Follow-up to last week’s Rocky Mountain Dispatch coverage on the special legislative session.

DENVER — Colorado lawmakers convened this week for a rare August special session to confront a staggering $1.2 billion budget deficit, the result of cascading revenue losses tied to recent federal tax reforms. The session, which began August 7, builds on last week’s reporting in the Rocky Mountain Dispatch and is expected to last through early next week.

Governor Jared Polis called the emergency session following the passage of federal H.R. 1, which altered depreciation schedules and corporate tax structures, triggering a sharp drop in state income tax collections. The fallout has forced Colorado’s General Assembly to consider sweeping budget cuts, revenue adjustments, and temporary suspensions of tax credits.

Major Cost-Saving Measures Proposed

Among the most immediate actions is a statewide hiring freeze, effective August 27 through the end of the year. The freeze applies to most state agencies, excluding critical health and safety positions, and is projected to save between $3 million and $7 million.

Lawmakers are also weighing the suspension of select state tax credits for 2026 and 2027, including vendor fee allowances and home office deductions. These changes aim to preserve general fund revenue and close loopholes that disproportionately benefit high-income earners and large corporations.

In a bid to recapture lost revenue, the legislature is reviewing mechanisms to tax foreign earnings and offshore income more effectively. These adjustments would align Colorado’s tax code with international reporting standards and reduce reliance on federal conformity.

Program-Specific Adjustments

The budget crisis has placed pressure on health and food assistance programs. Lawmakers are considering emergency funding for providers like Planned Parenthood, which recently lost Medicaid reimbursements due to federal policy shifts. Additionally, leftover funds from the state’s free school lunch program may be redirected to cover anticipated shortfalls in SNAP benefits, especially in counties like Larimer, where demand has surged by 150% over five years.

Another urgent concern is the expiration of federal Affordable Care Act subsidies, which could raise health insurance premiums by 28% statewide. Legislators are exploring temporary relief measures to protect the roughly 300,000 Coloradans who rely on ACA marketplace plans.

Revenue Stabilization Strategies

To address structural weaknesses in the state’s tax code, lawmakers are considering decoupling from specific federal provisions that have destabilized Colorado’s revenue base. This includes reforms to accelerated depreciation schedules and timing shifts that allow corporations to defer taxable income.

The legislature is also reviewing the fiscal impact of the Colorado AI Act (SB24-205), which is set to take effect in February 2026. Implementation costs for state agencies are estimated between $2.5 million and $5 million, prompting calls to narrow the law’s scope and delay enforcement.

Looking Ahead

The special session must last at least three days to pass any legislation, with tight deadlines for committee review and floor votes. Lawmakers are expected to introduce a limited number of bills focused on fiscal stabilization, regulatory reform, and preserving essential services for children, veterans, and older Coloradans.


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