2026 Colorado Legislative Session Preview

The Colorado General Assembly convenes Jan. 14 against a backdrop of deep fiscal constraints in the state budget, affordability concerns and looming midterms in which the every member of the House, roughly half the Senate and all statewide offices are on the ballot.

Businesses and other political stakeholders should anticipate a session dominated by tough budget decisions and competing political agendas. Gov. Jared Polis enters the final session of his last term, adding urgency to his push for policy wins that could shape his legacy.

As lawmakers face these headwinds, they do so amid a period of significant political reshuffling. Among the most notable changes is the passing of Sen. Faith Winter in late November, a profound loss for the legislature and the communities she served. She will be remembered for her leadership on paid family leave, transportation funding and climate policy.

Additionally, Senate Minority Leader Paul Lundeen and House Minority Leader Rose Pugliese both stepped down earlier this interim. More recently, Democratic Rep. Shannon Bird has left her seat in the House and on the influential Joint Budget Committee to focus on her candidacy for Colorado’s bellwether 8th Congressional District. Further complicating the political dynamics in the capitol is the recent spotlight on the Opportunity Caucus, a newly formed bloc of over 20 moderate leaning Democrats, that has added another layer of complexity highlighting divisions within the party.

With this political backdrop, here’s a breakdown of the most prominent issues likely to shape the 2026 Colorado legislative session.

Budget Outlook and Key Priorities

The dominant issue for the 2026 legislative session is the state’s structural budget deficit. After $1.2 billion in cuts during the 2025 regular session and an additional $800 million in reductions during the August special session, Colorado now faces an additional $800 million in cuts for FY2026–27. The shortfall is driven largely by rapidly rising Medicaid and education costs, compounded by the constraints of the TABOR revenue cap related to slower population increases and reduced inflation.

Lawmakers will confront difficult choices to close the gap. Cuts to core services in the Medicaid program will be considered, and legislators will likely avoid bills with significant fiscal notes to limit new spending. One major proposal from Gov. Polis is the full conversion of Pinnacol Assurance, the state’s last-resort workers’ compensation provider, from state control to a member‑owned mutual insurance carrier. While the Governor’s Office estimates the move would generate $400 million in revenue for the state, the idea faces bipartisan skepticism in the legislature. Failure to advance the proposal could necessitate deeper cuts elsewhere.

Beyond spending reductions, revenue options outside TABOR-restricted tax increases are also on the table, including eliminating tax incentives, increasing fees and moving general fund spending to state enterprises.

Health Care and Medicaid

Medicaid now surpasses K–12 education as the largest spend in Colorado’s budget, growing at about 12% annually. This growth stems not only from expanded eligibility and rising health care costs but is also driven by new federal mandates under H.R. 1 (the federal “One Big Beautiful Bill Act”), including stricter work requirements, more frequent eligibility checks and a greater burden on states to fund key provisions of the program.

To manage costs, Gov. Polis has proposed a growth cap across all Medicaid programs, which would likely impact both provider payments and patient access. In light of these proposed reductions, state-led health care initiatives such as mental health crisis response and autism services face funding uncertainty amid budget balancing efforts.

Housing and Property Taxes

Affordability has become a defining theme for voters across the country this year, with housing costs at the center of the conversation. Colorado is no exception, and lawmakers are preparing legislative proposals aimed at tackling housing challenges.

While more modest reforms such as extending access to affordable housing funds from Prop 123 f for tribal communities are likely, lawmakers are also planning to introduce two major land use bills. The first would aim to expand housing supply by allowing homeowners to subdivide and sell portions of their land, while the second would enable schools, housing authorities and qualified nonprofits to build housing on large properties regardless of local zoning. Backed by Gov. Polis, these proposals are expected to reignite debates over local control alongside discussions on renter protections and broader affordability strategies.

