is expected to increase Colorado individual income tax receipts starting for tax year 2025. As shown in the left panel of Figure 6, wage withholding—the largest stream of income tax revenue, totaling over three times the amount of estimated payments and cash with returns combined in recent fiscal years—slowed considerably in 2023, the first year when the income tax rate cut in Proposition 121 applied to withheld taxes, but has since grown at rates consistent with a moderate expansion. Wage withholding is expected to continue to show moderate but slowing growth in 2025 and 2026, before picking up in 2027, reflecting expectations for growth in employment and wages.

September 2025

General Fund Revenue

Page 38

Figure 6 Selected General Fund Revenue Sources Millions of Dollars in Monthly Collections Individual Income Tax Withholding

$1,000

Sales Tax $400 $350

$800

$300

$600

$250

$400

$150

$200 $100

$200

$50

$0 2008 2010 2012 2014 2016 2018 2020 2022 2024

Source: Office of the State Controller with Legislative Council Staff seasonal adjustments. Data are shown as a three-month moving average on a cash basis. August 2025 collections are preliminary data from the Department of Revenue.

This forecast includes adjustments for future impacts of legislation on individual income tax revenue enacted by the General Assembly during the 2025 regular and special legislative sessions, including the expansion of the income tax credit for care workers in House Bill 25-1296, the extension of the income tax credit for energy storage systems in Senate Bill 25-026, and the extension of the state add-back of the federal qualified business income deduction for certain taxpayers in HB 25B-1001. The forecast also includes an adjustment of $216.6 million in FY 2026-27 and $229.4 million in FY 2027-28 for the diversion from the General Fund to the Kids Matter Account in the SEF under House Bill 25-1320. Starting in July 2024, revenue attributable to Proposition FF for the Healthy School Meals for All Program is deposited into the Healthy School Meals for All Cash Fund. Prior to that, revenue was deposited into a specific account in the General Fund. Many taxpayers who pay higher taxes under Proposition FF file income taxes on an extension schedule, such that a disproportionately high share of collections are accounted at the October extension deadline. Through September 2, 2025, Proposition FF revenue for tax year 2024 totaled $105.6 million, an increase of 35 percent over the amount collected as of the same date for tax year 2023 payments last year. As a result, revenue expectations were increased throughout the forecast period, with tax year 2024 revenue expected to total $133.2 million. Starting with tax year 2026, the forecast incorporates the constitutionally required adjustment in addback amounts, discussed below. The forecast also incorporates upward adjustments for the OBBBA, which expands federal standard and itemized deductions, thereby increasing the amount that taxpayers will be required to add back to calculate their state income tax liability. On an accrual basis, Proposition FF revenue totaled $132.3 million in FY 2024-25, and is expected to come in as follows:   

$151.5 million for FY 2025-26; $144.3 million for FY 2026-27; and $149.8 million for FY 2027-28.

September 2025

General Fund Revenue

Page 39

Revenue accrued for FY 2023-24 exceeded the $100.7 million estimate provided to voters in the 2022 Blue Book for Proposition FF. The state is required under TABOR (3)(c) to refund the excess to taxpayers and to increase the addback thresholds to reduce future revenue in proportion to the excess. The expected refund amount is $12.4 million, which includes $11.3 million in excess revenue plus ten percent interest. While there is no refund mechanism in place in current law to issue these refunds to taxpayers, the forecast assumes that Proposition FF revenue will be reduced by 10.1 percent starting in tax year 2026. House Bill 25-1274 refers a ballot measure to voters at the November 2025 election. If approved, the measure, Proposition LL, will allow the state to retain and spend the excess revenue.

Corporate Income Tax The corporate income tax forecast includes collections from C corporations and partnerships that have property, payroll, or sales in Colorado. Corporate income taxes have historically been a volatile revenue source because they are highly responsive to economic conditions and to federal tax policy. In addition, many corporations make strategic tax decisions about when and how to claim credits and deductions, making it more difficult to estimate the amount of corporate tax revenue. After reporting record highs in FY 2023-24, corporate income tax revenue totaled $2.62 billion in FY 2024-25, a 6.3 percent decline. In the current FY 2025-26, corporate revenue is expected to come in at $1.99 billion, a 23.9 percent decline from the prior year. The decline is mainly attributable to the OBBBA business provisions, which are expected to significantly reduce Colorado corporate income tax revenue in FY 2025-26. Revenue is expected to rebound in FY 2026-27 to $2.14 billion, a 7.6 percent increase from the prior fiscal year. By FY 2027-28, corporate revenue is expected to reach $2.25 billion, a 4.9 percent increase. Legislative adjustments. This forecast includes adjustments for legislation on corporate income tax revenue from the OBBBA and enacted by the Colorado General Assembly during the 2025 special legislative session. The OBBBA is expected to reduce corporate income tax revenue by reducing federal taxable income for businesses. The OBBBA is expected to reduce revenue by $336.3 million in FY 2025-26, $151.3 million in FY 2026-27, and $149.7 million in FY 2027-28. House Bill 25B-1002 creates a state income tax addition to state taxable income of corporations equal to the federal deduction for foreign-derived deduction-eligible income (FDDEI) beginning for tax year 2026. The bill is expected to increase corporate income tax revenue by $35.6 million in FY 2025-26, $72.2 million in FY 2026-27, and $73.0 million in FY 2027-28. House Bill 25B-1004 authorizes the State Treasurer to sell up to $125.0 million in insurance premium and corporate income tax credit certificates at reduced amount. The bill is expected to generate total sales proceeds of up to $100.0 million, which are transferred to the General Fund. It is estimated that approximately $37.5 million will be claimed by C corporations in FY 2026-27 and $25.0 million in FY 2027-28, reducing corporate income tax revenue in those years. The remaining $62.5 million in credit certificates will be claimed by insurance premium taxpayers, reducing insurance premium tax revenue. September 2025

General Fund Revenue

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House Bill 25B-1006 authorizes the State Treasurer to sell up to $125.0 million in insurance premium and corporate income tax credit certificates at reduced amount. The bill is expected to generate total sales proceeds of up to $100.0 million, which are credited to the Health Insurance Affordability (HIA) cash fund. Though the proceeds are credited to the HIA cash fund, the credits are claimed against tax liability owed by C corporations and insurance premium taxpayers. It is estimated that of the credits sold as result of this bill, approximately $37.5 million will be claimed by C corporations in FY 2026-27 and $25.0 million in FY 2027-28, reducing corporate revenue in those fiscal years. The remaining $62.5 million in credit certificates will be claimed by insurance premium taxpayers, reducing insurance premium tax revenue.

