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Colorado Cities and Counties Brace for an Uncertain 2026 Budget Season
After a decade defined by rapid growth and rising revenues, Colorado’s local governments are entering budget season with a very different mindset: caution. From the Front Range to the Western Slope, city and county leaders are confronting slowing tax collections, a cooling labor market and mounting pressure on public services. The result is a patchwork of spending plans that range from staff layoffs and program cuts in some communities to modest growth and strategic investment in others.
The common thread is uncertainty. While some city coffers remain relatively healthy, few officials expect the supercharged revenue gains of recent years to continue. Instead, they are preparing for what could be a turning point: a transition from a high-growth era to a more fragile, uneven economy where “flat” may count as success and where local governments must do more with less.
Front Range Cities Feel the First Pinch of Slowing Revenues
Nowhere is the shift in economic momentum more visible than along Colorado’s urbanized Front Range. Communities that saw their tax bases expand rapidly over the past decade are now being forced to confront leaner fiscal realities. In several major cities, managing the 2026 budget has meant eliminating positions and trimming spending in ways that would have seemed unlikely just a few years ago.
Colorado Springs, for example, has already cut more than 30 jobs. Boulder County has dropped nearly 100 positions. Denver, the state’s largest city, has had to make particularly deep reductions, including laying off 171 employees as part of a broader budget reset. These decisions are not just numbers on a page; they represent a recalibration of what services cities can sustainably provide if growth continues to cool.
- Colorado Springs eliminated more than 30 positions to balance its budget.
- Boulder County cut close to 100 jobs amid tightening fiscal conditions.
- Denver laid off 171 employees as part of a significant budget reduction effort.
- Local officials describe 2026 as a potential turning point after years of rapid expansion.
Rifle and Grand Junction: Western Slope Growth, But With Moderation
Not every Colorado community is cutting back. On the Western Slope, some cities still see room for cautious optimism, even as they acknowledge that the era of explosive growth is fading. Rifle, the largest municipality in Garfield County, continues to benefit from solid sales tax collections, its primary source of revenue. City leaders there are projecting budget growth of about 3 percent next year.
City Manager Patrick Waller credits Rifle’s stability to its role as a regional commercial hub. Major retailers such as City Market and Walmart draw shoppers not only from Rifle, but also from nearby communities like Silt and Parachute. At the same time, high housing costs in the Roaring Fork Valley — from Glenwood Springs to Aspen — have pushed more residents and development activity toward Rifle, where homes have historically been more affordable. With a median age of just 32, Waller describes Rifle as a “young, active, dynamic community” that still has room to grow.
- Rifle projects roughly 3 percent budget growth for the coming year.
- Sales taxes from big-box retailers form the backbone of local revenue.
- Spillover from high-cost areas like the Roaring Fork Valley supports population growth.
- City leaders have been able to raise pay across the board, including significant raises for police.
Grand Junction’s Conservative Approach After the Boom Years
About an hour west of Rifle, Grand Junction is also planning on a 3 percent increase in sales tax revenue. City officials emphasize that while this is still growth, it is far more modest than the windfall years that followed the pandemic. During that period, a surge of consumer spending and stimulus-driven activity produced unusually strong tax returns — a situation that City Manager Mike Bennett warns was never going to last forever.
In response, Grand Junction is deliberately cooling its spending plans and prioritizing long-term stability over short-term expansion. The city has frozen or eliminated a handful of positions, while still increasing investments in core areas such as public safety. Overall, Bennett says, operating expenses have been trimmed by about 10 percent, reflecting a desire to be conservative without recreating the deep austerity measures that followed the 2008 financial crisis.
- Grand Junction forecasts a 3 percent rise in sales tax revenue next year.
- Recent tax collections are down from the extraordinary post-pandemic highs.
- The city has frozen or cut some positions while boosting key services like public safety.
- Operating expenses have been reduced by roughly 10 percent as a precaution.
A Cooling Labor Market and the Fear of a ‘Silent Recession’
Underneath these local budget choices lies a broader economic concern: the health of the labor market. Nathan Perry, an economics professor at Colorado Mesa University, sees a pattern of slowing but not collapsing consumer activity across western Colorado. Sales tax data suggest that people are still spending, but many are shifting to lower-cost options and trading down in what they buy.
Perry describes a labor market that appears “frozen.” Hiring is low, and the quit rate — a measure of how confident workers feel about leaving their jobs — has dropped significantly. That suggests that people are worried about their ability to find new work if they walk away from their current positions. At the same time, layoffs are beginning to accelerate. For those who remain employed, life may still look normal; for those who lose a job, it can feel like a “silent recession,” even when headline economic indicators appear stable.
- Spending remains relatively steady, but many consumers are opting for cheaper goods.
- High-income earners are largely maintaining their consumption patterns.
- Low-income consumers are cutting back or trading down in price.
- Low hiring and quit rates, combined with rising layoffs, point to a cooling labor market.
Is a Recession Coming, or Just a Slowdown?
