OSPB Sept 2025 - Forecast_Presentation.pdf (1,792 KB)

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Colorado Economic and Revenue Outlook Mark Ferrandino – Director

Bryce Cooke – Deputy Director Will Mixon – Manager September 22, 2025

OSPB expects to remain below the TABOR cap in FY26 due to H.R. 1 tax provisions but by less than expected in the interim forecast update presented to this committee in August. This forecast includes Special Session and Executive Order impacts, with current balancing estimates discussed later. 2

This year, OSPB expects better wage growth and lower inflation than the prior outlook, resulting in more elevated consumer demand. However, turning to 2026, an economic slowdown is anticipated due to a weakening labor market, with reinflation expected to discourage spending while trade policy and monetary policy may discourage capital investments. 3

Economic growth in 2025 revised up, but 2026 revised down due to labor and consumer demand Figure 1. GDP Forecast and component contribution 8.0%

6.0%

Government Spending

2025 2026 2027

Personal Consumption

4.0%

Year

Previous Current Change Forecast Forecast 1.2% 1.7% +0.5% 1.0% 0.7% -0.3% 1.9% 1.7% -0.2%

U.S. Real GDP Growth

External Forecaster Range*: 2025: 1.6% to 1.7% 2026: 1.3% to 1.9%

2.0%

0.0%

2024 -2.0%

2025 Net Exports

2026

2027

*includes the Philadelphia Fed, Moody’s, Wells Fargo, and the Conference Board as of August 30th

Investments/Inventories

-4.0%

-6.0% Source: U.S. Bureau of Economic Analysis; OSPB Forecast

GDP components are impacted by uncertainty, federal policy • Personal Consumption of Expenditures: Slightly lower inflation expectations and solid wage growth support an additional boost to consumer demand in 2025 but anticipated worsening household balance sheets next year limit its contribution to GDP in 2026. • Investments/Inventories: Recent surveys suggest that businesses expect to absorb up to half the additional costs of tariffs, which reduces capital investments and labor demand, as companies look to avoid losses. In the near term, H.R. 1’s incentives to invest are expected to be more than offset by federal trade and immigration policy. H.R. 1 itself is expected to boost economic growth slightly in the longer term. • Net Exports: Both imports and exports are expected to fall in response to the existing trade policy environment but largely offset each other in the quarters ahead. Volatility in the first half of the year is thought to be behind us. • Government Expenditures: Federal spending is expected to remain relatively stable.

After a year of uncertainty, federal policies are largely incorporated into the forecast • Tax Policy: Included. H.R. 1 includes extension of key TCJA provisions, a higher SALT cap, temporary tax breaks on tipped wages, overtime, vehicle loan interest, an elevated senior standard deduction, and a new depreciation allowance for new factories and similar capital improvements. OSPB estimates are still in line with the interim presentation. • Fiscal Policy/Executive Action: Included. Certain federal workers have lost jobs, while private sector workers that are tied to federal contracts or grant distributions are more likely to be at risk of losing their jobs. Estimates of federal expenditures are incorporated into the GDP forecast, which is a slight drag on growth due to H.R. 1, while investments are now expected to have a tailwind and add to GDP growth based on tax policy changes in H.R. 1. •

Immigration Policy: Included. A drag on overall jobs growth is anticipated. Immigration policy is likely to impact sectors with higher percentages of undocumented workers, such as agriculture, construction, or lowerincome service sector jobs.

• Trade Policy: Included. Includes all impacts through August 26th, which assumes an effective tariff rate of approximately 21.0% in Colorado based on the recent OSPB publication on tariffs. Effective tariff rates have continued to increase with each forecast, but the downstream economic impacts have yet to have as great an impact as previously expected. Many tariffs are still being adjudicated in the courts but remain implemented. 6

Immigration policy lowers the potential for jobs growth Figure 2. Labor Force Participation Rate YoY by Birthplace, Percentage Change 1.0%

Foreign-born

0.5%

0.0% -0.5% -1.0%

U.S.-born

-1.5%

• Lower birth rates and an aging population means that a restrictive immigration policy reduces the available workforce • Labor force participation rate for foreign-born workers has declined sharply year-over-year starting in May 2025, while the U.S.-born participation rate has fallen slightly year-over-year

-2.0%

Source: Bureau of Labor Statistics Data shown as three-month moving average of percentage changes

Effective tariff rates are the highest in over a century Figure 3. Effective Tariff Rate in U.S. Increases by Nearly Eightfold Since Last Year 35.0%

30.0%

25.0%

20.0%

U.S. Effective Tariff Rate as of August 26, 2025: 20.7%

15.0%

• Current calculations based on tariff report released by OSPB on September 4th (link) • Effective tariff rates in Colorado are currently 21.0%, seven times what they were last year • Includes all tariffs implemented as of August 26, so doesn’t include doubled tariffs on India from 25 to 50% and the de minimis exemption elimination • OSPB acknowledges recent court rulings may reverse a majority of executive branch-imposed tariffs, but implementation remains in place until the Supreme Court rules on the case.

10.0%

5.0%

0.0%

Source: U.S. Customs and Border Protection, U.S. International Trade Commission, U.S. Census Bureau, OSPB calculations

Regional Impacts from Tariff Policies Figure 4. Selected sectors concentrated impacts

• Industries like construction and healthcare have impacts across all regions while agriculture, energy, and advanced industries impacts are more regional • Note that the mountain region is less directly impacted across sectors, but as a service-based economy, there are likely to be indirect impacts as well

Source: U.S. Census Bureau, OSPB estimates

Highlighting Colorado Industry Impacts from Tariffs •

Major Colorado economic sectors identified below represent over 90 percent of the international trade conducted by Colorado businesses and nearly half of Colorado GDP and direct jobs.

•

Agriculture: Agricultural products are the top export from Colorado, comprising over 25 percent of all state exports and valued at nearly $3 billion in 2024. Meat-related exports from Colorado have declined in 2025.

•

Construction: As tariffs increase input costs on steel, aluminum, and copper, decrease developer profitability, reduce household and business purchasing power, and introduce economic uncertainty, a downturn in the construction industry is likely to have widespread impacts across several aspects of the state economy.

•

Durable and Nondurable Goods: An estimated one-third of durable goods, such as automobiles and household appliances, are imported to the U.S. OSPB estimates that the impact of tariffs on these goods could result in up to $600 million in additional costs to Colorado consumers.

•

Energy: Energy is Colorado’s largest import as oil, gas, petroleum, and coal products comprise over one-fifth of all state imports. Nearly all the state’s imported oil and gas comes from Canada, which currently has a 10 percent energy tariff imposed. Imported renewable energy components are also impacted.

•

Healthcare: The U.S. healthcare system heavily depends on imported medical equipment and drugs. The price impacts of tariffs on these products and the countries that supply them are likely to cause fiscal strain on healthcare providers and other healthcare-related businesses, while also increasing consumer costs associated with medical care.

•

Technology and Advanced Industries: Aerospace in Colorado is an acutely impacted industry due to the 39 percent tariff currently levied against Switzerland. Colorado imported $741 million from Switzerland related to aerospace in 2024.

Tariffs impact various aspects of the economy in different ways dependent upon business decisions Tariff Taxes on Imported Goods Business Chooses to Absorb Costs

Business Passes on Costs to Consumers

Loss of Profitability

Higher Inflation

Layoffs

Reduced Business Investment

Unemployment Rate Rises & Job Growth Slows

Weaker Economic Growth

Lower Personal Income

Lower Purchasing Power & Reduced Spending

Restrictive Monetary Policy

Loss of Profitability Potential Productivity Gains for Large Businesses

Tariffs depress economic growth in the U.S. and Colorado below potential • OSPB views tariff policy as the single greatest threat to economic growth, due to the significantly higher trade barriers that increase costs to businesses and consumers • Based on recent business surveys, OSPB expects approximately half of the costs to be passed along to consumers, which would increase inflation and limit households’ purchasing power • However, the other half of those costs would negatively impact businesses’ profits, risking more firms going out of business or at least lowering their investments and labor demand • By creating new headwinds for consumers and businesses in a broad-based way, there is a one-time shock that is expected to temporarily limit U.S. GDP growth as well as Colorado’s Gross State Product (GSP) growth • If tariffs remained at 2024 levels, OSPB would expect GDP and GSP growth to remain at their potential growth rates of approximately 2.0%, but with currently implemented tariffs, OSPB expects GDP and GSP growth to slow and narrowly avoid a technical recession: Figure 5. GDP and GSP Under 2024 Tariffs 2023

2024

2025

2026

2027

U.S.