Sales Tax The 2.9 percent state sales tax is assessed on the purchase of goods, except those specifically exempted, and a small collection of services. Sales tax revenue grew by a sluggish 1.8 percent to $4.44 billion in FY 2024-25, implying real declines in Colorado retail sales. Growth in sales tax revenue is partially attributable to House Bill 24-1434, which reduced the amount of sales tax revenue to be allocated to the Housing Development Grant Fund by $35 million per year beginning in FY 2024-25. Downgrades to the forecast based on slowing consumer spending were offset by increased inflation expectations and House Bill 25B-1005, which disallowed retailers from retaining a portion of sales tax revenue to cover the costs of collecting sales tax revenue on behalf of the state. HB 25B-1005 is expected to increase sales tax revenue to the General Fund by $27.6 million in FY 2025-26 and $56.8 million in FY 2026-27 and future years. On net, projections for sales tax revenue were upgraded compared to the July forecast update by $17.1 million in FY 2025-26 and $4.9 million in FY 2026-27 on a cash basis. Accounting for slowing consumer spending, increased inflation expectations, and legislative and accrual adjustments, sales tax revenue is expected to grow 3.6 percent in FY 2025-26, 4.4 percent in FY 2026-27, and 5.1 percent in FY 2027-28. These growth rates imply real declines in consumer spending through 2026 as evolving tariff policy weighs on consumer sentiment and household budgets are constrained by a weakening labor market paired with increased prices.

Use Tax The 2.9 percent state use tax is due when sales tax is owed, but is not collected at the point of sale. Use tax revenue is largely driven by capital investment among manufacturing, energy, and mining firms. Manufacturing activity has remained slow in a lagged response to high interest rates, lending to a 7.1 percent decline in FY 2024-25. While lower interest rates may encourage investment in industries contributing to use tax revenues such as oil and gas, construction, and manufacturing, use tax revenues are expected to be dampened by evolving trade and immigration policy. Manufacturing and construction businesses—particularly those using copper, steel, aluminum or other materials for which tariffs have been increased—will face higher input costs only partially offset by easing monetary policy. In addition, the deportation of immigrants working in these industries may contribute to labor supply constraints, increasing labor costs and negatively impacting production. September 2025

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Accordingly, the forecast has been downgraded compared to the July forecast update. Use tax revenues are projected to increase by a sluggish 3.4 percent in FY 2025-26 as businesses respond to lower interest rates, tariffs increase input costs, and disruptions in trade and immigration policy impact production decisions. A rebounding construction market amongst lower interest rates paired with inflationary pressures on materials subject to increased tariffs are expected to contribute to higher growth in use tax revenue at a rate of 7.3 percent in FY 2026-27 and 14.8 percent in FY 2027-28.

Proposition EE Cigarette, Tobacco, and Nicotine Taxes Proposition EE increased cigarette and tobacco taxes, created a new tax on nicotine products, and created a minimum price for cigarette sales. Revenue from the new taxes is exempt from TABOR as a voter-approved revenue change. Proposition EE revenue is deposited in the General Fund, transferred to the 2020 Tax Holding Fund, and distributed to fund preschool programs, tobacco education programs, and the General Fund. Proposition EE tax rates increased on all three types of products beginning on July 1, 2024 and the final tax rate increase will go into effect on July 1, 2027. Revenue from Proposition EE increased by 17.2 percent to $243.6 million in FY 2024-25 as the tax increases went into effect. The revenue forecast was increased slightly compared to June due to higher than expected cigarette collections, which were partially offset by lower nicotine tax collections. Table 12 shows expected revenue collections, while equivalent transfers from the General Fund to the 2020 Tax Holding Fund are shown in Table 7 on page 21. Cigarette revenue is the largest portion of Proposition EE, making up 54 percent of total Proposition EE revenue in FY 2024-25. Cigarette use tends to decline over time, but consumption has fallen more steeply than normal in the past few years since the Proposition EE taxes went into effect and continue to increase. Proposition EE cigarette revenue is expected to increase by 1.4 percent in the current fiscal year after low collections in FY 2024-25. Nicotine is the next largest revenue stream, with revenue increasing throughout the forecast period due to increased tax rates and rising prices on nicotine products. The forecast for nicotine faces elevated downside risks. Many nicotine products are imported in small packages which were formerly covered by the de minimis exemption, which allowed them to not be subject to certain taxes and fees. Eliminating the de minimis exemption is expected to have a negative impact on revenue collections, as it may make it more difficult to import flavored vape products and may make them more expensive for consumers. Additionally, increased federal enforcement against flavored e-cigarettes may reduce sales. Tobacco makes up the rest of the Proposition EE revenue, bringing in $20.3 million in FY 2024-25. Tobacco revenue is expected to decrease by 7.9 percent to $18.7 million in the current fiscal year as many tobacco products, such as cigars, are imported and consumption may be reduced due to increased tariffs. Tobacco sales have fallen by approximately 5 percent in calendar year 2025 through August compared to the same period in 2024.

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Table 12A Total General Fund Revenue Estimates Dollars in Millions Category Sales, Use, and Excise Taxes Percent Change in Sales, Use, and Excise Taxes Income Tax to the General Fund Percent Change in Income Tax to the General Fund Other General Fund Revenue Percent Change in Other General Fund Revenue Gross General Fund Revenue Percent Change in Gross General Fund Revenue

Preliminary FY 2024-25 $5,188.8 1.8% $11,107.4 -1.7% $885.0 4.1% $17,181.3 -0.4%

Estimate FY 2025-26 $5,352.2 3.1% $10,772.4 -3.0% $1,050.2 18.7% $17,174.7 0.0%

Estimate FY 2026-27 $5,581.9 4.3% $11,887.9 10.4% $974.7 -7.2% $18,444.5 7.4%

Estimate FY 2027-28 $5,856.5 4.9% $12,560.4 5.7% $1,044.3 7.1% $19,461.2 5.5%

Table 12B Sales, Use, and Excise Taxes Dollars in Millions Preliminary FY 2024-25 $4,441.1 1.8% $216.6 -7.1%

Estimate FY 2025-26 $4,602.8 3.6% $223.9 3.4%

Estimate FY 2026-27 $4,804.0 4.4% $240.3 7.3%

Estimate FY 2027-28 $5,049.5 5.1% $275.9 14.8%

Retail Marijuana Sales Tax Percent Change in Retail Marijuana Sales Tax

$186.4 -4.4%

$174.2 -6.5%

$169.3 -2.8%

$169.9 0.4%

Cigarette Tax Percent Change in Cigarette Tax Tobacco Products Tax Percent Change in Tobacco Products Tax Liquor Tax Percent Change in Liquor Tax

$19.5 -4.6% $23.7 9.7% $54.0 -3.6%

$18.2 -6.6% $23.3 -1.8% $55.3 2.4%

$17.6 -3.4% $24.1 3.5% $55.7 0.8%

$15.8 -10.0% $12.3 -49.0% $50.9 -8.7%

$243.6 17.2% $3.9 N/A $5,188.8 1.8%

$238.0 -2.3% $16.4 317.2% $5,352.2 3.1%

$246.6 3.6% $24.3 47.8% $5,581.9 4.3%

$250.0 1.4% $32.1 32.3% $5,856.5 4.9%

Category Sales Tax Percent Change in Sales Tax Use Tax Percent Change in Use Tax

Proposition EE Tobacco Taxes Percent Change in Proposition EE Tobacco Taxes Firearms and Ammunition Tax Percent Change in Firearms and Ammunition Tax Total Sales, Use, and Excise Taxes Percent Change in Sales, Use, and Excise Taxes

