State economists confirmed Colorado’s brutal budgetary situation Monday, kicking off lawmakers’ mad dash to fill a $1.2 billion hole in the budget. 

The March economic forecasts from the governor’s office and legislative staff solidify the numbers lawmakers will use to set the final state budget. Lawmakers had been aware — and raising alarms — about the massive hole since last year, and have already set in motion some cuts to fill it.

How close lawmakers are to filling the hole should become clearer Tuesday during a planned hearing on how cuts proposed so far square with the forecasts. They will then need to finalize the budget — including any additional cuts — before the budget is heard by the entire Senate next week.

It needs to be approved by the legislature in the next month and will dictate state spending for the next fiscal year, which begins July 1.

“We have worked so hard to find ways to have the least possible impact on Coloradans,” Sen. Jeff Bridges, a Democrat and chair of the Joint Budget Committee, said following the forecasts.

He added that he’s optimistic “that those really painful, difficult decisions have led to a place where we are very close to closing this budget in a way that creates the least amount of pain possible for the people of Colorado.”

Lawmakers have grappled with how to pay for — or cut — services like Medicaid, child care for the poorest Coloradans, and school meals, as well as core functions like education. Rocketing Medicaid costs in particular have blown open the state budget, while lawmakers are also trying to find ways to pay for Proposition 130, the voter-approved measure forcing the state to pay $350 million to bolster law enforcement.

Lawmakers from both parties agree the state faces a structural spending problem, but disagree on the blame.

Bridges faults the Taxpayer’s Bill of Rights, or TABOR, for forcing “rationing” because it limits state spending, regardless of economic conditions or needs. Republicans, including budget committee member Sen. Barbara Kirkmeyer, blame state spending that they say outpaces the voter-approved constitutional amendment. She points to charts from 2021 showing general fund spending on a trajectory to outpace the TABOR cap.

“We’re still in a structural deficit,” Kirkmeyer, a Brighton Republican, said. “We cannot just expect to sweep cash funds and not reduce, not stop our spending of ongoing general funders and think we’re going to be OK the following year.”

She was less optimistic than Bridges on how close the budget committee was to filling the gap. She estimated they still needed to find about $500 million in cuts, while Bridges predicted the committee was closer by “several hundred million” dollars.

Despite the cuts hanging over lawmakers’ heads, economists still predict state tax collections will outpace the cap set by TABOR — though refunds will be far from the recent windfalls taxpayers have received in recent years. This upcoming year’s TABOR surplus may be particularly slim, nonpartisan legislative economists predicted.

That expected $108 million surplus, versus the $1.3 billion surplus from last year, may even force lawmakers next year to dip into the general fund to pay for recently passed property tax cuts.

Economists for lawmakers and from Gov. Jared Polis’ office both pointed to uncertain national policy as rippling through their forecasts. Both camps, independent of each other, predicted a higher risk of recession as the Trump administration’s tariff and tax policies materialize.

“I think the word of the day is uncertainty,” said Mark Ferrandino, Polis’ budget director.

Stay up-to-date with Colorado Politics by signing up for our weekly newsletter, The Spot.