Actual 2.9%

Actual 2.8%

Forecast 1.9%

Forecast 2.0%

Forecast 1.9%

Colorado

4.4%

1.9%

2.1%

Figure 6. GDP and GSP Under Current Tariffs

U.S. Colorado

2023 Actual 2.9% 4.4%

2024 Actual 2.8% 1.9%

2025 Forecast 1.7% 1.7%

2026 Forecast 0.7% 0.8%

2027 Forecast 1.7% 2.0%

Re-inflation resulting from tariff policy appears to be underway after August report, placing upward pressure on 2026 year-over-year price growth Figure 7. YoY Inflation by Major Component July 2025 Denver vs. U.S. Energy

-7.7% -1.3% 0.5% 1.1%

Goods less Food and Energy

2.0% 2.9%

Food

1.6%

Shelter

3.7%

5.3% 4.0%

Services less Shelter

Topline

Denver

U.S.

Source: Bureau of Labor Statistics; OSPB's Calculations. *MSA = Metro Statistical Area

2.1% 2.7%

• U.S. year-over-year inflation was 2.9% in August, 0.4% month-over-month vs. 0.2% in July • Inflation impacts from tariffs are expected to have concentrated month-over-month impacts at the end of 2025, which translates to more elevated year-over-year growth in 2026 • Businesses accumulated large inventories prior to the implementation of tariffs in early 2025 to avoid cost increases for as long as possible • Energy prices have recorded declines because gas prices fell, out of step with typical seasonal trends

More restrictive monetary policy in 2025 from Federal Reserve due to concerns around tariffs increasing prices Figure 8. OSPB Federal Funds Rate Forecast by Tariff Scenario 5.5 5.0

Current Tariff Rates: Fed Funds Rate Forecast

4.5 4.0 3.5 3.0

2024 Tariff Rates: Fed Funds Rate Forecast

• Federal Reserve has cited tariff policy as significant issue in holding the federal funds rate higher • In 2024, both the market and Federal Reserve expected quicker rate cuts • Saw 0.25% rate cut last week – first cut this year

2.5 2.0

Source: Board of Governors of the Federal Reserve System for 2024 data. 2025-2027 are OSPB projections based upon different tariff scenarios.

• Fed funds rate now expected to remain higher over 2025 and 2026 as Fed attempts to limit re-inflation from tariffs; will result in weaker aggregate demand in the economy

Healthy consumer demand thus far in 2025, but slowing demand is expected as re-inflation negatively impacts real discretionary income Figure 9. Retail Sales Growth by Selected Industry (Jan-June 2025 vs Jan-June 2024) U.S. CO

Health and Personal Care Stores Furniture, Home Furnishings Stores, electronics and Appliance stores

7.4% 6.2% 2.7% 5.6% 5.1% 5.5%

Motor Vehicle and Parts Dealers

4.7% 3.7% 3.2%

Total Sporting Goods, Hobby, Musical Instrument, Book Stores and Miscellaneous

Building Material and Garden Equipment and Supplies Dealers -10.0%

• OSPB continues to anticipate downside risks to consumer spending from tariffs and inflation, a weakening jobs market, and higher consumer debt levels

4.7% 1.6%

5.1%

Food Services and Drinking Places Gasoline Stations

• Growth in Colorado driven in tariffsusceptible areas such as furniture/appliances, and motor vehicles

2.3%

General Merchandise Stores

• Overall consumer spending patterns through the spring have outpaced OSPB’s expectations - national growth at 3.8% through August, Colorado growth at 3.2% through June

1.5% -3.7% -2.5% -0.3% -4.7%

Note: Year over Year Percentage Change Source: U.S. Census Bureau, Colorado Department of Revenue

0.0%

10.0%

Labor demand has stagnated due to uncertainty surrounding tariffs, particularly in certain sectors • Manufacturing, construction, and retail trade are among the sectors more impacted by trade policy and have seen negative aggregate jobs growth as tariffs rise

• Employers cite market conditions and economic uncertainty related to tariffs, inflation expectations for slow hiring; unemployment rising modestly, but increase almost entirely driven by young workers (16-24) • August 2025 marks the first time there have been more unemployed workers than job openings since April 2021 • Total job growth has slowed significantly in Q2 and Q3 of 2025 – averaged 111k jobs added per month in Q1 but down to 55k in Q2 and 51k in Q3 so far

Thousands

Figure 10. Three-Month Average Monthly Job Growth by Tariff Impact, U.S.

250

Industries not tariff-impacted

200 150

100

Tariff-impacted Industries

50 0 -50

Source: Bureau of Labor Statistics Tariff impacted industries are: mining, manufacturing, construction, retail trade, wholesale trade, and transportation & warehousing Shaded area denotes the time period when tariffs were increased significantly.

U.S. and Colorado aggregate wage growth expected to slow on weaker jobs growth and smaller pay increases Figure 11. U.S. and Colorado Annual Wage Growth 10.0%

• Wage growth healthy over first half of 2025 but projected to weaken to below-average rates in 2026 and 2027 for the U.S. and Colorado

Colorado

9.0% 8.0% 7.0% 6.0%

• Slower job growth has significant impact on aggregate wage growth as it represents a combination of wages added through new jobs and pay increases from current payrolls

5.0%

U.S.

4.0%

3.0% 2.0% 1.0% 0.0%

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

Note: Dotted line indicates forecast. Source: Bureau of Economic Analysis, OSPB forecast

Tariffs will raise housing construction costs, further weakening demand as interest rates remain high 25,000

20,000

Figure 12. Colorado Housing Market Indicators (12-Month Moving Averages)

Figure 13. Colorado and U.S. Home and Residential Rent Prices Typical Home Prices Year-Over-Year Change

Active Listings

15,000

25%

20%

15%

10%

10,000

5,000

Sold Listings

Fed begins raising rates

U.S.

10% 5%

Housing Construction Starts* Construction Permits

Residential Rent Prices Year-Over-Year Change

Fed begins cutting rates

-5%

0% CO

-5%

-10%

Source: Colorado Association of Realtors; U.S. Census Bureau; DODGE Data Analytics. Source: Apartment List; Zillow. * Note: Thousands of square feet

• •

Tariff impacts on housing construction inputs are expected to raise costs over time, reducing demand from buyers and developers. OSPB expects tariffs to raise new home prices by 4-6 percent, or $30-45k for median value homes. However, ongoing low demand due to high mortgage rates and economic uncertainty has kept Colorado home and rent price growth below the U.S.

Commercial real estate also faces interest rate and tariff headwinds Figure 14. Commercial Real Estate Construction Starts (1,000s of SF, 12-Month Moving Averages) 3,000

Figure 15. Commercial Real Estate Construction Starts ($ millions, 12-Month Moving Averages) $400

2,500 2,000

$300

Office

Office $200

1,500

Industrial

1,000

$100 500

Retail

Source: DODGE Data & Analytics.

Retail $-

Source: DODGE Data & Analytics.

• CRE square footage new starts are down 5.0 percent YTD, while dollar-value starts are up 21.3 percent, potentially indicating that construction material costs are increasing with tariff impacts and/or developers are focusing on higher-value projects.

Oil prices fall due to supply increases from OPEC+ and global demand concerns from protectionist policies Figure 16. Annual Oil and Natural Gas Prices $100

$10

$94.90

$90

$80

Annual Oil Prices

$70

$65.23

$76.63

$6.45

$30

$3.15

$6 $47.77

$2.56

$20 $10

$63.58

$39.16

$50 $40

$56.99

$60

Annual Natural Gas Prices

$3.61

$2.03

• U.S. Energy Information Administration downgraded WTI oil forecast below $50/bbl for 2026

$4.34

$2.19

$0 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 Note: Shaded area denotes recession. Dotted line indicates U.S. Energy Information Administration forecast. Henry Hub natural gas prices and West Texas Intermediate oil prices reflected. Source: U.S. Energy Information Administration

$5 $4 $3 $2 $1 $0

• EIA expects record U.S. oil production in 2025 before a production decline in 2026 from weaker price environment • Colorado oil production will likely be similarly impacted • Natural gas fundamentals remain much stronger

Chance of a recession in the next 12 months remains at 50% with elevated downside risk Downside risks: • Trade policy barriers increase • Reacceleration of inflation, which would lead to longer-term restrictive monetary policy that would dampen consumer demand and business investment • Softening labor market beyond expectations • Global geopolitical conflicts • Federal Reserve independence • Federal data reports Upside risks: • Trade barriers are reduced • Business environment following settled trade policy • Federal Reserve responds more quickly than expected with faster rate cuts, likely a result of a weaker labor market, which would stimulate the economy without an uptick in inflation • Shelter inflation remains low alongside stronger wages that attract greater net-migration into Colorado from other states

Significant downward General Fund revenue revisions from tax changes in federal H.R. 1 place the State below the TABOR cap in FY 2025-26. Surpluses expected to return in FY 2026-27 and FY 2027-28.