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Table 12C Income Taxes Dollars in Millions Category Net Individual Income Tax Percent Change in Net Individual Income Tax Net Corporate Income Tax Percent Change in Net Corporate Income Tax Total Income Taxes Percent Change in Total Income Taxes Less: Portion Diverted to the SEF Percent Change in SEF Diversion Less: Portion Diverted to Kids Matter Account Percent Change in Kids Matter Diversion Less: Portion Diverted for Affordable Housing Percent Change in Affordable Housing Diversion Less: Portion Diverted for Healthy School Meals Percent Change in School Meals Diversion Income Tax to the General Fund Pct. Change in Income Tax to the General Fund

Preliminary FY 2024-25 $9,997.9 -0.5% $2,619.5 -6.3% $12,617.4 -1.7% -$1,060.6 -12.3% $0.0

Estimate FY 2025-26 $10,278.3 2.8% $1,992.9 -23.9% $12,271.3 -2.7% -$1,036.5 -2.3% $0.0

-$317.0 -3.1% -$132.3 N/A $11,107.4 -1.7%

-$310.9 -1.9% -$151.5 14.5% $10,772.4 -3.0%

Estimate FY 2026-27 $11,548.3 12.4% $2,144.5 7.6% $13,692.8 11.6% -$1,110.8 7.2% -$216.6 N/A -$333.2 7.2% -$144.3 -4.7% $11,887.9 10.4%

Estimate FY 2027-28 $12,220.3 5.8% $2,248.6 4.9% $14,468.9 5.7% -$1,176.4 5.9% -$229.4 5.9% -$352.9 5.9% -$149.8 3.8% $12,560.4 5.7%

Income tax collected under Proposition FF is diverted to the Healthy School Meals for All Cash Fund beginning in FY 2024-25.

Table 12D Other General Fund Revenue Dollars in Millions Category Insurance Premium Tax to General Fund Percent Change in Insurance Premium Tax Pari-Mutuel Wagering Tax Percent Change in Pari-Mutuel Wagering Tax General Fund Investment Income Percent Change in Investment Income Court Receipts to General Fund Percent Change in Court Receipts Other General Fund Income Percent Change in Other General Fund Income Total Other General Fund Revenue Percent Change in Other General Fund Revenue

September 2025

Preliminary FY 2024-25 $659.5 21.7% $0.3 -20.4% $166.7 -33.7% $2.1 -35.3% $56.5 6.4% $885.0 4.1%

General Fund Revenue

Estimate FY 2025-26 $797.5 20.9% $0.3 -7.4% $189.0 13.4% $1.3 -38.1% $62.1 10.1% $1,050.2 18.7%

Estimate FY 2026-27 $787.0 -1.3% $0.2 -2.0% $140.7 -25.5% $1.3 3.4% $45.3 -27.0% $974.7 -7.2%

Estimate FY 2027-28 $888.3 12.9% $0.2 0.2% $109.9 -21.9% $1.3 -4.5% $44.6 -1.7% $1,044.3 7.1%

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Cash Fund Revenue This section presents the forecast for cash fund revenue subject to TABOR and for selected sources of cash fund revenue exempt from TABOR. Cash fund revenue subject to TABOR is a determinant of the state TABOR refund obligation, which is paid from the General Fund. Cash fund revenue exempt from TABOR does not have a direct impact on the General Fund budget, but revenue available for expenditure from those cash funds may trade off with spending from the General Fund.

Cash Fund Revenue Subject to TABOR Table 13 summarizes the forecast for cash fund revenue subject to TABOR. The largest sources of cash fund revenue subject to TABOR are motor fuel taxes and other transportation-related revenue, severance taxes, and gaming taxes. Table 13 Cash Fund Revenue Subject to TABOR Dollars in Millions Line

Revenue Source

Preliminary FY 2024-25

Estimate FY 2025-26

Estimate FY 2026-27

Estimate FY 2027-28

CAAGR

1 2

Transportation-Related Transportation-Related Percent Change

$1,494.0 4.8%

$1,501.2 0.5%

$1,565.5 4.3%

$1,608.4 2.7%

2.5%

3 4

Severance Tax Severance Tax Percent Change

$66.9 -69.4%

$244.9 265.9%

$257.0 4.9%

$228.6 -11.1%

50.6%

5 6

Gaming Revenue Gaming Revenue Percent Change

$94.4 1.6%

$92.9 -1.6%

$97.5 5.0%

$99.9 2.4%

1.9%

7 8

Insurance-Related Insurance-Related Percent Change

$28.3 -0.8%

$24.0 -15.2%

$27.2 13.6%

$27.4 0.7%

-1.0%

9 10

Regulatory Agencies Regulatory Agencies Percent Change

$116.2 20.9%

$120.8 4.0%

$124.9 3.4%

$128.3 2.7%

3.4%

11 12

2.9% Sales Tax on Marijuana 2.9% Marijuana Tax Percent Change

$4.7 -13.0%

$3.8 -18.2%

$3.4 -10.1%

$3.3 -4.1%

-11.0%

13 14

Housing Development Grant Fund (HDGF) HDGF Percent Change

$34.8 -54.8%

$43.3 24.6%

$47.1 8.6%

$51.7 9.9%

7.2%

15 16

Kids Matter Account-State Education Fund Kids Matter Account Percent Change

$216.6 N/A

$229.4 5.9%

17 18

Other Cash Funds Other Cash Funds Percent Change Total Cash Fund Revenue Subject to the TABOR Limit

19 20

Total Cash Fund Revenue Percent Change

$930.6 8.8%

$1,051.4 13.0%

$902.3 -14.2%

$1,067.9 18.4%

$2,769.7

$3,082.3

$3,241.5

$3,312.4

-1.0%

11.3%

5.2%

2.2%

4.7%

6.1%

Totals may not sum due to rounding. CAAGR is the compound average annual growth rate for FY 2024-25 to FY 2027-28. Line 5, Gaming revenue in this table does not include extended gaming revenue from Amendments 50 and 77, because it is not subject to TABOR. Line 11, Marijuana revenue in this table includes revenue from the 2.9 percent sales tax collected from the sales of medical and retail marijuana. This revenue is subject to TABOR.

