JOINT RELEASE: Trump Policies Increase Economic and Consumer Uncertainty
rump tariffs and budget bill lead to higher costs, inflation and economic turbulence
DENVER, CO – Democratic members of the Joint Budget Committee (JBC) today released the following statements after the Legislative Council Staff (LCS) and the Office of State Planning and Budgeting (OSPB) delivered the June quarterly economic forecasts.
“This forecast paints a picture of uncertainty, even as Colorado’s economy remains strong,” said JBC Vice Chair Shannon Bird, D-Westminster. “In Colorado, teacher pay is on the rise and inflation is still below the national average. I am deeply concerned that Congressional Republicans and the Trump Administration are pursuing policies like tariffs and Medicaid cuts that will increase costs on families, hurt consumers and small businesses, and raise prices for everyone on everything from food and basic necessities to health care.”
“The chaos and uncertainty caused by Washington looms large over today’s economic forecast,” said JBC Chair Jeff Bridges, D-Arapahoe County. “From unpredictable tariffs raising prices to the decimation of the federal workforce, these actions are elevating our risk of recession and they threaten to have a disastrous impact on Colorado’s economy. Despite this uncertainty, the forecast also shows the resilience of Colorado businesses and workers who continue to show up and move our economy forward. We’re no stranger to tough budgets. We will continue to make thoughtful and strategic decisions to minimize harm while investing in Colorado's future.”
“This forecast shows that policies coming from Washington Republicans are harming consumers, increasing costs, and hurting our economy,” said JBC Member Emily Sirota, D-Denver. “In a tight budget year, we protected the key services and programs Coloradans and their families rely on, but Colorado can simply not absorb the proposed federal cuts to Medicaid and SNAP. The economic forecasts, which have some good news when it comes to housing costs and Colorado's new tax credits for working families, also show that what’s happening in Washington will have a direct impact on our economy, our budget, and the safety net services Coloradans rely on.”
“Today’s forecast shows that Colorado has tough budget decisions ahead, made worse by a federal administration whose erratic economic policies continue to do real harm to our country and state,” said JBC Member Judy Amabile, D-Boulder. “With no regard to the damage that they’ve already caused, Congressional Republicans continue to push the budget reconciliation bill forward to make devastating funding cuts to Medicaid and food assistance programs and further throw the economy into chaos. Despite these challenges, we remain focused on bringing down costs for Colorado families and providing high-quality health care and education, and we will be ready to navigate the impacts of damaging federal policies to the best of our ability.”
Despite economic uncertainty caused by federal policy changes, Colorado’s economy remains strong. Until the recent tariffs, inflation had been slowing nationally, and Colorado’s inflation is still lower than the national average. This is largely driven by slower rent increases.
New tariff policies on imported goods from Canada, Mexico, China, and other major trading partners have caused business volatility and will likely raise prices, including tariffs on Canadian oil that will increase gas prices. Tariff policies are also hurting consumer confidence. In May, consumer inflation expectations were the highest they have been in 44 years. The trade war is also negatively impacting one of Colorado’s top exports, beef.
Federal policies may slow job growth and lift unemployment rates. Mass federal layoffs are having ripple effects through Colorado’s leisure, hospitality and tourism industries and are increasing unemployment rates.
The OSPB forecast estimates that two new tax credits – the Earned Income Tax Credit and Family Affordability Tax Credit – will be fully implemented in the 2025 tax year, meaning low-and-middle income families will be able to keep more of their money.
Nearly all of the downside risks to the LCS forecast are due to policy decisions in Washington, which have caused slower hiring and caution among consumers and businesses. According to LCS, “Consumers and businesses are struggling to navigate the impact of current and potential federal policy shifts on prices, investment, markets, and monetary policy. Further strain on international relationships, backlash from international travelers, students, and other consumers, and retaliatory trade policy present additional downside risks. Along with trade policy, the Trump administration has made rapid changes regarding federal employment, contracts, and spending, indicating willingness to unwind various industry supports previously in place. In addition, proposed tax legislation currently making its way through Congress has raised bond market concerns about U.S. debt levels, placing upward pressure on interest rates and contributing to financial market turmoil. Consumers remain sensitive to price levels and sentiment has recently plummeted, signaling elevated uncertainty for the future.”
With lower-than-expected General Fund revenue, Colorado is at risk of falling below the Referendum C cap (TABOR cap). The LCS forecast estimates that the highest risk is in FY 2025-26 where revenue above the cap is only 0.4 percent above the cap. Under the LCS forecast, revenues above the TABOR cap are expected to be $142.2 million in FY 2024-2025, $83.3 million in FY 2025-2026 and $535.5 million in FY 2026-2027. Under the OSPB forecast, revenues above the TABOR cap are expected to be $224 million in FY 2024-2025, $289 million in FY 2025-2026 and $536.4 million in FY 2026-2027.
The Legislative Council Staff (LCS) forecast anticipates General Fund revenues to be $17.57 billion in FY 2025-2026, adding to an opening balance of $2.35 billion in reserves, for a 3.2 percent reduction in total funds available from 2024-2025. They forecast revenue growing by 4.0 percent to $18.27 billion in FY in 2026-2027. As costs and caseloads increase faster than the TABOR cap, LCS estimates the state will face a budget shortfall of $698 million in FY 2026-27.
The Office of State Planning and Budgeting (OSPB) anticipates that General Fund revenue will be $17.1 billion for FY 2024-2025 and $17.8 billion for FY 2025-2026 – a $114 million decrease for FY 2024-2025 and a $178 million decrease for FY 2025-2026 as compared with the March revenue forecast.