General Fund revenue revised down over forecast period from impacts of H.R. 1 with partial offsets from special session and upward September forecast revisions Billions

Figure 17. Changes in General Fund Revenue Forecast

$20 -$295.4M

$18 $16

+$67.3M

$17.1

$17.2

$17.8

-$756.0M

$18.4

$18.1

$17.0

Projected General Fund Year-OverYear Revenue Growth:

$14 $12 $10 $8

•

FY 2024-25: -0.4%

•

FY 2025-26: -0.8%

•

FY 2026-27: 6.1%

•

FY 2027-28: 5.3%

June June

$6 $4 $2

June 2025

Sept. 2025

June 2025

Sept. 2025

June 2025

Sept. 2025

$0 FY 2024-25 Source: OSPB September 2025 Forecast.

FY2025-26

FY 2026-27

FY 24-25 TABOR surplus closely aligned to March forecast, but FY 25-26 significantly different after H.R. 1 Billions $24

Figure 18. Total TABOR Revenue and TABOR Refunds Forecast

$22 $20

General Fund Revenue Exceeding the TABOR Cap

$18

Revenue over TABOR Cap FY25: +$296M FY26: -$219M FY27: +$364M FY28: +$721M

$16

$14

$10 $8

General Fund Revenue below the TABOR Cap

Total Revenue Growth Rates FY25: +0.1% FY26: +1.7% FY27: +5.3% FY28: +5.8%

FY 2025-26: -$861.8M

TABOR Surplus Revisions from June forecast: FY 2024-25: +$72.1M FY 2025-26: -$508.1M FY 2026-27: -$172.5M

FY 2024-25: -$5.4M

FY 2026-27: -$411.9M

Ref. C TABOR Cap

$12

TABOR Surplus Revisions from March forecast:

Cash Fund Revenue Subject to TABOR

FY 2025-26 TABOR Forecast: From June to September ➢ FY 2025-26 TABOR Surplus June Forecast: $289.0 million • H.R. 1 revenue impacts: ($1,195.5 million) • Diversion Changes $170.9 million ➢ FY 2025-26 TABOR Surplus Forecast after accounting for H.R. 1: ($735.6 million) • Special Session Revenue Impacts: $368.5 million ➢ FY 2025-26 TABOR Surplus Forecast after Special Session: ($367.1 million) • September General Fund Revenue Forecast Revisions: $98.5 million • September Cash Fund Revenue Forecast Revisions: $49.5 million

➢ FY 2025-26 TABOR Surplus September Forecast: ($219.1 million)

FY 2026-27 TABOR Forecast: From June to September ➢ FY 2026-27 TABOR Surplus June Forecast: $536.4 million • H.R. 1 revenue impacts: ($676.0 million) • Diversion Changes $65.8 million • FATC/EITC Revenue Requirement Not Met for Tax Year 2027: $487.8 million ➢ FY 2026-27 TABOR Surplus Forecast after accounting for H.R. 1: $414.0 million

• Special Session Revenue Impacts: $287.0 million ➢ FY 2026-27 TABOR Surplus Forecast after Special Session: $701.0 million • • • •

September General Fund Revenue Forecast Revisions: $50.1 million September Cash Fund Revenue Forecast Revisions: ($3.5 million) FATC/EITC Revenue Requirement Fully Met for Tax Year 2027: ($487.8 million) TABOR cap decreased from lower inflation and population forecast: $104.1 million

➢ FY 2026-27 TABOR Surplus September Forecast: $363.9 million 26

Earned Income and Family Affordability tax credits assumed off in 2026, fully available in 2027 and 2028; workforce shortage tax credit reduced by half in 2026 •

•

FATC and expanded EITC only become available when compound annual TABOR revenue growth of 3% is forecast relative to FY 2024-25 estimates from March 2024 OSPB forecast

With CAGR revenue growth below 3% projected in FY 2026-27, Tax Year 2026 credits are assumed unavailable. Final determination will be in the December 2025 OSPB forecast.

•

FATC and expanded EITC are projected to be fully available in Tax Years 2027 and 2028 with required revenue growth met

•

Workforce shortage tax credit amounts (HB24-1365) are determined by this September forecast, based upon current-year TABOR revenue growth. With 1.7% TABOR revenue growth projected in FY 2025-26, these tax credits are reduced by half for Tax Year 2026.

Figure 19. FATC/EITC Current Forecast Assumptions Tax Year

FATC/EITC Available?

CAGR Revenue Growth

2026

Unavailable

FY 2026-27: 2.3%

2027

Fully Available

FY 2027-28: 4.1%

2028

Fully Available

FY 2028-29: Assumed >3.75%*

*Official FY 2028-29 revenue estimates are not included in this forecast but revenue growth above 3.75% is assumed given that estimates for FY 2027-28 are 4.1%.

Individual income tax revenue revised down over $500 million in FY 25-26 since June forecast, spurred by H.R. 1 Figure 20. Individual Income Tax Revenue Revisions

$ in millions June 2025 Forecast

FY 2024-25 Preliminary

FY 2025-26 Forecast

FY 2026-27 Forecast

$10,026.3

$10,991.5

$11,502.9

Policy Impacts from H.R. 1

$0.0

($778.0)

($494.5)

Policy Impacts from HB25B-1001*

$0.0

$62.0

$124.0

($28.4)

$159.8

$48.6

$9,997.9

$10,435.3

$11,181.0

Annual Growth %

-0.5%

4.4%

7.1%

Revisions from June 2025 Forecast

($28.4)

($556.2)

($321.8)

Forecast Changes September 2025 Forecast

*Note: This bill extended the Qualified Business Income deduction add-back, which impacts filers who receive income through sole proprietorships, partnerships, S-corporations, and some trusts that “pass-through” income to an individual’s tax returns. Despite income being from a business or trust, revenue reporting is typically captured in individual income collections.

Corporate income downward revenue revisions of over $400 million in FY 25-26, concentrated in that year Figure 21. Corporate Income Tax Revenue Revisions

$ in millions June 2025 Forecast

FY 2024-25 Preliminary

FY 2025-26 Forecast

FY 2026-27 Forecast

$2,642.1

$2,264.9

$2,377.0

Policy Impacts from H.R. 1

$0.0

($417.5)

($181.5)

Policy Impacts from HB25B-1002

$0.0

$40.0

$80.0

($22.6)

($56.0)

($21.2)

$2,619.5

$1,831.4

$2,254.3

Annual Growth %

-6.3%

-30.1%

23.1%

Revisions from June 2025 Forecast

($22.6)

($433.5)

($122.7)

Forecast Changes September 2025 Forecast

State Education Fund diversions revised down across the forecast period • Due to the impact of H.R. 1, tax diversions to the State Education Fund (SEF) have been revised down across all fiscal years. In FY 2024-25, SEF revenue has been revised down by $48 million, by $114 million in FY 2025-26, and $72 million in FY 2026-27. Cumulatively, revenue to the SEF has been revised down by $234 million across three fiscal years. • Revenue diversion to the Kids Matter Account (created by HB25-1320) has also been revised down. OSPB expects a lower diversion of $14 million in FY 2026-27. Figure 22. State Education Fund Revenue Diversion Revisions FY 2024-25 Preliminary

FY 2025-26 Forecast

FY 2026-27 Forecast

FY 2027-28 Forecast

June Forecast Diversion

$1,108.5

$1,156.6

$1,207.5

N/A

September Forecast Diversion Change

$1060.6 -$47.9

$1,042.7 -$113.9

$1,135.3 -$72.3

$1,192.1 N/A

$ in millions

Proposition 123 diversions also revised down due to impacts from H.R. 1 • Revisions down in Prop 123 diversions primarily caused by H.R. 1 reducing taxable income, thereby reducing the diversion.

