Tucked deep within the hundreds of pages of the proposed $46.8 billion 2026–27 state budget is a line item showing $306.1 million in savings — achieved by canceling Taxpayer’s Bill of Rights refunds.

Gov. Jared Polis has recommended withholding TABOR refunds in both 2026–27 and 2027–28. His budget proposal says the state accidentally overpaid $306.1 million in refunds during the 2025–26 fiscal year.

According to the governor’s office, the overpayment stemmed from federal budgetary changes that affected how the state calculated revenue for 2024–25. Those revised calculations led to higher-than-appropriate refunds being issued in 2025–26, according to the Polis administration.

The request argued that, if the federal budget’s impact on 2024–25 state revenues had been known at the time, the state would have fallen below the Referendum C cap that year — meaning no TABOR refunds would have been issued in the first place.

The recommendation drew pushback from Joint Budget Committee staff, who wrote in a Feb. 20 memo that keeping the $306.1 million — spread across the 2026–27 and 2027–28 budgets — would not be legal.

“JBC staff recommends the committee weigh the potential legal risks” of treating those funds like an over-refund against the potential benefits.

The TABOR certification, conducted annually by the state controller, did not account for the impact the federal budget would have on 2024-25 revenues, largely because the bill was signed into law on July 4, 2025, as the state’s fiscal year ended.

The JBC memo noted that state law has a way to correct over-refunds, directing the state controller to reduce refunds in a subsequent year by the amount of the over-refund.

But that doesn’t apply here, the memo stressed, because of the time gap between the end of the 2024-25 fiscal year and the actual signing of the federal budget.

The state could not have accrued the impact back to the 2024-25 fiscal year without violating accounting rules, the memo stated. Hence, there was no over-refund, as the term is used.

The JBC rejected the staff recommendation and decided to use half of the over-refund, $153 million in general funds, as part of the budget-balancing process for the 2026-27 fiscal year. The rest will be applied in the next budget year.

While the JBC intends to use the over-refund to help balance the budget, a bill to do so has not yet been introduced.

The JBC staff memo highlighted several key caveats, including uncertainty about whether the TABOR surplus in 2026–27 and 2027–28 will be large enough to cover those amounts.

Another factor is the senior and disabled veterans’ property tax refund, which is paid out of the TABOR surplus before anything else.

The homestead exemption is also being funded with general fund dollars in the 2026-27 budget because state revenues are not expected to exceed the TABOR cap that year.

The memo stated the 2026-27 TABOR refund would have to be much larger to avoid creating a general fund obligation for the homestead exemptions in the 2027-28 budget year.

The March 2025 revenue forecast from the governor’s economists at the Office of State Planning and Budgeting confirmed there would be no TABOR surplus in the 2025-26 year, paid in 2026, and the surplus in the following year could be as high as $711 million, more than enough to cover the homestead exemption and the $153 million over-refund the state would keep.

The forecast from the legislature’s economists, however, was far more pessimistic, estimating a $276 million general fund surplus for 2026-27, which is not enough to cover both the homestead exemption, estimated to be around $200 million, and the over-refund of $153 million.

The JBC, as it has done for the past four years, chose to go with the numbers, including a $1.1 billion general fund shortfall, from the March forecast.