A tax credit for low-income families could be turned off for the next two tax years, state economists announced Thursday.

That’s because state revenue will likely not increase enough to trigger Colorado’s Family Affordability Credit. Since its creation in 2024, families have benefited from it just once, in 2025, and experts say that one-time benefit helped lower child poverty by 37% in the state.

“Our forecast assumes the credits are off and increases revenue to account for the inability of taxpayers to claim those credits in those years,” Greg Sobetski, the chief economist for the nonpartisan Legislative Council Staff, told lawmakers on Thursday morning. At the same time, he said there is a chance the revenue forecast could change to turn on the credit.

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The Governor’s Office of State Planning and Budgeting has a similar prediction, though the availability of the credit in 2027 will be officially determined during the December economic forecast. Annual revenue growth has to be at least 3% to activate it at the lowest level, and OSPB predicts growth at 1.8% and 2.8% for the next two fiscal years.

The Legislature partially revived the benefit this year by creating a family affordability credit funded through sales tax on downloadable software that was previously exempted, as well as a rearrangement of some other tax incentives. Other strategies to fully fund the credit by decoupling the state’s corporate tax code from federal law did not pass. The smaller credit means families will get a few hundred dollars per child next year.

The bipartisan Joint Budget Committee, a panel of six lawmakers tasked with crafting the state budget, hears four economic forecasts per year — many of which have lately been filled with dire warnings from state economists about the size of the state’s budget deficit. This year, lawmakers had to cut about $1 billion to balance the budget, and future years will also have significant budget challenges.

Sobetski called the revenue forecast on Thursday a “Goldilocks” scenario, though expectations will almost certainly change in the September and December forecasts. If the FATC ends up activating for 2027, for example, it will in turn reduce the state’s revenue.

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“We’re in a position where revenue is hitting just right for the (Fiscal Year 2027-2028) budget to essentially be the best-case scenario I can be presenting to you right now,” he said.

Both the LCS and OSPB forecasts predicted modest surpluses in future years over the cap set by the Taxpayer’s Bill of Rights, the constitutional amendment that allows the government to retain a certain amount of tax revenue before returning excess to taxpayers. OSPB predicts surpluses of $470 million in the upcoming fiscal year, and $52 million in the next one, decreasing over time because of expected high inflation.

Economists expect the state to collect more income tax revenue than previously predicted in March, but there is still a larger-than-anticipated drag on corporate income tax collections tied to H.R.1, the package of tax and spending cuts passed by congressional Republicans last year. LSC revised their revenue prediction up by $489 million the current fiscal year, and OSPB increased by $371 million.

“The impacts of H.R.1 are constantly being updated, and we will continue to make updates as we continue to get more information,” said OSPB Deputy Director Bryce Cook. “Our main suggestion is that compared to our initial estimates, that more of the impacts are hitting corporate income than individual income.”

The governor’s office predicts that the effects of H.R.1 — between a reduction in hospital provider fees, loss of nutrition assistance funding matches and administrative and compliance costs — will cost the state about $252 million in the 2027 fiscal year and then ramp up to about $1 billion.

That office also predicts a 40% of an economic recession over the next year, with pressure coming from sustained inflation, increased trade barriers and the country’s war in Iran. Data shows that wage growth is slowing, household savings rates are dropping and families are increasingly delinquent in credit card and student loan payments.

“The forecast reflects what many Coloradans already feel. The cost of gas, housing, and childcare continues to put pressure on family budgets,” JBC Vice Chair Senator Jeff Bridges, an Arapahoe County Democrat, said in a statement. “Combined with uncertainty from Washington, these challenges create real strain on Colorado’s economy and our state budget.”