• FY 2025-26 diversion is largely stable from FY 2024-25 with significant growth expected in FY 2026-27 • As part of the Governor’s Executive Order, Prop 123 is included in General Fund balancing efforts, which will reduce FY 2025-26 diversions to OEDIT by $105M. Figure 23. Proposition 123 Diversion Distributions Forecast FY 2024-25 Preliminary $332.9 $199.2 $132.8

FY 2025-26 Forecast $347.3 $208.2 $138.8

FY 2026-27 Forecast $362.6 $217.6 $145.0

FY 2027-28 Forecast N/A N/A N/A

September Forecast Diversion

$317.0

$313.1

$340.9

$358.0

OEDIT Diversion DOLA Diversion Change June-Sept

$190.2 $126.8 -$15.9

$187.8 $125.2 -$34.2

$204.5 $136.3 -$21.7

$214.8 $143.2 N/A

$ in millions June Forecast Diversion OEDIT Diversion DOLA Diversion

Sales and use tax revenue revised up on recent strength, policy changes Millions

Revisions from June:

Figure 24. Sales and Use Tax Revenue

$6,000

18.0%

16.8%

Forecast

$5,000

14.0%

$4,000

10.0% 7.4%

$2,000 $1,000

FY25: -$4.8M on actual revenue collected to close the year

•

FY26: +$75.2M due to policy changes from HB25B-1005 and continued resilience of retail trade in the short term

•

FY27: +$75.2M due to policy changes from HB25B-1005 and continued resilience of retail trade

•

FY28: Initial forecast for FY28 anticipates continued growth in sales and use tax revenue of 4.5%

12.0% Historical

$3,000

16.0%

•

8.0% 4.2%

1.7%

4.5% 6.0% 4.3% 4.0% 3.0%

1.1% 0.4%

2.0% 0.0%

Source: Colorado Department of Revenue, OSPB Forecast

Cash fund revenue revised upward in FY 2025-26 from policy adjustments, remains steady in other years

Cash fund revenue revisions largely in FY 2025-26 Millions $3,500

Figure 25. Cash Fund Revenue Forecast Revisions

$3,000

$2,500

+$399.7M

-$3.5M

$3,228.7

$3,237.5 $3,234.0

+$24.9M

$2,744.8 $2,769.7

Projected Cash Fund Year-OverYear Revenue Growth:

$2,829.0

$2,000

$1,500

$500

FY 2024-25: -1.0%

•

FY 2025-26: +16.6%

•

FY 2026-27: +0.2%

•

FY 2027-28: +5.8%

June

$1,000

•

June 2025

Sept. 2025

FY 2024-25 Source: OSPB September 2025 Forecast.

June 2025

Sept. 2025

FY 2025-26

June 2025

Sept. 2025

FY 2026-27

Miscellaneous cash funds see changes from policy impacts Figure 26. Miscellaneous Cash Funds Forecast ($ millions) $1,400.0 $1,200.0 $1,000.0 $66.1

$150.2

HIA Cash Fund

$200.0

Tax Credit Sales

$88.8

Adult Dental

$87.0

$800.0 $329.1 $377.1

Other

$480.6

Top 24

$434.2

$200.0

•

FY 2024-25 Adult Dental revenue of $66.1M was below June Forecast of $75.3M. However, first month of data for FY 2025-26 came in $16M above expectation. Out-year pressures still remains.

$461.0

$400.0 $518.3

Special session bills HB25B1004 and HB25B-1006 Tax Credit Sales, as well as the Health Insurance Affordability Enterprise disqualification increase FY 2025-26 revenue by $350.2M

$83.6

$600.0

$574.9

•

$534.9

Source: Office of State Controller; OSPB Forecast.

Transportation revenue: gas tax revenue returns to healthy growth while diesel revenue declines Millions $540

Figure 27. Gasoline Tax Revenue

$520 $500

Millions $150

Figure 28. Diesel Tax Revenue

$140 $130

$480 $120 $460 $440

$110

$420

$100

$400

$90

Note: Dotted line indicates forecast; shading denotes recession. Source: Colorado Department of Revenue, OSPB September 2025 Forecast

Severance tax revenue expected to normalize in FY 2025-26 but decline next fiscal year on lower oil prices Millions $400.0 $350.0

Figure 29. Severance Tax Revenue by Fiscal Year $374.7 $336.9

•

Severance tax revenue declined to $66.9 million in FY 2024-25 after elevated taxpayer refunds

•

Revenue is projected to normalize to long-term average levels in FY 2025-26

•

Decline in FY 2026-27 to belowaverage revenue levels expected due to downgraded oil price forecasts

$325.0

$300.0 $250.0

$218.4

20-Year Average

$200.0

$170.3 $153.0

$150.0 $100.0 $50.0

$213.2

$66.9

$48.2 $19.5

$14.7

$0.0

Note: Dotted bars indicate forecast. Source: Office of State Controller, OSPB September 2025 Forecast.

TABOR refunds projected in most years but below the cap in FY 2025-26 Millions

Figure 30. TABOR Refunds by Mechanism

$800

800.0

721.1

$700

700.0

$600

Six-Tier Sales 600.0 Tax Refund

266.3

$500

$200 $100

363.9 293.3

256.6 165.5

Change ($M) $69.3 -$289.0 -$172.5 N/A

Income Tax Rate Cut 300.0

• 200.0

198.4

198.3

FY2024-2025

FY2025-2026

FY2026-2027

FY2027-2028

FY2025-2026

FY2026-2027

FY2027-2028

FY2028-2029

186.8

$293.3 $0.0 $363.9 $721.1

Previous Forecast ($M) $224.0 $289.0 $536.4 N/A

400.0

106.5

Refund Incurred: Refund Paid:

FY24-25 FY25-26 FY26-27 FY27-28

500.0

$400

$300

FY Current Incurred Forecast ($M)

Property Tax 100.0 Refunds -

Preliminary data on Homestead Portability comes in well below expectations, revised down from $31M to $1.4M in PTY 2025, refund paid FY 2025-2026

Source: Office of the State Controller, OSPB Forecast.

Healthy School Meals for All revenue higher after H.R. 1 Millions

Figure 31. Healthy School Meals for All Revenue and Expense Forecast

•

HSMA Revenue has been revised up significantly across all fiscal years due to the impact of H.R. 1. FY 2025-26 revenue is revised up by $30 million and in FY 2026-27 revenue is revised up by $60 million.

•

If the expansion measure referred to the November ballot by HB25-1274 were to pass OSPB expects an additional $57 million (FY 2025-26), $114 million (FY 2026-27) and $116 million (FY 2027-28) in HSMA revenue to be available.

•

If the retention measure passes, OSPB expects there will be sufficient revenue to fully fund meal reimbursements in the HSMA program. If both measures pass, an estimated surplus of $70-$80 million is projected for FY 2026–27, with additional revenue funding a portion of SNAP.

$275 $250

Prop MM Revenue Projection

$225 $200 $175

$150

$138

$125

Projected HSMA Costs

$57

$195 $180

$145 Prop FF Revenue Forecast

$100 $75

$116

$114

$132

$150

$151

$156

FY 2025-26

FY 2026-27

FY 2027-28

$50

$25 $0 FY 2024-25

Source: Office of the State Controller, OSPB Forecast.

Marijuana revenue relatively stable due to increased wholesale revenue, higher demand for fresh product Figure 32. Share of Total Marijuana Sales by Product Type 60%

Concentrate

50%

•

Average market rate (AMR) fell to $655 per pound, lowest since Q2 2023

•

Flower is recovering its market share, suggesting higher demand for wholesale going forward

•

SB25-268 changed distribution of 15% Special Sales Tax, increasing share to MTCF and reducing share to local governments

Flower

40% 30% 20%

10% 0%

Source: Colorado Department of Revenue

Marijuana Tax Revenue

Total Revenue

Local Share

General Fund

Preliminary FY 2024-25 Forecast FY 2025-26 Forecast FY 2026-27 Forecast FY 2027-28

$237.1 $233.5 $239.4 $246.5

$18.6 $6.4 $6.6 $6.8

$26.1 $25.6 $26.3 $27.1

BEST School Capital Construction $42.3 $42.1 $44.3 $45.8

Public School Fund $21.1 $20.7 $21.3 $21.9

Marijuana Tax Cash Fund

Marijuana Cash Fund

$129.0 $135.9 $138.2 $142.0

$0.0 $2.7 $2.8 $2.9

Proposition KK revenue revised down, downstream distribution loses expected funding Preliminary FY 2024-25

Forecast FY 2025-26

Forecast FY 2026-27

Forecast FY 2027-28

Administrative Costs (DPS)

$0.4

$0.2

Crime Victim Services (DPS; first $30M + inflation)

$3.5

$15.4

$12.9

$13.3

$0.0

$3.9

$15.6

$13.1

$13.5

$ in millions

Veteran’s Mental Health Services Program (BHA; next $5M) Children and Youth Behavioral Health Crisis Response System (CDHS; next $3M) School Security Disbursement Grant Program (DPS; next $1M) Total FAETCF Revenue Distributions

Revisions from June:

FY25: -$1.7M (-29.7%) FY26: -$14.3M (-47.7%) FY27: -$18.4M (-58.4%)

•

The first 3 months of actual data has come in at around 30% of initial forecasts ($1.3M/month on average), leading to significant revisions downward on actuals alone.