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FY 2024-25. Preliminary figures from the Office of the State Controller indicate cash fund revenue subject to TABOR totaled just under $2.8 billion in FY 2024-25, a decrease of 1.0 percent from the prior fiscal year. The decrease is mostly attributable to falling severance tax revenue and to House Bill 24-1434, which lowered the amount of sales tax revenue credited to the Housing Development Grant Fund. Falling revenue in these areas more than offset increases in transportation-related revenue and in other miscellaneous cash funds revenue. The July forecast update did not incorporate year-end accrual accounting adjustments for the completed fiscal year, as these were not available yet. Relative to the July forecast update, FY 2024-25 total cash fund revenue was revised down by $20.8 million mainly from lower-than-expected revenue from other cash funds, the housing development grant fund, and transportation-related revenue. Severance tax and regulatory agencies revenue were revised upward slightly compared to the July forecast update. FY 2025-26. In the current budget year, cash fund revenue subject to TABOR is expected to increase 11.3 percent from the prior fiscal year to total almost $3.1 billion. Higher total cash fund revenue collections will primarily be driven from an increase in revenue to other cash funds. House Bill 25B-1006 permits the sale of certain state income tax credits with the proceeds being deposited into the newly-created Tax Credits Sale Proceeds Cash Fund, and then transferred to the Health Insurance Affordability Fund within the Health Insurance Affordability Enterprise (HIAE). As a result of this transfer, the HIAE will be disqualified as a state-owned enterprise, causing fees and interest earnings collected in the cash fund to become subject to TABOR for FY 2025-26 only. The proceeds from the sale of income tax credits and the enterprise disqualification more than offsets the expected downgrades from legislation enacted in the 2025 session. In addition, a rebound in severance tax revenue is expected to boost cash fund revenue subject to TABOR in the current budget. Compared to the July forecast update, revenue expectations were revised up $248.2 million. The revision is mainly from HB 25B-1006, which more than offset slight downward revisions in severance tax and transportation-related revenue. FY 2026-27. Cash Fund revenue is expected to come in 5.2 percent higher than in the prior year, totaling to just over $3.2 billion. This growth is mainly attributable to the first diversion to the Kids Matter Account in the State Education Fund. House Bill 25-1320 requires that, beginning July 1, 2026, state revenues collected from an existing tax on 65 percent of one-tenth of one percent of federal taxable income must be deposited into the account. Money in the fund must only be used for total program funding and categorical programs and is subject to annual appropriation by the General Assembly. Revenue expectations were revised up by $50.4 million relative to the July forecast. FY 2027-28. By FY 2027-28, cash fund revenue subject to TABOR is expected to be just over $3.3 billion, a 2.2 percent increase from FY 2026-27. The revenue increase is expected to be supported by most major cash fund components, though severance tax is expected to decline.

Transportation-Related Revenue Transportation-related revenue subject to TABOR increased by a moderate 4.8 percent in FY 2024-25. Transportation-related revenue is expected to continue to increase through the forecast period, albeit at a slower pace, growing 0.5 percent in FY 2025-26, 4.3 percent in September 2025

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FY 2026-27, and 2.7 percent in FY 2027-28. The slowdown is largely attributable to Senate Bill 25-258, which temporarily reduces the road safety surcharge by $3.70 from September 1, 2025 to September 1, 2027. The forecast for transportation-related revenue is presented in Table 14. For FY 2025-26, transportation-related revenue was revised downward by $6.2 million compared to the July 2025 forecast. The downward revision is primarily driven by sluggish motor fuel and jet fuel revenue. In addition, SB 25-317 diverts interest earnings for certain accounts in the Highway Users Tax Fund (HUTF) to the General Fund for FY 2025-26, contributing to slower collections for FY 2025-26. Motor fuel revenue is the largest component of transportation revenue, making up nearly half of total collections, followed by revenue from vehicle registrations. Consistent with nationwide trends, collections for taxes on gasoline and diesel fuel declined by 0.7 percent in FY 2024-25 from the prior fiscal year. As consumption expectations remain dampened in the near-term, motor fuel revenues are expecting to fall another 2.4 percent in FY 2025-26 before rebounding slightly in FY 2026-27 and FY 2027-28, though improving vehicle fuel efficiency paired with permanent shifts to remote or hybrid work for some are expected to contribute to the long-run dampening of motor fuel collections. Road usage fees are collected alongside motor fuel taxes such that a downward revision to the motor fuel forecast leads to a corresponding downward revision to projected road usage fee collections. Still, road usage fees increased to 4 cents per gallon in July 2024 and will increase by an additional 1 cent per gallon in each fiscal year through the forecast period; therefore, growth in collections is expected to remain in the double-digits throughout the forecast period. Downward revisions to revenue from motor fuel and road usage fees were offset by increased projections for collections from vehicle registrations, including the road safety surcharge after ending FY 2024-25 up $5.6 million more than the July 2025 forecast. However, growth is expected to remain soggy in FY 2025-26 and FY 2026-27 due to the temporary reduction in the road safety surcharge, which has an expected revenue impact of -$20.9 million in FY 2025-26 and -$24.9 million in FY 2026-27. Total registration-related revenue is expected to decline 1.5 percent in FY 2025-26 and increase by 0.6 percent in FY 2026-27. Aviation-related transportation revenue declined 19.4 percent in FY 2024-25 and totaled $43.8 million. The decline in revenue is partially attributable to jet fuel prices, which declined 19 percent in FY 2024-25. In addition, United Airlines started using a new jet fuel provider which has led to tax remittance issues for the airline. FY 2024-25 collections are approximately $4 million to $8 million less than they would have been without the delayed payments. As a result, expected jet fuel price declines in FY 2025-26 are expected to be partially offset, lending to an increase in aviation-related revenue to $44.9 million. Aviation-related revenue is expected to increase another 7.1 percent in FY 2026-27 and another 1.4 percent in FY 2027-28 as jet fuel prices moderate. Finally, retail delivery fees, which were created by SB 21-260 and went into effect on July 1, 2022, slightly underperformed July 2025 forecast expectations. Still, revenue from retail delivery fees is expected to continue to increase at significant rates throughout the forecast

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period as online spending continues to grow and the fee increases by a minimum of 1 cent per year from its current level of 29 cents per delivery. Table 14A Transportation Revenue by Source Dollars in Millions Line

Revenue Source

Highway Users Tax Fund (HUTF)

Non-HUTF

3 4

Total Transportation Funds Total Transportation Funds Percent Change

Preliminary FY 2024-25

Estimate FY 2025-26

Estimate FY 2026-27

Estimate FY 2027-28

CAAGR

$1,289.1

$1,293.6

$1,341.5

$1,395.0

1.9%

$205.0

$207.6

$224.0

$213.4

0.7%

$1,494.1

$1,501.2

$1,565.5

$1,608.4

1.7%

4.8%

0.5%

4.3%

2.7%

Totals may not sum due to rounding. CAAGR is the compound average annual growth rate for FY 2024-25 to FY 2027-28.

Table 14B Highway Users Tax Fund Revenue Dollars in Millions Line 5 6

Preliminary FY 2024-25 $644.3 -0.7%

Estimate FY 2025-26 $628.7 -2.4%

Estimate FY 2026-27 $636.2 1.2%

Estimate FY 2027-28 $646.1 1.5%

$120.1 29.2%

$145.0 20.7%

$176.9 22.0%

$201.7 14.0%

8.6%

7 8

Revenue Source Motor and Special Fuel Taxes Motor and Special Fuel Taxes Percent Change Road Usage Fees Road Usage Fees Percent Change

CAAGR 0.7%

9 10 11 12 13

Total Registrations Total Registrations Percent Change Total Registrations - Registrations Total Registrations - Road Safety Surcharge Total Registrations - Late Registration Fees

$434.8 11.6% $244.5 $145.1 $45.1

$428.0 -1.5% $252.4 $129.4 $46.2

$430.6 0.6% $257.0 $126.7 $46.9

$443.6 3.0% $260.9 $136.5 $46.1

0.9%

14 15

Retail Delivery Fees Retail Delivery Fees Percent Change

$22.6 6.4%

$24.6 8.8%

$27.4 11.5%

$31.2 13.8%

6.1%

16 17 18 19

Other HUTF Receipts Other HUTF Receipts Percent Change Total HUTF Total HUTF Percent Change

$67.3 3.1% $1,289.1 5.8%

$67.3 0.0% $1,293.6 0.4%

$70.4 4.5% $1,341.5 3.7%

$72.4 2.9% $1,395.0 4.0%

1.8%

0.8% 1.3% 0.0%

1.9%

Totals may not sum due to rounding. CAAGR is the compound average annual growth rate for FY 2024-25 to FY 2027-28. Line 14, “Retail delivery Fees”, includes retail delivery fee revenue credited to the HUTF under SB 21-260. Line 16, “Other HUTF Receipts”, includes daily rental fee, oversized overweight vehicle surcharge, interest receipts, judicial receipts, drivers' license fees, and other miscellaneous receipts in the HUTF.

