Colorado Faces Fiscal Crisis: Urgent Call for Tax Reform

The state of Colorado is confronting a significant fiscal crisis, underscored by recent federal developments and looming budget challenges. With the expiration of vital federal insurance premium tax credits, approximately 100,000 Coloradans may lose their health care coverage. This situation follows a narrow escape from a hunger emergency caused by a federal government shutdown, highlighting the state’s precarious financial position.

In response to these challenges, Governor Jared Polis and the Colorado General Assembly have taken immediate action. They have authorized $10 million in funding to support food banks, and voter-approved Propositions LL and MM are set to help replenish some funding for the Supplemental Nutrition Assistance Program (SNAP). Additionally, the Colorado Treasury has initiated a tax credit sale projected to generate $100 million in state revenue. Yet, these measures may not be sufficient to address the larger impending fiscal crisis.

Projected Shortfalls and Rising Costs

A recent analysis indicates that Colorado’s General Fund could face an alarming burden of up to $3 billion over the next few years for SNAP and Medicaid programs. Compounding this issue, changes to the federal tax code are expected to deprive the state of $2.6 billion in revenue through the fiscal year 2028. This financial strain is aggravated by a recent budget shortfall largely attributed to rising Medicaid costs at the state level.

As Dave Young, Colorado’s State Treasurer, notes, addressing these fiscal challenges requires decisive action from the state legislature. Young, who previously spent 25 years teaching junior high mathematics, emphasizes that the financial issues facing Colorado are not complex; they demand a proactive approach from lawmakers to avoid further austerity measures.

Young specifically highlights concerns about the state’s Medicaid program, which he argues could operate more efficiently. The Department of Health Care Policy and Finance (HCPF) has been criticized for functioning more like an insurance company than a service agency. Young warns that proposed cuts to critical services may ultimately lead to higher long-term costs, particularly for vulnerable populations such as children with disabilities.

The Case for Graduated Income Tax

In light of these challenges, Young advocates for a graduated income tax proposal introduced by the organization Protect Colorado’s Future. This measure seeks to ensure that Colorado’s wealthiest individuals—approximately 2% of the population—contribute a fair share of taxes. By implementing this reform, the state could potentially raise an estimated $2.4 billion in annual revenue, which would help mitigate immediate budget cuts and facilitate long-term planning for a sustainable fiscal future.

Young also urges the state to reevaluate its severance tax, which currently falls short compared to other Western states. For instance, despite lower oil and gas production, Wyoming generates more than twice the severance tax revenue that Colorado does. Updating tax codes and directing those funds toward health and social services is essential for maintaining the quality of life for all Coloradans.

As the Colorado General Assembly prepares for its next legislative session, Young stresses the need for lawmakers to assert their authority in protecting essential services for children, the elderly, and individuals with disabilities. He calls for a shift away from austerity measures that threaten the state’s ability to provide basic services. Without significant funding increases, Colorado risks facing a future where essential services are unsustainable, ultimately impacting the well-being of its residents.

In summary, Colorado stands at a crossroads, with the potential for a fiscal crisis looming. The time for bold action is now, and the implementation of a graduated income tax could be a vital step toward ensuring a stable and prosperous future for all residents of the state.