JBC staff advises against sponsoring governor’s TABOR ‘overrefund’ correction, citing legal and accounting risks

Director Craig Harper, JBC staff, told the Joint Budget Committee on Feb. 17 that the governor’s Statewide R2 proposal seeks to reduce TABOR refunds in the next two fiscal years to capture what the executive branch now asserts was an overrefund from fiscal 2024–25.

Harper said the executive branch’s approach would make “an additional roughly $300,000,000 available over 2 years,” splitting the benefit across FY26‑27 and FY27‑28. But he told members that legislative staff, after discussion with Legislative Council, legal services and the State Auditor’s office, concluded the certified TABOR refund does not fit the statutory definition of an ‘‘overrefund’’ and that treating it as an error would require accounting accruals that are unlikely to be justified.

Why it matters: TABOR (the Taxpayer’s Bill of Rights) and its refund mechanisms constrain what money the state can use. Changing how a prior year’s refund is treated would affect future certified refund amounts, could complicate homestead obligations and shift long‑term TABOR dynamics. Harper said those accounting choices could also threaten the clean certification opinion that accompanies the TABOR calculation and expose the state to litigation and downstream refund obligations.

Harper advised the committee that the timing of HR 1 (a federal tax law the executive branch says reduced 2025 tax‑year revenues) complicates accrual rules. He said accrual adjustments generally require information that was available during the period being adjusted; because HR 1 was enacted after the fiscal year closed, he said, ‘‘you wouldn't accrue things back unless it was information that was available during the period that you were accruing it to.’’ Harper added that moving forward with a statutory correction under current law would create ‘‘a degree of legal uncertainty and legal risk.’’

Office of Legislative Legal Services counsel Pierce Lively joined the conversation, noting a TABOR‑related refund judgment could include statutory interest. ‘‘There’s a 10% interest penalty that’s attached in TABOR,’’ Lively said, summarizing the possible downstream cost if the state were found to have retained money it should have refunded.

Committee response and next steps: Members asked whether splitting any correction over two years would reduce risk and whether reliable revenue forecasts could make the proposal feasible. Harper and staff said the potential benefit depends entirely on uncertain future revenue forecasts: if certification and future TABOR calculations left enough room, the proposal could produce budget relief; in other plausible scenarios it would not. After extensive questioning about accounting precedent, litigation exposure and forecast uncertainty, Harper said he would not recommend the Committee carry the bill. No member announced a sponsorship at the meeting.

The JBC will revisit the underlying forecasts and legal advice as the session proceeds; Harper pointed to the Controller’s TABOR certification in September and the March and June revenue forecasts as key future inputs.