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Table 14C Non-HUTF Transportation Revenue Subject to TABOR Dollars in Millions Preliminary FY 2024-25

Estimate FY 2025-26

Estimate FY 2026-27

Estimate FY 2027-28

State Highway Fund (SHF) SHF Percent Change Other Transportation Funds Other Percent Change

$35.2 26.5% $169.8 -5.3%

$31.3 -11.0% $176.3 3.8%

$38.3 22.5% $185.7 5.3%

$38.1 -0.6% $175.3 -5.6%

Other - Aviation Fund Other - Multimodal Transp. Options Fund Other - Law Enforcement-Related Other - Registration-Related

$43.8 $15.0 $6.7 $104.3

$44.9 $16.3 $6.4 $108.7

$48.2 $18.2 $6.1 $113.1

$48.9 $20.7 $6.0 $99.8

2.2% 6.1% -1.8% -2.1%

Total Non-HUTF Total Non-HUTF Percent Change

$205.0 -1.0%

$207.6 1.3%

$224.0 7.9%

$213.4 -4.7%

0.7%

Line

20 21 22 23 24 25 26 27 28 29

Revenue Source

CAAGR

5.0% -0.1%

Totals may not sum due to rounding. CAAGR is the compound average annual growth rate for FY 2024-25 to FY 2027-28. Line 20, “State Highway Fund (SHF)”, includes only SHF revenue subject to TABOR. Line 24, “Other - Aviation Fund”, includes revenue from aviation fuel excise taxes and the 2.9 percent sales tax on the retail cost of jet fuel. Line 26, “Other - Law Enforcement-Related”, includes revenue from driving under the influence (DUI) and driving while ability impaired (DWAI) fines. Line 27, “Other - Registration-Related”, includes revenue from Emergency Medical Services registration fees, emissions registration and inspection fees, motorcycle and motor vehicle license fees, and POST Board registration fees.

Most fuel taxes and vehicle registration fees are credited to the Highway Users Tax Fund (HUTF). From the HUTF, funds are disbursed to the Department of Transportation, State Patrol within the Department of Public Safety, the Division of Motor Vehicles within the Department of Revenue, the Department of Natural Resources, and to county and municipal governments. The State Patrol, Department of Revenue, and Department of Natural Resources receive HUTF funds through annual appropriations. The remaining revenue is allocated to the Department of Transportation (via the State Highway Fund), counties, and municipalities based on how much revenue is collected. Revenue is distributed based on multiple formulas that differ between revenue streams. SB 25-258 temporarily adjusted the formula for Funding Advancements for Surface Transportation and Economic Recovery Act of 2009 (FASTER) revenue streams, decreasing the amount distributed to the HUTF and increasing the amount distributed to counties and municipalities from September 1, 2025, to September 1, 2027. Impacted revenue streams include the unregistered vehicle fine, daily rental fee, road safety surcharge, late registration fees, and oversize/overweight fees. The estimated distributions from the HUTF are shown in Table 15 below.

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Table 15 Highway Users Tax Fund Distributions Dollars in Millions Line

HUTF Distribution Forecast

Department of Public Safety

Department of Revenue

Department of Natural Resources

State Highway Fund

Counties

Municipalities

Total HUTF Distributions

Total Nonexempt Revenue

Assumed Exempt Revenue

Transfers to HUTF

Preliminary FY 2024-25

Estimate FY 2025-26

Estimate FY 2026-27

Estimate FY 2027-28

$208.3 $2.0 $0.3 $658.5 $245.4 $176.2 $1,290.6 $1,289.1 $1.5 $0.0

$220.3 $1.2 $0.3 $646.3 $247.3 $179.9 $1,295.2 $1,293.6 $1.6 $0.0

$220.3 $1.2 $0.3 $673.2 $259.1 $188.8 $1,342.9 $1,341.5 $1.4 $0.0

$220.3 $1.2 $0.3 $713.6 $267.2 $193.9 $1,396.5 $1,395.0 $1.5 $0.0

Line 1, “Department of Public Safety”, allocations are made "off-the-top" to CDPS, regardless of the amount of revenue collected. Line 2, “Department of Revenue”, revenue is appropriated to the Department of Revenue in the Long Bill. The actual amount distributed to the department is often different from the amount appropriated due to differences in revenue collections. The amounts estimated in FY 2025-26 reflect full appropriations. Line 3, “Department of Natural Resources”, receives an ongoing appropriation of $300,000 for capital construction.

Severance Tax Severance tax revenue declined by 84.3 percent in FY 2024-25 to $28.0 million, largely due a historic amount of oil and gas refunds, totaling $204.5 million according to data from the Department of Revenue. Comparatively, there were about $73 million in refunds for FY 2023-24. Large property tax bills for operators over the past couple of years have led to a large amount of ad valorem tax credits that have combined with a weaker value of oil and gas production. In FY 2025-26, severance tax revenue subject to TABOR is expected to increase by about $178 million with a rebound in oil and gas severance tax revenue. However, the outlook has been downgraded since the July forecast with weaker-than-expected natural gas prices, both for the current fiscal year and through the forecast period. Severance tax revenue is more volatile than other revenue sources due to the boom-bust nature of the oil and gas sector and Colorado’s tax structure. The forecast for the major components of severance tax revenue is shown in Table 16. Severance tax collections from oil and natural gas fell by 84.3 percent in FY 2024-25 with weaker-than-expected market conditions and collections coinciding with historically high tax refunds, as noted above. In FY 2025-26, fewer ad valorem credits and higher natural gas prices will contribute to oil and gas revenue growing to an estimated $220.4 million. Stronger market conditions for natural gas are expected to offset weaker oil markets as prices slump. Severance tax revenue is expected to increase 1.9 percent in FY 2026-27, as natural gas prices continue to increase and offset declines in the value of oil production. In FY 2027-28, oil and gas collections are expected to fall by 11.3 percent. Despite improved market conditions, larger ad valorem credits will offset forecast gains in taxable income.