The question of whether the United States is sliding toward a recession has been lingering for months in economic circles, and Perry is among those who have been debating it. He argues that, if a downturn is coming, it is unfolding more slowly than any he has seen before. Growth is weakening, and the labor market is losing momentum, but the kind of sharp, sudden break that typically marks the onset of a recession has not yet appeared.
For local governments, that ambiguity makes budgeting even more difficult. If they cut too aggressively now, they risk undermining services and local confidence. If they assume that growth will continue and the slowdown will reverse, they could end up overextended if a true recession hits. In this environment, many are choosing the middle ground: tightening selectively while hoping that the slowdown does not deepen into something more severe.
- Economists have been asking “are we heading into a recession?” for an extended period.
- Current trends show a gradual cooling rather than a sharp downturn.
- Local leaders must budget amid uncertainty, without clear signals from the national economy.
- Many communities are opting for cautious cuts instead of drastic austerity or unchecked expansion.
Tourism Towns Prepare for Softer Lodging and Visitor Spending
In Colorado’s resort communities, the outlook for 2026 is shaped heavily by tourism trends. The town of Mountain Village near Telluride is bracing for an outright decline in sales tax receipts, rather than simply slower growth. Finance Director Lizbeth Lemley says the town expects about a 4 percent drop in sales tax revenue, driven largely by softer performance in the lodging sector, which is central to the local economy.
Projections from the travel industry and a cautious reading of market data suggest that visitors may spend less on accommodations, restaurants and bars than they did in recent years. However, Mountain Village leaders are trying to avoid overreacting. Lemley says the town is not planning staff reductions yet, and Town Manager Paul Wisor notes that resort areas now benefit from a stronger summer season. Increased in-state tourism during warmer months helps blunt the impact of winter dips in out-of-state visitation, providing some insulation that did not exist in the past.
- Mountain Village is forecasting roughly a 4 percent decline in sales tax revenue.
- Lodging, restaurants and bars are expected to see slower activity than in recent boom years.
- Town officials are cautious but not planning layoffs at this stage.
- A robust summer visitor season helps cushion winter volatility in ski tourism.
Counties Confront Rising Costs and Limited Revenue Options
While cities rely heavily on sales taxes, Colorado’s counties face a different set of budget pressures. Counties are subdivisions of the state and depend largely on property taxes, even as they carry responsibility for a wide array of essential services. That includes visible functions like snow plowing and road maintenance, as well as less visible but critical safety net programs such as child welfare, food assistance and cash support.
Kelly Flenniken, director of Colorado Counties, notes that programs like SNAP and TANF — which provide food and financial support to low-income residents — are costly to administer and have grown more expensive as federal policies shift some of the burden to states and local governments. The combination of rising demand, higher costs and limited flexibility on tax policy leaves counties with few levers to pull when trying to balance their budgets without undercutting essential services.
- Counties rely primarily on property taxes rather than sales taxes.
- They manage crucial services, including roads, child welfare and human services programs.
- Federal policy changes have pushed more costs downward to states and counties.
- Local officials are searching for ways to maintain services despite rising expenses.
Larimer County: Difficult Trade-Offs in Housing and Wildfire Protection
Larimer County in northern Colorado offers a concrete example of the difficult choices counties are confronting. Commissioner Kristin Stephens says that keeping the budget balanced has meant avoiding new hiring and cutting back on certain programs — even when those programs are popular and address pressing needs. The county has, for instance, stepped back from two initiatives aimed at helping residents afford housing, whether through rental support or other forms of assistance.
Larimer County has also reduced funding for wildfire mitigation grants that help property owners clear trees and vegetation to make their homes safer. These are not luxury services; they are, as Stephens puts it, programs that matter deeply to communities in a state where housing affordability and wildfire risk are major concerns. But they are not mandated by law, and when pressures mount, optional programs are often the first to be scaled back.
- Larimer County is limiting new hires and trimming non-mandated programs.
- Two housing-related programs designed to keep residents in homes or apartments have been dropped.
- Funding for wildfire mitigation grants has been reduced despite ongoing risk.
- Officials stress that cuts affect important, but not legally required, initiatives.
New Pressures From Policy Changes and Social Program Requirements
Even as Larimer County and others are cutting some programs, they anticipate needing more staff in the future to comply with changing policy requirements. Stephens points to potential increases in administrative workloads tied to Medicaid work requirements or strengthened work rules for SNAP recipients. Implementing and monitoring these policies demands additional personnel, training and oversight, all of which cost money.
The tension between mandated responsibilities and constrained resources is a recurring theme. Counties cannot simply walk away from administering federal and state programs, even when those programs become more complex or expensive to run. As a result, they may find themselves cutting community-focused initiatives in order to free up capacity for compliance and administration, raising concerns about the long-term health of local safety nets.
- Counties expect to hire more staff to administer new or expanded work requirements.
- Programs like Medicaid and SNAP are becoming more labor-intensive to manage.
- Mandated responsibilities crowd out discretionary spending on local priorities.
- Officials describe the overall environment as one of heightened uncertainty and strain.
