The 2025 legislative session is going to be different than any since 2020. Because of the end of pandemic-era federal funding, constitutional constraints on our state’s budget, and a federal government bent on disruptions that run counter to the views of the governing majority in Colorado, legislators in 2025 are going to have to focus on minimizing the damage. There will assuredly be progress made on making the state more affordable for the majority of Coloradans, and the Bell Policy Center will be working to move that agenda forward. But much of the action that legislators will undertake has to be reducing the pain that budget cuts will bring and the federal government’s efforts to push their will onto the most vulnerable Coloradans.

The State of the State Budget

The December economic and revenue forecast had some good news for Coloradans worried about budget cuts, but that news was only good because it was better than the dire warnings delivered at the September forecast. In September, it was predicted that the legislature would have to cut nearly $1 billion, but now non-partisan analysts think that the number will be more like $750 million – a still significantly large number, but not as much as before. Although, if the $350 million mandated by Proposition 130 – money that has to go to local governments to recruit and retain police officers – is all added in this coming fiscal year, then the state’s deficit would rise above $1 billion. It is unclear whether legislators will allocate the full amount in one year, or dole it out in tranches over several years to lessen the need for immediate budget cuts this year.

While less, that $750 million number will necessitate real cuts to services that Coloradans have relied upon. Programs like Medicaid, K-12 education, and child care could be cut to eliminate the deficit. But lawmakers should do everything they can to minimize cuts to these kinds of core programs that would cause real pain, and ensure the most vulnerable Coloradans do not suffer as a result. Gov. Jared Polis put forth his budget proposal in November that included a few ways to reduce that deficit – privatizing the state’s worker’s compensation provider, Pinnacol, as well as changing the ways the state counts K-12 students. But those suggestions have, understandably, been met with skepticism from legislators and seem unlikely to be enacted in the form they were proposed.

Until the budget is formally passed in late March and early April, discussions on how to bridge the gaps in the budget will take up a lot of oxygen in the state Capitol. But to truly tackle the problems, it is important to confront what got us here, even in a seemingly strong macro economy:

• TABOR: The Taxpayer’s Bill of Rights, the constitutional amendment passed all the way back in 1992, artificially constrains how much money the state is allowed to spend, regardless of how much revenue is collected. Furthermore, because the calculation on how much the state is allowed to spend is based in part upon last year’s inflation rate, the cap on spending grew less, relative to last year, due to lowered inflation. Our budget is in a deficit, in part, because inflation went down. That is one illustration of why TABOR has become a stone around Colorado’s economic neck.

• Medicaid: Our budget for Medicaid is skyrocketing. This is not because the state has overspent or low-income Coloradans need too much health care. Unfortunately, the problem is more complicated. During the COVID-19 pandemic, the federal government increased the amount of money it was spending on Medicaid, to take pressure off of states’ budgets. During a public health emergency this policy was prudent and important. However, that increased spending is now done, as the COVID-19 federal relief package has ended. Now Colorado is having to put in more money than during the pandemic just to provide the same services to Coloradans. Combined with an increasingly aging population, Colorado’s Medicaid spending has been increasing, and now the federal government is no longer picking up a larger portion of the tab.

• Federal Funding: As mentioned in the Medicaid bullet above, the federal COVID-19 funds has to be spent by the end of 2026, and there is no more coming. Colorado didn’t stand up new programs with one-time dollars, but some cost-shifting did occur to best take advantage of the influx of revenue. With the end of the federal dollars, there is less money in the system and that exacerbates the strain on the state budget. 
• Tax Cuts: Colorado has continually passed tax cuts that are coming home to roost. While the state’s voters have passed income tax cuts multiple times since 2018, right now we are seeing the pain that is accompanying the multiple rounds of property tax cuts from last year. As a reminder, a big bipartisan deal came together at the end of the 2024 session to lower property taxes for a number of Coloradans in a more equitable way, while preserving K-12 education funding, as property taxes are the main local funding source for public education. Then in August 2024, a special session was called to further cut property taxes to ensure that incredibly damaging tax cut proposals were taken off the ballot. However, those two bills will require the state to spend an additional $250 million on K-12 education to make up for reduced local share from property tax revenue just to keep per-pupil funding at the same level.

These budget challenges endanger the important investments made by prior legislatures. Colorado needs more revenue in its system to adequately fund all of that Colorado needs, and policy makers should work to reduce TABOR’s influence on how we run our state, and make sure to not go backward on important investments like Medicaid.

Other Policies to Watch For in Colorado

While much of the discussion at the Capitol will be taken up by the budget deficit, that does not mean that progress cannot be made in other areas. Legislators know they won’t be able to stand up new programs or policies that require money, but the march toward making Colorado more affordable will continue. Here are a few places that the Bell will be monitoring and supporting in the 2025 session:

Consumer Protection

This space will be occupied by efforts to ensure that corporations are not hiding fees and indiscriminately raising prices, as well as stopping companies from using algorithms to increase rents or hold down wages. “Junk fees” has been a popular discussion in Washington D.C., and can apply to a lot of industries that pile fees on top of a product’s cost – in many cases charging those fees discretely or in a very opaque manner. We will be supporting efforts to control the use of these algorithms and fees this session. 

Additionally, the Bell Policy Center has long been working to protect Coloradans against  predatory loan products. We helped lead the campaign to pass Proposition 111 in 2018 to cap interest rates on payday loans at 36 percent. Since then other financial instruments that try to exploit loopholes in the law have popped up. In order to better understand the landscape of predatory lending and the impacts on Coloradans, we hope to see a bill passed to give the Attorney General authority to collect and publish data so that we can continue to monitor these issues and stop predatory companies from trapping Coloradans in cycles of debt.

Housing

Housing policy has been  top of mind for Colorado lawmakers over the past several years. While property taxes are no longer on the docket after the two rounds of tax cuts that occurred in 2024, ensuring that more housing can be built – and that housing is affordable for low- and middle-income Coloradans – will be something that elected officials will be debating.  A bill to ensure that landlords and management companies cannot use algorithms to set prices of rent – many times significantly higher than what the actual market rate would be – will be making a comeback after failing last year. Also, we can expect bills that ease restrictions on housing in places like churches and religious institutions.

Older Adults

The Bell will continue to lead on policies to help older Coloradans. Last year, a bill to collect data on older Coloradans in the workforce didn’t move forward, despite bipartisan support, due to competing priorities. The bill is expected to come back. Older adults are one of the fastest growing segments of our state’s workforce. Gaining a better understanding of their needs and challenges in finding meaningful employment will support older Coloradans’ financial security while also fostering a stronger economy.

Federal Policy Impacts

With a new U.S. Congress and administration taking the reins in January, change is coming to Washington D.C. While the Bell Policy Center has not typically gotten involved in federal policy discussions, the threats to Colorado from the new administration makes understanding the federal landscape crucial for the next couple of years.

With the Congressional majority already planning to pair significant tax cuts for the wealthy with cuts to the budget, there is a further threat to our state’s economic stability, outside of the state budget. If Republicans in Congress follow through on cutting funding for the Department of Education, federal child care funding, funding for Medicaid, and other important public programs, those cuts will do direct harm to Coloradans. Because our state will be unable to backfill any federal government cuts with state revenue – because we do not have enough money as it is – any cuts to state funding from Congress will be direct cuts to programs because the state will not be able to make up for the loss. While much of the federal action will not be known until after the Colorado legislative session is complete, any policies from the federal level that affect Coloradans will likely require action in 2026. Nevertheless, we will be monitoring and trying to arm Congressional allies with important Colorado specific information to try and minimize the damage as much as possible.