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Table 16 Severance Tax Revenue Forecast by Source Dollars in Millions Preliminary FY 2024-25 $28.0 -84.3%

Estimate FY 2025-26 $220.4 687.3%

Estimate FY 2026-27 $224.5 1.9%

Coal Taxes Coal Percent Change

$6.9 5.4%

$6.4 -8.5%

$5.9 -7.5%

$5.6 -5.0%

-7.0%

Molybdenum and Metallics Taxes Molybdenum and Metallics Percent Change

$2.1 28.2%

$2.2 4.7%

$2.2 -2.6%

$2.2 1.7%

1.2%

Total Severance Tax Revenue Total Severance Tax Revenue Pct. Change Interest Earnings Interest Earnings Percent Change

$37.1 -80.1% $29.8 -6.8%

$229.0 517.4% $15.9 -46.6%

$232.5 1.6% $24.5 53.5%

$207.0 -11.0% $21.6 -11.5%

-10.2%

Total Severance Tax Fund Revenue $66.9 $244.9 Severance Tax Fund Revenue Pct. Change -69.4% 265.9% CAAGR: Compound average annual growth rate for FY 2024-25 to FY 2027-28.

$257.0 4.9%

$228.6 -11.1%

50.6%

Revenue Source Oil and Gas Taxes Oil and Gas Percent Change

Estimate FY 2027-28 CAAGR $199.1 -11.3% 92.3%

77.4%

Coal severance tax revenue increased by 5.4 percent in FY 2023-24 to $6.9 million. Through the forecast period, shifting market dynamics are expected to result in declining collections. In the next few years, the coal-fired Craig Station is set to close. Along with the closure, the Colowyo Mine in Moffat County is set to end coal production by the end of 2025. Ongoing reductions in demand from the electricity sector are expected to contribute to declines through the forecast period. Severance tax revenue from coal is expected to decline by 8.5 percent in FY 2025-26, 7.5 percent in FY 2026-27, and 5.0 percent in FY 2027-28. Metal and molybdenum tax collections rose 28.2 percent to $2.1 million in FY 2024-25, increasing for the second consecutive year after a large decline in FY 2022-23. The market for metals and molybdenum is expected to contribute to further gains in FY 2025-26. Molybdenum production started 2025 with double-digit growth and exports are strong. Through the forecast period, collections are expected to remain fairly stable, but below the long-term average. Finally, interest earnings in severance tax funds are expected to fall by nearly half in FY 202526, due to legislative adjustments that will credit interest in the Just Transition Cash Fund and the Local Government Severance Tax Cash Fund to the General Fund. Starting in FY 2026-27, interest earnings for the Local Government Severance Tax Fund will once again be credited to that fund, while interest earnings from the Just Transition Fund will continue to be diverted to the General Fund.

Limited Gaming Revenue Limited gaming revenue includes taxes, fees, and interest earnings collected in the Limited Gaming Fund and the State Historical Fund. The state limited gaming tax is a graduated tax assessed on casino adjusted gross proceeds, the amount of wagers collected less the amount paid to players in winnings. Casinos on tribal lands in southwestern Colorado are not subject to the state tax. September 2025

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Gaming revenue is subject to TABOR except for revenue attributable to gaming expansions enacted under Amendment 50 and Amendment 77 (extended limited gaming), which is TABOR-exempt. In addition, House Bill 24-1469 specifies that limited gaming revenue that is distributed to local governments by a constitutional requirement is considered a collection for another government, and is therefore exempt from TABOR. Thus, pre-Amendment 50 county and city distributions, as well as distributions of revenue in the State Historical Fund to gaming cities, are no longer subject to TABOR. The bill is expected to decrease the gaming tax revenue accounted as subject to TABOR by about $33 million per year through the forecast period. Growth in gaming revenue has decelerated since FY 2020-21, with the 2.2 percent growth rate posted in FY 2024-25 the lowest since the COVID-19 recession. Based on slowing consumer spending, worsening inflation expectations, and a weakening labor market, the American Gaming Association (AGA) expects little to no growth in customer activity in the year ahead. FY 2025-26 growth in revenue is expected to slow due to Senate Bill 25-317, which diverts interest in the Limited Gaming Fund to the General Fund for the fiscal year. However, gaming revenue is also expected to be slightly boosted by the Chamonix Casino Hotel in Cripple Creek, which completed construction in July 2025. Gaming revenue is expected to grow by a slow but positive 1.8 percent in FY 2025-26, a slight downgrade from the July 2025 forecast as overall economic expectations worsen. Collections from gaming are expected to reaccelerate to grow 3.5 percent in FY 2026-27 and another 3.0 percent in FY 2027-28, reaching $192.3 million by the end of the forecast period. Expected growth in the out years aligns with historical average growth rates and is supported by expectations for an improving labor market and increased consumer spending. Statute only allows for pre-Amendment 50 revenue (subject to TABOR) to grow by 3.0 percent annually, so in years such as FY 2026-27 where projected gaming revenue growth is above that threshold, extended limited gaming revenue (TABOR-exempt) grows faster than total gaming revenue.

Other Cash Funds The other cash funds line in Table 13 shows revenue subject to TABOR that is collected in cash funds other than those for which a specific forecast is prepared. The number of cash funds varies across fiscal years and is the second largest source of the overall forecast for cash fund revenue subject to TABOR. Year-to-year fluctuations in this revenue can be an important determinant of the TABOR refund obligation and the General Fund budget. FY 2024-25. Preliminary figures from the Office of the State Controller show other cash funds revenue subject to TABOR totaled $930.6 million, an 8.8 percent increase from the prior year. Out of the almost 400 cash funds, the top 20 funds made up 62.0 percent of total other cash funds revenue. For FY 2024-25, the largest five cash funds in the other cash funds group were:     

Adult Dental Fund ($66.1 million); General Fund Unrestricted Cash Fund ($58.5 million); Medicaid Nursing Facility Cash Fund ($49.0 million); Department of State Cash Fund ($42.4 million); and Public School Fund ($38.9 million).

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Revenue from the Adult Dental Fund is from transfers from the Unclaimed Property Trust Fund across TABOR district boundaries made each year to fund dental services for adult Medicaid beneficiaries. The General Fund Unrestricted Cash Fund designation is used for revenues that are not general purpose revenue (income tax, sales tax, etc.) and are used by state departments for general government purposes. Of the $58.5 million with this designation in FY 2024-25, $29.1 million, or just under half, was from transfers and service charges paid by TABOR enterprises to other areas of the state government. Revenue to the Medicaid Nursing Facility Fund comes from nursing facility fees to draw down matching federal funds, while the Department of State Cash Fund receives revenue from the fees generated by the business filings and other services. This cash fund then supports most of the Department of State's operational expenses and activities. Finally, the Public School Fund, also called the “Permanent Fund,” receives proceeds from state land leases. FY 2025-26. Other cash funds revenue in FY 2025-26 is projected to increase by 13.0 percent to about $1.05 billion. Revenue growth is principally from HB 25B-1006, which permits the sale of corporate and insurance state income tax credits. For FY 2025-26 only, the bill is expected to raise just over $100 million. The proceeds will be credited to the nonexempt Tax Credits Sale Proceeds Cash Fund and then transferred to the Health Insurance Affordability Fund within the HIAE. As a result, over 10 percent of the HIAE’s revenue will come from state support, disqualifying it as an enterprise such that incoming fee and interest revenue, which is currently estimated at $143 million, will become subject to TABOR for FY 2025-26 only. Federal funds and surplus funds from previous years will remain exempt. The HIAE will requalify as an enterprise in FY 2026-27. The proceeds from the sale of income tax credits and the enterprise disqualification more than offsets the expected downgrades from legislation enacted in the 2025 legislation session. Legislation enacted in the 2025 regular session is expected to reduce other cash funds revenue by $183.0 million. Finally, compared to the July forecast, revenue expectations for other cash funds were revised up $257.0 million. FY 2026-27 through FY 2027-28. Other cash funds revenue is expected to fall by 14.2 percent, from the prior fiscal year and total about $902.3 million in FY 2026-27. The reduction in revenue is primarily from legislation enacted in the 2024 legislation session, which is expected to reduce other cash funds by $132.5 million. Compared to the July forecast, revenue expectations for FY 2026-27 were revised up by $29.4 million. By FY 2027-28, other cash funds revenue is expected to total near $935 million, 3.7 percent higher than in the previous fiscal year.

