Report: Colorado can pay its bills, but future is uncertain

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(The Center Square) – Colorado ranked 22nd nationally, according to Truth in Accounting’s 2025 “Financial State of the States” report.

The Centennial State received a “B” ranking after the report found that it has more than enough money to cover its bills, coming in at $1,500 in surplus per taxpayer. That is how the state’s rankings are determined.

While still in the positive, Colorado’s financial situation is dire compared to some of the other high-ranking states. For example, North Dakota comes in first on the report with over $60,000 in surplus per taxpayer.

This year’s report showed great improvement for Colorado, though, Sheila A. Weinberg, founder and CEO of Truth in Accounting, told The Center Square in an exclusive interview.

“What stood out is that Colorado ended the year with $3.5 billion available to pay its bills,” she said. “This marks a significant improvement from the previous year, when the state faced a shortfall.”

Increased revenue also helped Colorado get out of the red fiscally.

In total, Colorado had $32.1 billion available to pay $28.7 billion worth of bills. In just one year, Colorado saw an overall improvement of $5.9 billion — moving from a deficit to having $3.5 million to pay its bills with.

Yet, Weinberg is doubtful that it is sustainable.

“More than half of the improvement was due to unrealized gains in the value of pension investments,” she explained. “The recent increase helped lower the state’s pension debt and made Colorado’s finances look better overall, but those gains might not last.”

Cuts in federal funding could also have a substantial impact on the state, something lawmakers are already expressing concerns about.

Colorado’s legislature already held a special session to address immediate federal funding cuts, which led to a $1.2 billion budget shortfall. That session did not provide enough permanent solutions to truly solve the deficit though.

Since COVID-19, Colorado has consistently received large amounts of temporary federal aid. It is set to lose as much as $7.2 billion in federal funding if allocations return to 2019 levels. That is 14% of the state’s expenses.

Weinberg said now is the time for Colorado policymakers to prepare for more cuts.

“This means planning for long-term spending without depending on temporary federal aid and continuing efforts to reduce pension and retiree health care liabilities,” she said. “Transparency and disciplined budgeting will be essential. Additionally, Colorado should explore ways to diversify its revenue sources and ensure that any positive financial position is used to strengthen its fiscal foundation rather than simply cover short-term gaps.”

If the state does not take action, Weinberg said Coloradans could feel real impacts as more federal funding cuts could be coming.

“The state’s financial health directly affects public services that people rely on, like schools, roads and health care. If federal funding decreases as expected, the state may have to make tough choices such as cutting services, increasing taxes or both,” she said. “Simply put, Colorado’s financial challenges could impact the quality of life for residents if not addressed soon.”

The report also highlighted concerns with Colorado’s pension plan. It found that the state only has 65 cents saved for every dollar it has promised to pay in benefits.

“By federal corporate standards, this level is considered critical,” Weinberg said. “Colorado should seriously consider creating its own rehabilitation plan to protect the pension system and ensure long-term financial health.”

If the pension’s funding is not addressed, pensioners could see reduced retirement benefits or an increase in required contributions from workers and taxpayers.

Despite all these concerns, the report found Colorado was still better off than many states, though.

The report found that, at the end of 2024, 25 states across the country did not have enough money to pay its bills. New Jersey ranked 50th on that front, with a deficit of $44,500 per taxpayer.

Judi Willard, communications and development manager for Truth in Accounting, told The Center Square that the report is filling a critical oversight need.

“This report reveals a stark reality: The government’s accounting standards are fundamentally flawed, resulting in misleading financial reports that obscure the true fiscal health of our states,” Willard said. “Year after year, our research reveals the alarming consequences of these flawed standards — billions in hidden liabilities, unfunded promises and budgets that don’t add up.”