•

Due to the lower-than-expected actuals and forecasts, the CVS distribution is less than half of the original expectation, and all downstream distributions receive zero funding.

•

SB25-003 will prohibit certain gun sales beginning August 2026, leading to further revenue decline in FY 2026-27

Revenue uncertainty is elevated from H.R. 1 with an unknown impact until early 2026 Downside risks: • Federal tax policy changes from H.R. 1 – most of the revenue impact will be recorded during tax filing in 2026 and will be largely unknown until then • Demand destruction for discretionary goods from tariffs • Weaker individual income tax revenue from slower wage and salary growth due to federal immigration policy • Corporate profits and tax liability volatility • Gas/diesel demand and transportation revenue

Upside risks: • • • • •

Trade policy volatility resolved Faster consumer reengagement and growth in the retail goods sector Better than expected salary and wage growth Increased business profits Gas/diesel demand and transportation revenue

The baseline forecast anticipates less room for budget balancing…

June → September FY 2024-25 Forecast Changes: Figure 33. Forecast Impacts on the FY 2024-25 Ending Balance June Forecast FY25 Ending Balance Above/Below Reserve

($24.5)

(-) FY25 GF Over-expenditures

($68.6)

(-) Cash Fund Revenue Increase

($24.2)

(+) TABOR Limit Increase

$13.9

(+) Exempt GF Revenue

$5.6

(+) Transfers to GF

$2.7

(-) Higher R&Es

($1.4)

(+) Reduced Transfers from GF Sept Forecast FY25 Ending Balance Above/Below Reserve

$1.7 ($94.8)

•

OSPB September forecast changes reduced the ending balance below the reserve by $70.3 million more in FY 2024-25, relative to the June forecast.

•

Downward revisions are due primarily to a HCPF over-expenditure and higher than expected cash fund revenue.

•

The disqualification of an enterprise also increased the TABOR limit.

•

Other revisions are relatively small components of the forecast update.

June → September FY 2025-26 Forecast Changes: Figure 34. Forecast Impacts on the FY 2025-26 Ending Balance June Forecast FY26 Ending Balance Above/Below Reserve H.R. 1 Impacts (-) H.R. 1 GF Revenue Impacts (+) TABOR Cap Surplus Elimination H.R. 1 Subtotal Impacts Special Session Impacts (+) Special Session GF Revenue Impacts (+) Spending Restrictions from EO (+) EO Transfers & Diversions (-) HIA Disqualification (net-zero offsetting impact) (+) General Fund Transfer from Tax Credit Sales SS Subtotal Impacts Forecast Impacts (-) Change in Beginning Balance (from FY25 HCPF OEX) (+) Forecast GF Revenue (+) Forecast Transfers to GF (+) Forecast R&Es (+) Forecast Transfers from GF (+) Changes in Reserve after Supplementals Pass Forecast Subtotal Impacts Sept Forecast FY26 Ending Balance Above/Below Reserve

•

OSPB September forecast changes reduced the FY 2025-26 ending balance below the reserve by $151.6 million more relative to June forecast.

•

The impacts of H.R.1 had a net negative impact of $735.6 million, slightly different than the interim forecast due to accruals assumptions.

•

The Special Session and proposed spending cuts and transfers, diversions in the August 28 Executive Order added $520.7 million to the GF ending balance.

•

All other forecast revisions added another $63.3 million to the ending balance.

($40.9) ($1,024.6) $289.0 ($735.6)

$168.5 $103.0 $149.2 $0.0 $100.0 $520.7 ($70.3) $100.1 ($2.8) $7.7 $13.1 $15.4 $63.3 ($192.5)

These impacts from H.R. 1 along with caseload pressures, particularly from Medicaid, place significant pressure on upcoming FY 2026-27 budget also

H.R. 1’s tax policy changes negatively impact the FY 2026-27 beginning General Fund balance • OSPB’s projected ending balance for FY 2025-26 is $192.5 million below the statutory reserve, which is $151.6 million worse off than the June forecast after updates to economic assumptions, executive action on spending reductions, proposed action on transfers/diversions, and legislative changes in the extraordinary session. However, it is $590.6 million better than the expectations presented to this committee in the interim forecast presentation.

• But, because revenue is expected to be below the TABOR cap in FY 2025-26, homestead obligations in FY 2026-27 must be paid out of the General Fund instead. This anticipated $193.0 million cost, combined with the $151.6 million lower FY 2026-27 beginning balance, results in a worse FY 2026-27 budget position by nearly $350 million compared to June’s expectations. • Beyond the immediate budget impacts due to revenue, there are also out-year expenditure pressures due to federal policy changes in H.R. 1, particularly to Medicaid and SNAP.

Figure 35. FY 2025-26 Balancing Position $0.00

-$50.00

June

-$100.00 -$150.00 -$200.00

September

-$250.00

H.R. 1 – Federal Funding Impacts • OSPB expects significant additional General Fund expenses to support Medicaid and SNAP benefits with no State policy changes, per CBO estimates. OSPB expects impacts to begin in the upcoming budget year, due to administrative SNAP costs. • Medicaid: Without state policy changes, costs could increase significantly. These include: • New mandatory work requirements for the Medicaid expansion population, which will create administrative costs for both state and local governments • Pullback in federal support for Colorado’s provider fee (CHASE) will result in a lose of approximately $2.7 billion in federal funds once the policy is fully implemented. • SNAP: Costs are expected to increase by $250-350 million. These include: • Require state share match of at least 5% and up to 25%. Given Colorado’s error rate between 8-10%, the state would be required to provide a 10% match, costing approximately $200 million per year; but if the error rate rises to between 10-13.3%, the match is 15%, costing approximately $300 million per year • States would also be required to cover 75% of the costs of administering SNAP vs. the 50% that they cover now, which could cost up to $50 million for Colorado

Major budgetary impacts from the 2025 Extraordinary Session • HB25B-1004 and HB25B-1006: Sells tax credits on future insurance and corporate tax obligations to raise $200 million in non-exempt revenue in FY26, with $100 million to support the General Fund and $100 million to support the Healthcare Insurance Affordability enterprise. Over the long term, this reduces overall tax collections but shifts more of those collections into the current year.

• HB25B-1001: Maintains existing tax policy to continue the current decoupled nature of the Qualified Business Income Deduction. • HB25B-1002: Adjusts deductions for C-corporation’s taxable income held in foreign jurisdictions • HB25B-1005: Eliminates distributions of the state sales tax vendor fee without impacting the transfers directed to the Housing Development Grant Fund • SB25B-001: Increased the threshold to start the process of reducing spending during a shortfall from 7.5 percent to 12.0 percent

Executive Order Budget Balancing Actions • Spending cuts, including the hiring freeze, in Executive Order D 2025 014 on August 28th total an estimated $103.0 million. These cuts include $75.6 million in ongoing cuts from HCPF. Figure 36. Spending Cuts by Category ($ in millions) HCPF cuts

$20

Other cuts

Hiring Freeze

$40

$60

$80

$100

$120

• In addition to reductions in spending, with ongoing savings attached, there are also one-time reductions in diversions and increased transfers from Cash Funds into the General Fund to increase the FY 2025-26 ending balance. The largest impact is from reducing the Proposition 123 diversion to OEDIT in FY 2025-26 by $105 million. Figure 37. Diversion and Transfer Changes ($ in millions) Other Transfers to the GF

Prop 123 Diversion

$20

$40

$60

$80

$100

$120

$140

$160

Medicaid caseload increases without policy changes eat up the entirety of increased retained GF underneath the spending cap Millions

Figure 38. Actual and Anticipated HCPF GF portion and TABOR increases*

•

In FY 2025-26 and FY 2026-27, there is no other budget availability if we meet the existing Medicaid caseload demand without policy changes

•

Note that this doesn’t account for the Kids Matter diversion of $221.6M and assumes that the Medicaid cuts in the EO in FY26 are on-going.

