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Colorado: Governor Polis Calls Special Session to Address Budget Hole Created by Federal Bill

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DENVER ~ Denver, CO - Governor Jared Polis has announced that the General Assembly will reconvene on August 21, 2025 at 10:00 AM to address the significant impact of the federal government's budget-busting bill, H.R.1, on Colorado's budget. The decision comes after careful evaluation of the negative effects of the bill and its potential to disrupt the state's balanced budget.

Joined by Office of State Planning and Budgeting Director Mark Ferrandino, Governor Polis emphasized the responsibility to deliver a balanced budget to Coloradans and expressed concern over the immediate revenue shortage caused by H.R.1. "Unlike Congress, which has made the federal deficit and debt worse, Colorado actually has to balance our budget," said Governor Polis. "We are committed to working alongside the General Assembly to find the best possible solution in these truly challenging circumstances caused by the federal reconciliation bill."

Director Ferrandino echoed this sentiment, stating that all options are on the table and that they look forward to collaborating with the General Assembly to find a solution. He also highlighted some of the considerations that will be addressed during the special session, including changes regarding revenue shortfalls and insufficient revenue, closing tax loopholes, and cutting spending.

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The call for a special session takes a carefully balanced approach in addressing H.R.1's major impact on Colorado's budget. This includes not only fiscal measures but also considerations in areas such as health care, food security, and artificial intelligence.

In terms of fiscal measures, some proposed changes include allowing the state to shift revenues by selling tax credits to certain taxpayers and extending decoupling from certain federal deductions. Additionally, there will be reductions in areas such as home office rates and sales tax vendor fees.

In terms of health care, efforts will be made to ensure Medicaid services remain available for eligible individuals despite providers being banned from federal Medicaid financing due to H.R.1. The Health Insurance Affordability Enterprise will also be addressed to prevent premium increases and loss of coverage.

Food security will also be a focus, with adjustments being made to the Healthy School Meals for All Program to include Supplemental Nutrition Assistance Program costs. The state's laws around foreign tax havens will also be updated to ensure companies are paying appropriate taxes in Colorado.

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The impact of H.R.1 on artificial intelligence will also be addressed, with a focus on mitigating any negative effects on consumers, businesses, and state and local governments.

Governor Polis also announced a hiring freeze for state agencies under his purview, effective August 27, 2025 until December 31, 2025. This is in an effort to save money and stabilize the state budget. However, certain positions that are fully funded through TABOR-exempt funding sources will be exempt from this freeze.

H.R.1 is expected to reduce state revenue by over $1.2 billion in the current year and by roughly $700 million in Fiscal Year 2027 and Fiscal Year 2028. This is largely due to increased tax deductions for corporations and shifting costs from the federal government to the states. The impact is expected to grow significantly over time, potentially reaching over $3 billion when accounting for loss of federal funds due to Medicaid and SNAP.

Governor Polis and Director Ferrandino are committed to finding a solution that minimizes the negative impact of H.R.1 on Colorado's budget while ensuring a balanced budget for the state. The special session will provide an opportunity for collaboration between the Governor's office and the General Assembly in addressing this pressing issue.

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