State Fiscal Briefs

September 2021

Looking for Colorado data related to the pandemic? We have health, economic, and fiscal data on our new tool, How the COVID-19 Pandemic is Transforming State Budgets.

Colorado’s budget basics

According to the National Association of State Budget Officers (NASBO), Colorado’s total expenditures in fiscal year (FY) 2020 were $40.9 billion, including general funds, other state funds, bonds, and federal funds. NASBO reported that total expenditures across all states in FY 2020 were $2.3 trillion, ranging from $4.7 billion in Wyoming to $337.7 billion in California.

Each state allocates spending and taxes differently among different levels of governments, and local governments often administer programs with state funds, so combined state and local government data show a more complete picture of individual benefits and contributions when comparing states.

Per the US Census Bureau, Colorado’s combined state and local direct general expenditures were $53.9 billion in FY 2018 (the most recent year census data were available), or $9,465 per capita. (Census data exclude “business-like” activities such as utilities and transfers between state and local governments.) National per capita direct general expenditures were $9,801.

Colorado’s largest spending areas per capita were elementary and secondary education ($1,934) and public welfare ($1,715). The Census Bureau includes most Medicaid spending in public welfare but also allocates some of it to public hospitals. Per capita spending is useful for state comparisons but is an incomplete metric because it doesn’t provide any information about a state’s demographics, policy decisions, administrative procedures, or residents’ choices.

Colorado’s combined state and local general revenues were $55.4 billion in FY 2018, or $9,731 per capita. National per capita general revenues were $10,071. Colorado uses all major state and local taxes. Colorado’s largest sources of per capita revenue were charges ($1,874), such as state university tuition and highway tolls, and federal transfers ($1,816).

Colorado’s politics

Governor Jared Polis, a Democrat, was elected in 2018 with 53 percent of the vote. The next gubernatorial election is in 2022.

Democrats control both the House of Representatives (41 Democrats to 24 Republicans) and Senate (20 Democrats to 15 Republicans). Control of the governor’s mansion and each house of the legislature gives Democrats a trifecta in Colorado. All Colorado House seats are on the ballot in 2022 because representatives serve two-year terms. Senators serve four-year terms; roughly half the senatorial seats are on the ballot in 2022, and the other half will be up for election in 2024.

Colorado’s budget institutions, rules, and constraints

Colorado uses an annual budget. The legislature must pass a balanced budget, but it can carry a deficit into the following year. Colorado also has one of the most stringent tax limits in the country: the state’s Taxpayer Bill of Rights (TABOR) requires voter approval for any increases in state or local tax rates and requires the state to return any excess revenue beyond the previous year’s limit—increased annually by population growth and inflation—to its taxpayers. Colorado also limits spending, restricting it to either 5 percent of personal income or 6 percent of expenditure growth from the previous year’s budget (whichever is lower). Both the revenue and spending rules are binding and thus a legislative supermajority or vote of the people is required to override them. On top of these rules, the state limits both its authorized debt and debt service.

(Note: Some states have informal budget institutions that constrain overall spending growth or a specific expenditure’s growth.)

Colorado’s recent fiscal debates

  • Colorado was the first state (followed quickly by Washington) to legalize and tax marijuana. The state levies both a 15 percent excise tax on the retail sale of marijuana and a 15 percent tax on the wholesale transaction between cultivators and distributors or retailers. Localities are also allowed to levy both taxes. The state collected $266 million from marijuana taxes in 2018, or roughly 1 percent of the state’s own-source general revenue.
  • Although most states use federal adjusted gross income as the starting point for their state individual income tax, Colorado is one of a handful of states that use federal taxable income. Because the Tax Cuts and Jobs Act of 2017 made significant changes to federal taxable income, these changes “flowed through” and made major changes to Colorado’s income tax system, such as increasing state taxes for Colorado families with several children. Governor Jared Polis advocated for tax reform in his 2019 State of the State address, but the legislature did not make any substantial changes during the legislative session.
  • Colorado constituents largely agree that the state should spend more on transportation and infrastructure, but there is less agreement on how to pay for it. In 2018, the state passed legislation that transferred hundreds of millions of dollars from the general fund to transportation funds. However, the legislature left a decision on revenue sources to the state’s voters, which yielded two ballot measures in the 2018 election: one that proposed using general fund dollars without a corresponding tax increase and one that proposed increasing the state general sales tax rate. Both initiatives failed. Another transportation spending initiative that does not have a corresponding spending increase is on the ballot in 2020.

Colorado’s current budget

Governor Polis released his FY 2021 budget proposal in January 2020. The proposed general fund appropriations of $13.6 billion was a 3 percent increase over enacted FY 2020 spending. In March, however, Colorado released a revised revenue forecast that significantly lowered the estimated revenue collections for both FY 2020 (the current year) and FY 2021.

Colorado enacted its FY 2021 budget in June 2020. The enacted budget included $10.9 billion in general-fund spending, a 10 percent decrease from FY 2020 operating levels and nearly $3 billion lower than the governor’s January proposal. To help close the deficit, the enacted budget cut spending—including over $700 million in education spending—and eliminated some corporate tax breaks by “decoupling” from federal tax provisions in the CARES Act.

Governor Polis released his FY 2022 budget in November 2020 and gave his State of the State address in February 2021. The governor’s budget included general fund spending of nearly $15 billion. Overall, the governor proposed a 20 percent increase in discretionary spending, including a $1.3 billion stimulus package. Some of that money helped fund an executive order Governor Polis signed in October that sent $375 checks to all unemployment insurance claimants in Colorado who had a weekly benefit allowance between $25 and $500 for any week between March 15, 2020, to October 24, 2020. In his speech, the governor pushed for the enactment of his $1 billion stimulus plan and proposed a range of tax cuts—including eliminating the state’s business personal property tax, making Social Security benefits nontaxable, increasing the state’s earned income tax credit, and creating a $600 child tax credit—that he said could be paid for by closing tax loopholes.

For more on Colorado’s budget, see