•

The forecasted TABOR increase of $615 million is less than the combined budget of 13 departments

$1,200

$1,000

$800

HCPF GF cost increase

TABOR (Ref C) increase

$600

$400

$200

$0 FY 2024-25 FY 2025-26 FY 2026-27 (forecast) *Note: HCPF includes reserve impacts and TABOR increases don’t factor in enterprise adjustments

Medical caseload pressures exceed available revenue growth Figure 39. Percentage Changes in Spending and Spending Cap 30.0%

Millions

Figure 40. Increased Spending if GF Medicaid costs grow at different rates

$6,000

25.0%

HCPF Growth

HCPF Actuals

$5,000

Avg State Medicaid

20.0% $4,000 15.0% 10.0%

Avg State Medicaid

-5.0%

TABOR

$3,000

General Fund $2,000

5.0% 0.0%

General Fund

TABOR Cap

$1,000 $-

-10.0% -15.0%

Medical caseload pressures crowd out other State expenses Billions

Figure 41. Medical expenses growth reduces availability for the remainder of the budget

$25

$20

$15

• Assuming medical expenditures from Medicaid grow at the same rates as the last 10 years (8.84%), and TABOR grows at rates of the last 10 years (4.38%), the state would be out of money for the rest of the state by the first half of the 2040 decade.

Medical Expenses

$10

K-12 Expenses

Higher Ed Expenses

• This analysis assumes implementing the new school finance formula and that the backfill of HAS fee cut by H.R. 1

Remainder

Questions?

Appendix

FORECAST TABLES & MISC.

Table 1: Colorado Economic Variables – History and Forecast Income 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

Personal Income (Billions) /A Change Wage and Salary Income (Billions) Change Per-Capita Income ($/person) /A Change Population & Employment Population (Thousands) Change Net Migration (Thousands) Unemployment Rate Total Nonagricultural Employment (Thousands) Change Construction Variables Total Housing Permits Issued (Thousands) Change Nonresidential Construction Value (Millions) /B Change Price Variables Retail Trade (Billions) /C Change Denver-Aurora-Lakewood Consumer Price Index (1982-84=100) Change

Actual Actual Actual Actual Actual Forecast Forecast Forecast 2020 2021 2022 2023 2024 2025 2026 2027 $374.3 $416.7 $447.9 $470.6 $492.9 $514.6 $536.2 $562.0 6.5% 11.3% 7.5% 5.1% 4.7% 4.4% 4.2% 4.8% $187.8 $205.6 $224.8 $238.7 $250.5 $261.0 $270.9 $282.8 2.7% 9.5% 9.3% 6.2% 4.9% 4.2% 3.8% 4.4% $64,700.0 $71,676.0 $76,548.0 $79,752.0 $82,744.0 $85,752.0 $88,777.0 $92,483.0 5.6% 10.8% 6.8% 4.2% 3.8% 3.6% 3.5% 4.2% 2020 2021 2022 2023 2024 2025 2026 2027 5,784.6 5,814.0 5,850.6 5,900.9 5,957.2 6,001.2 6,040.2 6,076.5 0.9% 0.5% 0.6% 0.9% 1.0% 0.7% 0.6% 0.6% 29.4 13.6 23.8 33.4 38.9 25.0 20.0 20.0 6.8% 5.5% 3.1% 3.3% 4.3% 4.7% 5.0% 4.7% 2,652.7 2,750.9 2,869.7 2,937.5 2,971.0 2,985.9 2,996.3 3,020.3 -4.9% 3.7% 4.3% 2.4% 1.1% 0.5% 0.4% 0.8% 2020 2021 2022 2023 2024 2025 2026 2027 40.5 56.5 48.8 39.4 32.2 32.3 33.2 35.3 4.8% 39.7% -13.6% -19.3% -18.3% 0.5% 2.7% 6.3% $5,607.5 $5,681.0 $6,630.1 $6,691.6 $4,734.4 $5,757.0 $5,877.9 $6,201.2 8.6% 1.3% 16.7% 0.9% -29.2% 21.6% 2.1% 5.5% 2020 2021 2022 2023 2024 2025 2026 2027 $228.8 $268.3 $299.9 $302.6 $306.5 $313.6 $322.7 $337.2 1.9% 17.3% 11.8% 0.9% 1.3% 2.3% 2.9% 4.5% 272.2 281.8 304.4 320.3 327.6 336.1 348.2 356.9 2.0% 3.5% 8.0% 5.2% 2.3% 2.6% 3.6% 2.5%

/A Personal Income as reported by the federal Bureau of Economic Analysis includes: wage and salary disbursements, supplements to wages and salaries, proprietors' income with inventory and capital consumption adjustments, rental income of persons with capital consumption adjustments, personal dividend income, personal interest income, and personal current transfer receipts, less contributions from government social insurance. /B Nonresidential Construction Value is reported by Dodge Analytics (McGraw-Hill Construction) and includes new construction, additions, and major remodeling projects predominately at commercial and manufacturing facilities, educational institutions, medical and government buildings. Nonresidential does not include non-building projects (such as streets, highways) /C Retail Trade includes motor vehicles and automobile parts, furniture and home furnishings, electronics and appliances, building materials, sales at food and beverage stores, health and personal care, sales at convenience stores and service stations, clothing, sporting goods / books / music, and general merchandise found at warehouse stores and internet purchases.

Table 2: National Economic Variables – History and Forecast Line Income 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21

Inflation-Adjusted Gross Domestic Product (Billions) /A Change Personal Income (Billions) /B Change Per-Capita Income ($/person) /B Change Wage and Salary Income (Billions) Change Population & Employment Population (Millions) Change Unemployment Rate Total Nonagricultural Employment (Millions) Change Other Key Indicators Consumer Price Index (1982-84=100) Change Corporate Profits (Billions) Change Housing Permits (Millions) Change Retail Trade (Billions) Change

Actual 2020

Actual 2021

Actual 2022

Actual 2023

Actual 2024

Forecast 2025

Forecast 2026

Forecast 2027

$20,267.6 -2.2% $19,620.1 6.8% $59,172 5.8% $9,465.7 1.5% 2020 331.6 1.0% 8.1% 142.2 -5.8% 2020 258.8 1.2% $2,411.3 -3.5% 1.47 6.1% $6,107.8 0.7%

$21,494.8 6.1% $21,419.5 9.2% $64,497 9.0% $10,315.6 9.0% 2021 332.1 0.2% 5.4% 146.3 2.9% 2021 271.0 4.7% $3,077.6 27.6% 1.74 18.1% $7,225.4 18.3%

$22,034.8 2.5% $22,088.9 3.1% $66,131 2.5% $11,123.1 7.8% 2022 334.0 0.6% 3.7% 152.5 4.3% 2022 292.7 8.0% $3,316.7 7.8% 1.68 -3.3% $7,873.5 9.0%

$22,671.1 2.9% $23,402.5 5.9% $69,484 5.1% $11,725.2 5.4% 2023 336.8 0.8% 3.6% 155.9 2.2% 2023 304.7 4.1% $3,546.5 6.9% 1.51 -10.1% $8,139.5 3.4%

$23,305.0 2.8% $24,669.3 5.4% $72,533 4.4% $12,401.1 5.8% 2024 340.1 1.0% 4.0% 158.0 1.3% 2024 313.7 2.9% $3,827.8 7.9% 1.48 -2.2% $8,386.0 3.0%

$23,701.2 1.7% $25,779.4 4.5% $75,345 3.9% $12,934.3 4.3% 2025 342.2 0.6% 4.2% 159.4 0.9% 2025 322.8 2.9% $3,950.3 3.2% 1.42 -3.9% $8,654.3 3.2%

$23,867.1 0.7% $26,733.3 3.7% $77,744 3.2% $13,374.1 3.4% 2026 343.9 0.5% 4.6% 159.9 0.3% 2026 334.1 3.5% $3,887.1 -1.6% 1.43 0.8% $8,836.1 2.1%

$24,272.9 1.7% $27,882.8 4.3% $80,684 3.8% $13,868.9 3.7% 2027 345.6 0.5% 4.7% 160.5 0.4% 2027 341.8 2.3% $4,093.1 5.3% 1.51 5.2% $9,171.8 3.8%

/A U.S. Bureau of Economic Analysis, National Income and Product Accounts /B Personal Income as reported by the U.S. Bureau of Economic Analysis includes: wage and salary disbursements, supplements to wages and salaries, proprietors' income with inventory and capital consumption adjustments, rental income of persons with capital consumption adjustments, personal dividend income, personal interest income, and personal current transfer receipts, less contributions from government social insurance