Energy and Environment

Gov. Polis is expected to champion changes to the state’s carbon-neutral electricity goal. This policy will be the subject of significant debate between energy providers and environmental organizations as the governor seeks to cement his legacy on clean energy. Other key issues will include renewable energy siting legislation to ease the installation of that infrastructure as well as possible fee-based funding to backfill the loss of federal dollars for electric vehicle adoption.

The Colorado Public Utilities Commission faces its scheduled sunset review this session, with recommendations expected to extend its authority while introducing targeted reforms to improve transparency and oversight. Data centers will be another topic of legislation this session—including  a rumored bill would that prohibit new data centers unless powered by renewable energy—along with legislation aiming to balance the growing demand for data infrastructure with concerns over cost and energy use.

Outside the energy sphere, water policy is expected to dominate discussions as Colorado engages with neighboring states on long-term drought and water shortages. Lawmakers are likely to consider measures to conserve resources, protect the state’s water rights and preserve water quality. This is especially critical as more than 40 million people in the western U.S. rely on water from the Colorado River.

Also in play is the upcoming Valentine’s Day deadline for states in the upper and lower river basins to agree on a long-term plan, as the current agreement expires in 2026. These states failed to reach an agreement by the November 2025 deadline, and if no solution is found, the federal government could step in to decide where cuts will be made.

AI Regulation

On Dec. 11, President Trump signed an executive order establishing a “federal-first” approach to artificial intelligence to preempt certain types of state and local AI laws and regulations. The executive order is likely to implicate Colorado’s AI law (SB24-205), which would regulate certain “high-risk” AI if it is allowed to become law in June. It is doubtful that the executive order will prevent Colorado lawmakers from continuing to work toward a “fix” of SB 205, with a task force convened by Gov. Polis still meeting and other negotiations actively happening. Other AI bills are also likely to be introduced, including on the topics of health care, mental health and pricing.

Other Notable Issues

While clean energy, water policy and AI regulation are expected to dominate headlines, lawmakers are also likely to tackle a wide range of other issues this session. These include retail theft, penalties for violent crimes and drug possession, reforming driver’s education, mental health, restrictions on 3D-printed firearms, air quality, cannabis and intoxicating hemp, parental rights, and a return of the debate around Colorado’s Labor Peace Act.

Citizen-Initiated Ballot Measures

So far, only one citizen-initiated ballot measure has qualified for what is surely to be a crowded November 2026 ballot. That proposal would make possession of any amount of fentanyl a felony, increase penalties and require treatment for smaller cases. Other proposals currently gathering signatures include measures on college admissions, immigration enforcement, protections for minors and transportation funding, though none have been certified for the ballot yet. The high-profile proposed measure to eliminate Colorado’s flat income tax for individuals and businesses in favor of a graduated income tax structure to boost state revenue is still moving through the process.

Bottom Line

Looking ahead, the 2026 session will be colored by a structural budget crisis and affordability concerns across health care, housing and energy. Expect difficult decisions to close an $800 million gap, alongside debates over Medicaid growth, housing supply proposals and Gov. Polis’s energy priorities.

While the Democratic governing majorities will continue to dominate policy discussions, Gov. Polis and many senior lawmakers will be looking to secure wins on legacy policy achievements, creating a degree of tension between the state’s legislative and executive branches. Compounding this dynamic will be the looming 2026 election, a major reshuffle of state power structures. While each legislative session brings a unique set of challenges to the capitol, 2026 will be a year of significant change for Colorado.

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This document is intended to provide you with general information regarding Colorado’s 2026 legislative session. The contents of this document are not intended to provide specific legal advice. If you have any questions about the contents of this document or if you need legal advice as to an issue, please contact the attorneys listed or your regular Brownstein Hyatt Farber Schreck, LLP attorney. This communication may be considered advertising in some jurisdictions. The information in this article is accurate as of the publication date. Because the law in this area is changing rapidly, and insights are not automatically updated, continued accuracy cannot be guaranteed.