Polis freezes hiring, calls for special session to deal with Colorado’s $800 million budget gap

Colorado Gov. Jared Polis announces a special legislative session at the governor’s mansion in Denver on Wednesday. Mark Ferrandino, executive director of the Governor’s Office of State Planning and Budgeting, is at left (Sara Wilson/Colorado Newsline).

Colorado state lawmakers will head back to the Capitol for a special legislative session on Aug. 21 to address the nearly $800 million gap in the current state budget caused by provisions in the recent federal domestic policy law.

In addition to reconvening the Legislature, Gov. Jared Polis also instituted a hiring freeze in the state government until the end of the year.

“We have 11 months remaining in the budget year, and that’s very important. That means that cuts, while difficult, can be spread over a longer period of time than the regular course of (a typical legislative session),” Polis said Wednesday at a press conference in Denver.

The Legislature typically meets in January through May.

Lawmakers passed, and Polis signed, a balanced state budget earlier this year. But those numbers are now out of whack due to changes in the federal tax code made by the Republican-backed bill President Donald Trump signed in July, dubbed the One Big Beautiful Bill Act. Those tweaks to individual and corporate income tax obligations will result in significant losses to expected state revenue, since Colorado tax code closely mirrors federal law.

“All Coloradans are now the collateral damage from the GOP’s cruel bill, which will jeopardize services for hardworking families, children, veterans and older Coloradans. We’ll work hard to minimize the fallout on our communities, but that requires us to act now to mitigate the harm this bill has caused our state,” House Speaker Julie McCluskie, a Dillon Democrat, said in a statement.

Nonpartisan Legislative Council Staff and the Governor’s Office of State Planning and Budgeting both predict a $1.2 billion hit to state tax revenue for the current fiscal year, which began July 1. Colorado is expected to collect revenue over the limit set by the state Taxpayer’s Bill of Rights, which will soften the budget impact to somewhere between $680 million, as legislative economists predict, and $783 million, as the governor’s office thinks.

The special session will need to fill that hole in order to rebalance the budget. Polis’ office is suggesting legislation to issue tax credits to large taxpayers like insurance companies, expand the list of foreign countries Colorado companies cannot send their income to in order to avoid taxes, and decouple Colorado from various federal tax deductions. He also wants spending cuts in existing programs and services.

The state can also tap into its budget reserves, which now stand at 15%, but lawmakers will need to repay that money later on. State law allows the governor to restrict spending if the reserves are expected to fall below half of the required level — meaning the state would need to spend over $1.2 billion before the governor can enact a spending cut plan — but Polis also wants the Legislature to lower that threshold.

Polis also wants lawmakers to tweak ballot language for an initiative this November to retain more revenue for universal school meals so that it will also allow the state to keep money for future new food assistance program costs.

The special session is also an opportunity to support Planned Parenthood, which was targeted by the federal bill, and cushion expected insurance premium increases next year.

Polis also charged the Legislature with addressing the state’s artificial intelligence anti-discrimination law, which is set to go into effect in February. Negotiations between bill sponsors and industry leaders fell through in the final days of the legislative session this year, and a last-minute effort to delay implementation also failed. Polis said Wednesday that he didn’t have a preference over whether the Legislature delays the start of that law or makes significant policy changes during the special session.

Colorado Republican lawmakers characterized the call for a special session as an “unnecessary and expensive political stunt.”

“This is a waste of taxpayer dollars and state resources,” House Minority Leader Rose Pugliese, a Colorado Springs Republican, said in a statement. “The governor is using a special session to stir fear about the Big Beautiful Bill when the truth is that the Big Beautiful Bill continues to cover the people it was designed to serve: seniors, single mothers, children, and people with disabilities.”

The House Republican caucus statement did not include policy ideas to fix the budget gap. It did note that the special session will coincide with the first weekend of the Colorado State Fair.

This will be the third special session in as many years. It will last at least three days, which is the minimum time for a bill to pass both chambers.

Editor’s note: This story first ran on Colorado Newsline, which is part of States Newsroom, a nonprofit news network supported by grants and a coalition of donors as a 501c(3) public charity. Colorado Newsline maintains editorial independence. Contact Editor Quentin Young for questions: info@coloradonewsline.com.