Table 3: General Fund Revenue Estimates by Tax Category /A Line 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

Excise Taxes Sales Use Retail Marijuana Sales - Special Sales Tax Cigarette Tobacco Products Liquor Total Proposition EE Proposition KK Total Excise Income Taxes Net Individual Income Net Corporate Income Total Income Less: State Education Fund Diversion Less: Kids Matter Account Diversion Less: Proposition 123 Diversion Less: Healthy School Meals Total Income to General Fund Other Revenue Insurance Interest Income Pari-Mutuel Court Receipts Other Income Total Other GROSS GENERAL FUND

Preliminary FY 2024-25 $4,441.1 $216.6 $186.4 $19.5 $23.7 $54.0 $243.6 $3.9 $5,188.8 FY 2024-25 $9,997.9 $2,619.5 $12,617.4 $1,060.6 $0.0 $317.0 $132.3 $11,107.4 FY 2024-25 $659.5 $166.7 $0.3 $2.1 $56.5 $885.0 $17,181.3

Percent Change 1.8% -7.1% -4.4% -4.6% 9.7% -3.6% 17.2% NA 1.8% % chg. -0.5% -6.3% -1.7% -12.3% NA -3.1% NA -1.7% % chg. 21.7% -33.7% -20.4% -35.3% 6.4% 4.1% -0.4%

Forecast FY 2025-26 $4,575.6 $229.1 $183.0 $18.3 $22.5 $56.8 $238.0 $15.6 $5,338.9 FY 2025-26 $10,435.3 $1,831.4 $12,266.7 $1,042.7 $0.0 $313.1 $149.8 $10,761.1 FY 2025-26 $727.7 $144.6 $0.3 $4.1 $64.3 $941.0 $17,041.0

Percent Change 3.0% 5.8% -1.8% -6.3% -4.9% 5.1% -2.3% 297.2% 2.9% % chg. 4.4% -30.1% -2.8% -1.7% NA -1.2% 13.2% -3.1% % chg. 10.4% -13.3% 20.3% 97.4% 13.9% 6.3% -0.8%

Forecast FY 2026-27 $4,769.8 $245.7 $187.6 $17.3 $22.3 $56.8 $232.1 $13.1 $5,544.7 FY 2026-27 $11,181.0 $2,254.3 $13,435.4 $1,135.3 $221.6 $340.9 $150.7 $11,586.8 FY 2026-27 $749.2 $130.1 $0.3 $3.5 $64.2 $947.2 $18,078.7

Percent Change 4.2% 7.2% 2.5% -5.6% -0.9% 0.1% -2.5% -16.3% 3.9% % chg. 7.1% 23.1% 9.5% 8.9% NA 8.9% 0.6% 7.7% % chg. 2.9% -10.0% -0.3% -14.1% -0.2% 0.7% 6.1%

Forecast FY 2027-28 $4,986.7 $259.1 $193.3 $16.3 $22.0 $57.6 $270.5 $13.4 $5,818.9 FY 2027-28 $11,796.5 $2,394.9 $14,191.4 $1,192.1 $232.7 $358.0 $155.6 $12,253.0 FY 2027-28 $778.6 $122.7 $0.3 $3.4 $61.8 $966.9 $19,038.8

Percent Change 4.5% 5.4% 3.0% -5.6% -1.5% 1.4% 16.5% 2.6% 4.9% % chg. 5.5% 6.2% 5.6% 5.0% 5.0% 5.0% 3.2% 5.7% % chg. 3.9% -5.7% -2.9% -2.8% -3.7% 2.1% 5.3%

/A Dollars in Millions

Table 4A: General Fund Overview- Current Law/A Line Revenue 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

Beginning Reserve Gross General Fund Revenue Transfers to the General Fund TOTAL GENERAL FUND AVAILABLE Expenditures Appropriation Subject to Limit Overexpenditures from the General Fund Dollar Change (from prior year) Percent Change (from prior year) Spending Outside Limit TABOR Refund under Art. X, Section 20, (7) (d) Homestead Exemption (Net of TABOR Refund) Other Rebates and Expenditures Transfers for Capital Construction Transfers for Transportation Transfers to State Education Fund Transfers to Other Funds TOTAL GENERAL FUND OBLIGATIONS Percent Change (from prior year) Reversions and Accounting Adjustments Reserves Year-End General Fund Balance Portion of the GF Reserve Held at Treasury Portion of the GF Reserve Held at PERA Year-End General Fund as a % of Appropriations General Fund Statutory Reserve /B

Preliminary FY 2024-25 $3,153.5 $17,181.3 $520.0 $20,854.7 FY 2024-25 $15,621.8 $68.6 $1,803.2 13.0% $2,883.1 $293.3 $0.0 $187.4 $254.1 $117.5 $146.0 $1,884.8 $18,573.5 10.1% $17.5 FY 2024-25 $2,263.7 $2,263.7 $0.0 14.5% $2,358.5

Forecast FY 2025-26 $2,263.7 $17,041.0 $210.2 $19,514.9 FY 2025-26 $16,538.1 $0.0 $916.2 5.9% $1,497.5 $0.0 $0.0 $835.8 $170.5 $42.7 $0.0 $448.6 $18,035.6 -2.9% ($103.0) FY 2025-26 $2,082.3 $1,582.3 $500.0 12.6% $2,439.5

Forecast FY 2026-27 $2,082.3 $18,078.7 $27.8 $20,188.8 FY 2026-27 $16,359.9 $0.0 ($178.1) -1.1% $1,416.2 $363.9 $193.0 $335.9 $20.0 $61.0 $0.0 $442.4 $17,776.1 -1.4% $0.0 FY 2026-27 $2,412.7 $1,912.7 $500.0 14.7% $2,412.7

Forecast FY 2027-28 $2,412.7 $19,038.8 $27.6 $21,479.1 FY 2027-28 $17,257.7 $0.0 $897.7 5.5% $1,674.1 $721.1 $0.0 $335.1 $20.0 $110.5 $0.0 $487.4 $18,931.7 6.5% $0.0 FY 2027-28 $2,547.4 $2,047.4 $500.0 14.8% $2,547.4

Statutory Reserve %

15.1%

14.8%

14.7%

14.8%

Above/Below Statutory Reserve

($94.8)

($357.1)

$0.0

/A. FY 2024-25 and FY 2025-26 expenditures and transfers reflect all bills signed by the Governor through the end of the 2025 regular and extraordinary legislative sessions. Reversions and accounting adjustments in FY 2024-25 reflect projected year-end adjustments, and reversions and accounting adjustments in FY 2025-26 reflect the Governor’s spending restrictions per Executive Order D 2025 014. FY 2026-27 and FY 2027-28 expenditures and fund balance projections are intended to be illustrative. The statutory reserve is no longer simply 15 percent of General Fund appropriations, but is adjusted for SB25-310, HB24-1231, and HB24-1466. Dollars in millions.

Table 4B: Translation from Current Law to Governor’s Budget/A Table 4B - Translation from Current Law to Governor's Budget (Bolded Lines Sum to Overall Difference) Delta ($M) Line from Table 4a/4c FY 2024-25 FY 2025-26 FY 2026-27 FY 2027-28 (1) Beginning Reserve 0.0 0.0 149.2 149.2 (2) Gross General Fund Revenue 0.0 105.0 0.0 0.0 (3) Transfers to the General Fund 0.0 44.2 0.0 0.0 (5) Appropriation Subject to Limit (8) Spending Outside Limit (9) TABOR Refund (11) Other Rebates and Expenditures (12) Transfers for Capital Construction (13) Transfer to Transportation Funds

0.0 0.0 0.0 0.0 0.0 0.0

-103.0 0.0 0.0 0.0 0.0 0.0

0.0 0.0 0.0 0.0 0.0 0.0

(15) Transfer to Other Funds (20) Reversions (21) General Fund Statutory Reserve Total Difference (Net Increase in GF for Governor's Budget)

0.0 0.0 0.0

0.0 103.0 0.0

0.0 0.0 0.0

0.0

-252.2

-149.2

/A. This reflects the August 28th, 2025 Executive Order to help balance the budget shortfall. FY 2025-26 reflects proposed increases in gross general fund revenue from the Prop 123 diversion reduction and $44.2m in increased transfers to the General Fund. Finally, it includes a change to the appropriations lines, offsetting the reversions impacts in Table 4A from the spending reductions. There are ongoing impacts to the beginning balance for FY27.