State Budget Shortfalls Ripple Down to Local Governments
Layered on top of local challenges is a growing gap at the state level. Colorado is dealing with a budget shortfall that was close to $1 billion and is expected to remain around $800 million in the upcoming fiscal year. State leaders have already begun trimming their own spending, including a recent $200 million reduction in transportation funding — a move that has direct implications for counties and cities that rely on state dollars for critical infrastructure projects.
Stephens notes that transportation funding was already a pain point. With fewer state dollars in the pipeline, projects designed to improve safety, ease congestion and maintain roads may be delayed or canceled. Flenniken adds that tight federal and state budgets place counties in a precarious position as they try to plan for the future. Local officials are left to make difficult choices about what to prioritize when higher levels of government are also tightening their belts.
- Colorado faces an ongoing state budget shortfall of roughly $800 million.
- Recent cuts include about $200 million in transportation funding.
- Local road and safety projects may be postponed or scrapped as a result.
- State and federal constraints compound the fiscal pressure on counties and cities.
“Flat Is the New Normal”: A Mixed Fiscal Outlook Across Colorado
With so many moving parts — local tax trends, labor market shifts, tourism patterns, policy changes and state-level cuts — it is difficult to draw a single straight line through Colorado’s city and county budgets. The Colorado Municipal League is expected to shed more light on conditions when it releases an upcoming survey of cities and towns. In the meantime, Executive Director Kevin Bommer describes the landscape as a “mixed bag.”
Bommer says that, at best, most municipalities are planning for flat budgets next year rather than strong growth or massive reductions. For some communities, “flat” will mean maintaining staffing and services at current levels while deferring expansion. For others, staying flat will still require painful trade-offs and careful prioritization. The one constant is a recognition that the era of easy assumptions about ever-rising revenues is over — at least for now.
- Fiscal conditions vary widely between communities, from job cuts to modest growth.
- Many cities expect next year’s budgets to be flat rather than expanding.
- Local leaders are waiting for more detailed data from statewide surveys.
- After years of rapid growth, cautious stability has become a realistic best-case scenario.
FAQ: Colorado Local Budgets, Jobs and Economic Uncertainty
Colorado’s 2026 budget season raises many questions for residents, workers and local leaders. The following frequently asked questions address what is driving the changes, how communities are responding and what it might mean for services in the years ahead.
- Why some cities are cutting jobs while others still see growth.
- How the labor market slowdown affects local budgets.
- What counties must fund and why they face unique pressures.
- How state budget gaps ripple down to roads, safety and social programs.
- What residents can expect from their local governments in an era of uncertainty.
Why are some Colorado cities laying off workers while others are still growing?
Local budgets depend heavily on each community’s economic base. Cities that rely on sectors experiencing rapid slowdowns, or that saw particularly strong post-pandemic booms, are often the first to tighten, sometimes through layoffs and hiring freezes. Other communities with more stable or diversified revenue sources — such as steady regional retail hubs — may still be able to add staff, increase pay or grow slowly, even as they plan more cautiously for the future.
How does a cooling labor market affect local government finances?
When hiring slows and people become more reluctant to change jobs, wage growth can moderate and consumer confidence may weaken. That can translate into slower sales tax growth, especially if lower-income households cut back spending or trade down to cheaper products. At the same time, rising layoffs or longer job searches may increase demand for public services, putting pressure on social safety nets and the budgets that fund them.
What makes counties’ budget challenges different from cities?
Counties in Colorado depend largely on property taxes and are responsible for a broad range of state-mandated services, from roads and snow plowing to child welfare and public assistance programs. They have less flexibility to change their revenue structures and often face rising costs for administering federal and state programs. When budgets get tight, they may be forced to cut important but non-mandated local initiatives, such as housing support or wildfire mitigation grants.
How do state budget cuts impact cities and counties?
When the state reduces its own spending to close budget gaps, local governments often feel the effects directly. Cuts to transportation funding can delay or cancel road and safety projects, while reductions in other shared programs may force counties and municipalities to either fill the gap with local dollars or scale back services. State-level shortfalls can thus compound existing local fiscal challenges and limit options for addressing community needs.
What does it mean when officials say “flat” is a good outcome?
After years of strong growth, many local governments became accustomed to expanding budgets, adding staff and launching new programs. In a slowing economy, simply keeping revenues and spending roughly level — without having to make deep cuts — can be considered a positive result. A “flat” budget may still require careful choices, but it allows communities to preserve core services while they wait for clearer economic signals.
Are Colorado communities preparing for a recession?
Many local leaders are not prepared to declare that a recession is underway, but they are planning as if the risk is real. That means trimming operating expenses where possible, reviewing staffing needs, delaying some discretionary projects and building reserves. At the same time, most are trying to avoid overreacting by cutting too deeply, since doing so can harm residents and slow recovery if conditions improve.
What should residents expect from their local governments in 2026?
Residents can expect city and county leaders to focus on protecting essential services — such as public safety, roads and key human services — while being more selective about expansions and new initiatives. Some programs, particularly those that are helpful but not legally required, may be scaled back or eliminated. In many communities, 2026 will likely be a year of adjustment, with local governments trying to balance realism about the economy with a commitment to maintaining the foundations of community life.