Colorado Legislature Considers Changes to Governor's Emergency Powers Amid Fiscal Crisis

The Colorado Legislature is evaluating potential adjustments to how and when the governor can take drastic action to address revenue shortfalls during economic downturns, as state economists warn of a significant budget impact from the recent federal tax break and spending cut bill. The state faces a projected $783 million budget shortfall, resulting from a $1.2 billion revenue hit due to tax code changes in the Republican-backed federal law. Economists anticipate Colorado will take a more substantial revenue hit compared to most other states, primarily due to its policies of automatically adopting most federal tax code changes at the state level and basing tax calculations on federal taxable income.

Key Takeaways:

• The Colorado Legislature is considering amending the state's laws to change when the governor can take sweeping action to respond to revenue shortfalls during economic crises.
• The governor's authority to reduce spending is outlined in two provisions of state law: requiring a plan to restore the general fund reserve and suspending or discontinuing government services if there isn't enough revenue to carry on the functions of state government.
• The JBC staff suggested changing the threshold at which the governor needs to restrict spending and submit a plan to the Legislature, recommending a trigger when expenditures cause the reserve to fall by greater than 2% or 3% of General Fund appropriations.
• The proposed changes aim to ensure the Joint Budget Committee and General Assembly receive a plan for cuts and potentially discuss them with the Governor before implementation.
• Sen. Judy Amabile requested drafting authority for a bill to tweak the reserve trigger, which she can run during a special session or wait until the regular lawmaking term next year.
• The governor's executive order to cut spending will be in effect for three months, starting on the first calendar day of the next month.

Statistics:

• Colorado faces a $783 million budget shortfall due to a $1.2 billion revenue hit from tax code changes in the Republican-backed federal law.
• The state's projected revenue hit is one-third to the 15% general fund reserve.
• Economists anticipate Colorado will take a more substantial revenue hit compared to most other states.
• The governor's Office of State Planning and Budgeting revised its estimate from a $950 million shortfall to a projected $783 million shortfall.

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