Table 4C: General Fund Overview- Governor’s Budget/A Line Revenue 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26

Forecast FY 2025-26 $2,263.7 $17,146.0 $254.4 $19,664.1 FY 2025-26 $16,435.1 $0.0 $813.2 5.2% $1,497.5 $0.0 $0.0 $835.8 $170.5 $42.7 $0.0 $448.6 $17,932.6 -2.9% $0.0 FY 2025-26 $2,231.5 $1,731.5 $500.0 13.6% $2,424.0 14.7%

Forecast FY 2026-27 $2,231.5 $18,078.7 $27.8 $20,338.0 FY 2026-27 $17,354.4 $0.0 $919.4 5.6% $1,416.2 $363.9 $193.0 $335.9 $20.0 $61.0 $0.0 $442.4 $17,776.1 -1.4% $0.0 FY 2026-27 $2,561.9 $2,061.9 $500.0 14.8% $2,561.9 14.8%

Forecast FY 2027-28 $2,561.9 $19,038.8 $27.6 $21,628.3 FY 2027-28 $18,252.2 $0.0 $897.7 5.2% $1,674.1 $721.1 $0.0 $335.1 $20.0 $110.5 $0.0 $487.4 $18,931.7 6.5% $0.0 FY 2027-28 $2,696.6 $2,196.6 $500.0 14.8% $2,696.6 14.8%

($94.8)

($192.5)

$0.0

/A. FY 2024-25 and FY 2025-26 expenditures and transfers reflect all bills signed by the Governor through the end of the 2025 regular and extraordinary legislative sessions. General Fund reserve ending balances assume that current law is then amended for all the items proposed in the Executive Order D 2025 014, as shown in Table 4b. The statutory reserve is no longer simply 15 percent of General Fund appropriations, but is adjusted for SB25-310, HB24-1231, and HB24-1466. Dollars in millions.

Table 5: General Fund and State Education Fund Overview /A Line 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

Revenue Beginning Reserves State Education Fund General Fund Gross State Education Fund Revenue Transfer to State Education Fund Gross General Fund Revenue /B TOTAL FUNDS AVAILABLE FOR EXPENDITURE Expenditures General Fund Expenditures /C State Education Fund Expenditures TOTAL OBLIGATIONS Percent Change (from prior year) Reversions and Accounting Adjustments Reserves Year-End Balance State Education Fund General Fund

Preliminary FY 2024-25 $4,827.7 $1,674.1 $3,153.5 $1,146.8 $146.0 $17,701.2 $23,675.7 FY 2024-25 $18,504.9 $1,840.7 $20,345.7 15.2% $94.7 FY 2024-25 $3,381.3 $1,049.0 $2,332.3

Forecast FY 2025-26 $3,312.7 $1,049.0 $2,263.7 $1,068.7 $0.0 $17,251.2 $21,632.6 FY 2025-26 $18,035.6 $1,576.3 $19,611.9 -3.6% ($103.0) FY 2025-26 $2,123.7 $541.4 $1,582.3

Forecast FY 2026-27 $2,123.7 $541.4 $1,582.3 $1,379.8 $0.0 $18,106.5 $21,610.0 FY 2026-27 $17,776.1 $1,646.9 $19,423.0 -1.0% $0.0 FY 2026-27 $2,380.0 $274.3 $2,105.7

Forecast FY 2027-28 $2,380.0 $274.3 $2,105.7 $1,442.6 $0.0 $19,066.4 $22,889.0 FY 2027-28 $18,931.7 $1,586.8 $20,518.5 5.6% $0.0 FY 2027-28 $2,370.5 $130.1 $2,240.4

/A See the Budget and General Fund sections discussing the State Education Fund for more detail. /B This amount includes transfers to the General Fund shown in line 3 in Table 4. /C General Fund expenditures include appropriations subject to the limit of 5.0% of Colorado personal income shown in line 5 in Table 4 as well as all spending outside the limit shown in line 8 in Table 4. Combined Reserves include GF in excess of the 15% GF appropriations reserve

Table 6: Cash Fund Revenue Subject to TABOR /A Line 1 2

3 4 5 6 7 8 9

10 11 12 13 14 15 16

Category Transportation-Related /A Change

Limited Gaming Fund /B Change Regulatory Agencies Change Insurance-Related Change Severance Tax

Change Kids Matter Account Change Other Miscellaneous Cash Funds Change TOTAL CASH FUND REVENUE Change

Preliminary FY 2024-25

Forecast FY 2025-26

Forecast FY 2026-27

Forecast FY 2027-28

$1,494.0

$1,524.9

$1,574.9

$1,648.0

4.8%

2.1%

3.3%

4.6%

$94.4

$93.3

$95.7

$96.3

1.6%

-1.1%

2.6%

0.6%

$116.2

$117.4

$120.5

$123.9

20.9%

1.0%

2.6%

2.8%

$28.3

$26.1

$28.9

$29.0

5.1%

-7.7%

10.7%

0.2%

$66.9

$170.3

$153.0

$213.2

-69.4%

154.5%

-10.2%

39.4%

$0.0

$221.6

$232.7

N/A

$970.0

$1,296.7

$1,039.5

$1,079.5

3.4%

33.7%

-19.8%

3.8%

$2,769.7

$3,228.7

$3,234.0

$3,422.5

-1.0%

16.6%

0.2%

5.8%

/A Includes revenue from Senate Bill 09-108 (FASTER) which began in FY 2009-10. Roughly 40 percent of FASTER-related revenue is directed to State Enterprises. Revenue to State Enterprises is exempt from TABOR and is thus not included in the figures reflected by this table. Dollars in millions. Additionally, includes the impact of SB21-260, which dedicates funding and creates new state enterprises to enable the planning, funding, development, construction, maintenance, and supervision of a sustainable transportation system. /B Excludes tax revenue from extended gaming as allowed by Amendment 50 to the Colorado Constitution as this revenue is exempt from TABOR. The portion of limited gaming revenue that is exempt is projected based on the formula outlined in HB09-1272 and updated for HB24-1469.

Table 7: TABOR and the Referendum C Revenue Limit/A TABOR Revenues

Preliminary FY 2024-25

Forecast FY 2025-26

Forecast FY 2026-27

Forecast FY 2027-28

General Fund /A

$16,680.4

$16,543.5

$17,586.1

$18,614.0

Cash Funds /A

$2,769.1

$3,228.7

$3,234.0

$3,422.5

Total TABOR Revenues

$19,449.4

$19,772.2

$20,820.1

$22,036.5

Revenue Limit Calculation

FY 2024-25

FY 2025-26

FY 2026-27

FY 2027-28

Line

Previous calendar year population growth

0.6%

1.4%

0.5%

0.6%

Previous calendar year inflation

5.2%

2.3%

2.6%

3.6%

Allowable TABOR Growth Rate

5.9%

3.6%

3.1%

4.2%

TABOR Limit /B

$15,462.7

$16,167.8

$16,514.1

$17,207.7

General Fund Exempt Revenue Under Ref. C /C

$3,690.7

$3,604.5

$3,942.1

$4,107.7

Revenue Cap Under Ref. C /B /D

$19,153.4

$19,991.4

$20,456.2

$21,315.4

Amount Above/Below Cap

$296.1

($219.1)

$363.9

$721.1

Revenue to be Refunded including Adjustments from Prior Years /E

$293.3

$0.0

$363.9

$721.1

TABOR State Emergency Reserve Requirement

$574.6

$593.2

$613.7

$639.5

/A Amounts differ from the General Fund and Cash Fund revenues reported in Table 3 and Table 6 due to accounting adjustments and because some General Fund revenue is exempt from TABOR. /B The TABOR limit and Referendum C Cap is adjusted to account for changes in the enterprise status of various State entities. /C Under Referendum C, a "General Fund Exempt Account" is created in the General Fund. The account consists of money collected in excess of the TABOR limit in accordance with voter-approval of Referendum C. /D The revenue limit is calculated by applying the "Allowable TABOR Growth Rate" to either "Total TABOR Revenues" or the "Revenue Cap Under Ref. C," whichever is smaller. Beginning in FY 2010-11, the revenue limit is based on the highest revenue total from FY 2005-06 to 2009-10 plus the "Allowable TABOR Growth Rate." FY 2007-08 was the highest revenue year during the Referendum C timeout period. /E These adjustments are the result of: (a) changes that were made to State accounting records for years in which TABOR refunds occurred that resulted in changes in required refunds to taxpayers, and (b) the refund to taxpayers in previous years was different than the actual amount required. Such adjustments are held by the State until a future year in which a TABOR refund occurs when the total refund amount distributed to taxpayers is adjusted.