Cash Fund Revenue Exempt from TABOR Selected sources of TABOR-exempt cash fund revenue are presented below due to their importance as budget determinants. A few of the areas discussed include revenue subject to TABOR, such as 2.9 percent sales taxes on marijuana products, sports betting fee revenue, and unemployment support surcharges. This portion of the forecast document is not exhaustive, as there are many other sources of TABOR-exempt cash fund revenue that are not discussed here.

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Marijuana Tax Revenue Marijuana tax revenue continues to fall. The decline in marijuana tax revenue has largely been due to low prices alongside falling demand as other states across the country legalize marijuana, and the increasing availability of intoxicating hemp. Revenue is expected to continue to decline through FY 2026-27, before rebounding slightly in FY 2027-28. The presence of intoxicating hemp, a marijuana-like product cultivated outside of legal marijuana grow operations, poses a downside risk for the forecast that is difficult to quantify, as the amount of intoxicating hemp being bought and sold in Colorado is unknown. The state’s 15 percent excise tax and 15 percent special sales tax, which make up the majority of the marijuana-related revenue, are voter-approved revenue exempt from TABOR. The 2.9 percent general state sales tax is assessed on medical marijuana and non-marijuana products sold at marijuana retailers, and is subject to the state’s revenue limit. The marijuana tax revenue forecast is shown in Table 17. Table 17A Tax and Interest Revenue from the Marijuana Industry Dollars in Millions

TABOR Status

Exempt Nonexempt Total Percent Change in Total Revenue

Preliminary FY 2024-25

Forecast FY 2025-26

Forecast FY 2026-27

Forecast FY 2027-28

$230.0 $4.7 $234.7 -7.0%

$215.5 $3.8 $219.4 -6.5%

$208.3 $3.4 $211.7 -3.5%

$210.0 $3.3 $213.3 0.8%

Table 17B Exempt Revenue from the Marijuana Industry Dollars in Millions Preliminary FY 2024-25

Forecast FY 2025-26

Forecast FY 2026-27

Forecast FY 2027-28

Special Sales Tax Percent Change in Special Sales Tax Excise Tax Percent Change in Excise Tax

$186.4 -4.4% $40.2 -16.1%

$174.2 -6.5% $38.8 -3.5%

$169.3 -2.8% $36.5 -5.9%

$169.9 0.4% $36.8 1.0%

Interest Percent Change in Interest Total Exempt Revenue Percent Change in Total Exempt

$3.4 -17.0% $230.0 -6.9%

$2.6 -24.0% $215.5 -6.3%

$2.5 -3.8% $208.3 -3.4%

$3.3 32.0% $210.0 0.8%

Revenue Source

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Table 17C Nonexempt Revenue from the Marijuana Industry Dollars in Millions Preliminary FY 2024-25

Forecast FY 2025-26

Forecast FY 2026-27

Forecast FY 2027-28

Sales Tax on Medical Marijuana Percent Change in Medical Marijuana Sales Tax on Non-Marijuana Products Percent Change in Non-Marijuana Sales

$3.0 -23.3% $1.5 23.3%

$2.2 -27.0% $1.5 -1.3%

$1.7 -21.7% $1.6 6.7%

$1.5 -14.9% $1.7 6.3%

Interest Income Percent Change in Interest Total Nonexempt Revenue Percent Change in Nonexempt Revenue

$0.1 -15.7% $4.7 -12.2%

$0.1 -15.0% $3.8 -18.2%

$0.1 -11.0% $3.4 -10.1%

$0.1 15.0% $3.3 -4.1%

Revenue Source

The marijuana special sales tax is the largest source of marijuana revenue, assessed when consumers purchase marijuana at retail stores. Revenue is distributed to the Marijuana Tax Cash Fund (MTCF), the State Public School Fund, the General Fund, Marijuana Cash Fund, and local governments. House Bill 25-268 modified the distribution of special sales tax revenue by reducing the local share, increasing the distribution to the MTCF, and creating a new distribution to the Marijuana Cash Fund. Special sales tax revenue continues to fall, but at a slowing rate compared to prior years. However, the special sales tax can be quite volatile on a monthly basis, making it difficult to predict. Special sales tax revenue is expected to continue to fall in the current fiscal year and the next, and begin recovering in FY 2027-28 as consumption and prices start to rebound. Special sales tax revenue ended FY 2024-25 4.4 percent lower compared to the prior year, and is expected to fall by another 6.5 percent in the current fiscal year. Revenue is expected to stabilize by the end of FY 2027-28. Special sales tax revenue is not expected to fall indefinitely, as price pressures and population increases will eventually put sufficient upward pressure on tax revenue to reverse the recent downward trend. The marijuana excise tax is the second-largest source of marijuana revenue, assessed when a retailer or production facility purchases marijuana from a grower. Revenue is dedicated entirely to the BEST Fund for school construction. The excise tax is based on the calculated or actual wholesale price of marijuana when it is transferred from the cultivator or manufacturer to the retailer. Therefore, wholesale prices are a significant determinant of excise tax revenue. Falling prices have contributed to falling excise tax revenue per unit, as well as falling sales volume as cultivators exit the market because prices are too low to support their businesses. The number of licensed cultivators has fallen by 12.5 percent compared to one year prior.

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Figure 7 Adult-Use Marijuana Revenue Forecast Millions of Dollars, 3-Month Moving Average $30 $25 $20

Special Sales Tax

$15 $10

Excise Tax

$5 $0 2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

Source: Colorado Department of Revenue and Legislative Council Staff forecast.

Wholesale prices for bud are 6.9 percent lower than they were ago. Excise tax revenue collections are expected to fall slowly over the next few years, but are expected to stabilize by the end of FY 2026-27. Revenue is expected to be 7.9 percent lower in FY 2025-26 than the prior year and then decrease by another 4.9 percent in FY 2026-27. Exempt interest credited to the MTCF reached $3.4 million in FY 2024-25, a 17 percent decrease from the year prior, as interest rates fell slightly. This amount is expected to fall to $2.6 million in the current fiscal year as revenue and the MTCF fund balance decline. Exempt interest is credited to the fund in a lump sum at the end of the fiscal year which adds additional uncertainty to this forecast as there is no tracking data throughout the year. The 2.9 percent state sales tax rate applies to medical marijuana and non-marijuana products purchased at retail marijuana stores. Revenue from the 2.9 percent sales tax is deposited in the MTCF and is subject to TABOR. The medical marijuana sales tax brought in $3.0 million in FY 2024-25, a 23.3 percent decline compared to the year prior. The number of medical marijuana card holders continues to decline significantly, and is expected to result in continued falling medical marijuana tax revenue throughout the forecast period. Retail marijuana dispensaries also remitted $1.5 million in 2.9 percent general sales tax in FY 2024-25. Collections are expected to stay fairly low throughout the rest of the forecast period.

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Table 18 Distributions of Marijuana Revenue Dollars in Millions Preliminary FY 2024-25

Forecast FY 2025-26

Forecast FY 2026-27

Forecast FY 2027-28

Marijuana Tax Cash Fund BEST Fund General Fund State Public School Fund Marijuana Cash Fund Local Distributions

$128.6 $40.2 $26.1 $21.0 $0.0 $18.6

$127.8 $38.8 $24.4 $19.7 $2.6 $6.1

$123.9 $36.5 $23.7 $19.2 $2.5 $5.9

$125.0 $36.8 $23.8 $19.2 $2.5 $5.9

Total Distributions Percent Change in Total Distributions

$234.6 -7.0%

$219.4 -6.5%

$211.7 -3.5%

$213.3 0.8%

Marijuana Revenue Distribution

Based on the above forecasts, revenue distributed to the Marijuana Tax Cash Fund is expected to be $127.8 million in FY 2025-26, $123.9 million in FY 2026-27, and $125.0 million in FY 2027-28. This is a downward revision relative to the July forecast, due to lower incoming revenue data and a continuing decline in the number of business licenses for the marijuana industry.

Federal Mineral Lease Federal mineral lease (FML) revenue is the state's portion of the money the federal government collects from mineral production on federal lands. Collections are mostly determined by the value of mineral production on federal land and royalty rates negotiated between the federal government and mining companies. FML revenue is exempt from TABOR. In FY 2024-25, FML revenue decreased by 12.3 percent and declined for the second consecutive year. As shown in Table 19, FML revenue is forecast to increase more than 29 percent to $110.0 million in FY 2025-26, with expectations for sustained higher natural gas prices over the next year. Natural gas prices are forecast to rise further, to about $4.75 per million BTU in 2027, increasing expected non-bonus lease revenue payments. Provisions in the OBBBA are expected to modestly increase FML revenue on net over the forecast period. The OBBBA decreases royalty rates for natural gas and coal, which will decrease revenue. However, lease sale requirements, noncompetitive bidding, and other incentives in the legislation for natural gas are expected to increase production overall and offset the effect of reduced royalty rates. Coal production is still expected to decline in the state through the forecast period.

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Table 19 Federal Mineral Lease Revenue Distribution Dollars in Millions Item Total FML Revenue Bonus Payments (portion of total revenue) Local Government Permanent Fund Higher Education FML Revenue Fund Other FML Payments (non-bonus revenue) State Public School Fund Colorado Water Conservation Board DOLA Grants DOLA Direct Distribution School Districts Higher Education FML Revenue Fund

Preliminary FY 2024-25

Estimate FY 2025-26

Estimate FY 2026-27

Estimate FY 2027-28

$85.0 $0.2 $0.08 $0.08 $84.8 $41.0 $8.5 $17.0 $17.0 $1.4 $0.1

$110.0 $1.1 $0.5 $0.5 $108.9 $52.6 $10.9 $21.8 $21.8 $1.9 $0.5

$126.1 $1.3 $0.6 $0.6 $124.9 $60.3 $12.5 $25.0 $25.0 $2.1 $0.6

$145.7 $1.5 $0.7 $0.7 $144.3 $69.7 $14.4 $28.9 $28.9 $2.5 $0.7

DOLA = Department of Local Affairs. Note: The table shows the actual and projected revenue distributions to the various FML recipients. It does not reflect transfers of FML revenue from the recipients and funds to other funds, such as the General Fund, that have occurred.

Sports Betting Sports betting was legalized after the passage of Proposition DD at the November 2019 election. Betting launched on May 1, 2020, and has grown significantly since its inception. Revenue collected from sports betting activity includes licensing fees, an operations fee, and tax revenue, which is set at 10 percent of casinos’ net sports betting proceeds. As voter-approved revenue, sports betting tax revenue is not subject to the TABOR limit, but fee revenues are subject to TABOR. While Proposition DD limited sports betting revenue to $29 million per year, voters approved Proposition JJ in the November 2024 election, which allows the state to retain sports betting revenue above $29 million to fund water projects. In FY 2024-25, $33.5 million in sports betting revenue was distributed to the Water Plan Implementation Cash Fund. In addition, House Bill 25-1311 decreased the amount of free bets sports betting operators may deduct from their tax owed beginning in FY 2025-26 and disallows free bet deductions in FY 2026-27 onwards. Due to Proposition JJ and HB 25-1311, water projects are expected to receive an additional $18.2 million in FY 2025-26, another $36.0 million in FY 2026-27, and another $41.2 million in FY 2027-28, compared to what would have been received prior to these policy changes. TABOR-exempt sports betting revenue, which consists of taxes and interest, grew by 20.8 percent in FY 2024-25, marking five years of double-digit growth since the legalization of sports betting. Growth is expected to accelerate to 27.4 percent in FY 2025-26 and another 37.3 percent in FY 2026-27, largely attributable to increased revenue from the HB 25-1311 provisions described above. Total TABOR-exempt sports betting revenue is expected to reach $72.7 million in FY 2027-28, up from the $37.5 million posted in FY 2024-25.

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Sports betting fee revenue subject to TABOR—which includes gaming licenses, operations fees, credit card fees, interest, and other charges for service—declined 20.7 percent to $1.9 million in FY 2024-25, mostly due to decreasing revenue from operations fees and other charges for services such as credit card fees, fines, and interest. Revenue is expected to rebound from its FY 2024-25 low in future years, growing 3.8 percent in FY 2025-26, another 4.3 percent in FY 2026-27, and another 1.6 percent in FY 2027-28. This revenue is included in the Other Cash Funds forecast in Table 13.

Firearms Tax Approved by voters in the November 2024 election, Proposition KK created a new 6.5 percent tax on firearms, certain firearm parts, and ammunition (firearms tax). Firearms dealers, manufacturers, and ammunition vendors making less than $20,000 per year in retail sales are exempt, as are sales to peace officers, law enforcement agencies, and active-duty military. Implementation of the new tax began on April 1, 2025. Revenue from the tax is TABOR exempt as a voter-approved revenue change. Proposition KK revenue is deposited in the General Fund, transferred to the new Firearms and Ammunition Excise Tax Cash Fund, then distributed as follows after paying administrative costs: 

 

