A discussion about a proposal to eliminate $300 million in taxpayer refunds over the next two fiscal years quickly shifted into a strategy session — and a tense exchange among members of a budget committee — over what would happen if a lawsuit were filed to stop it.

House Bill 1419 attempts to take $300 million in Taxpayer’s Bill of Rights refunds over the next two years to cover what Democratic lawmakers believe is an overpayment of those refunds in the 2024-25 fiscal year.

But those overpayments never showed up in the 2024-25 budget because they were a direct result of H.R. 1, the Trump administration budget that made substantial changes to tax deductions.

State analysts said the congressional budget cost Colorado hundreds of millions of dollars. It led the governor to call lawmakers back for a special session last August to address an immediate shortfall in the 2025-26 budget and to change how some of those deductions were handled.

The clash among Joint Budget Committee members — even though all four Democrats on the panel are listed as sponsors — dominated the start of Wednesday’s Senate Appropriations Committee hearing.

Sen. Barbara Kirkmeyer, R-Brighton, started by asking how the bill gets around accounting rules.

It doesn’t, replied Sen. Jeff Bridges, D-Greenwood Village.

He explained that H.R. 1 reduced state revenue in a previous year — 2024-25 — after the books had already been closed for the year.

The 2024-25 fiscal year closed on June 30, 2025. Trump signed the congressional budget a few days after on July 4.

The fiscal analysis noted that, if the state does not collect a TABOR surplus in 2025-26, which is expected, HB 1419 would require the state controller to determine the amount of the FY 2024-25 TABOR surplus that was “over-refunded.”

The fiscal note said that’s $136.1 million in 2026-27 and $153 million in 2027-28.

The 2026-27 budget includes a placeholder at $153.1 million — meaning that’s the amount of TABOR refunds that would not be paid.

At its core, TABOR, adopted by voter initiative in 1992, limits the revenue that the state and its political subdivisions can keep and spend. When more money is collected than the limit set by TABOR, the “excess” dollars are refunded to taxpayers.

The lawsuit discussion soon followed.

“Why would we open ourselves up for more lawsuits?” asked Sen. Byron Pelton, R-Sterling.

Bridges didn’t answer the lawsuit question.

“All we’re doing in this bill is making up for that difference exactly as is already required for us to do in existing law,” he responded.

The bill was amended to clarify that if there is no TABOR surplus in 2025-26, it would not take effect. That’s likely to happen, according to Greg Sobetski, the chief economist for the Legislative Council staff.

But that would have to be confirmed if HB 1419 passes, he said.

Republicans questioned what would happen to the state budget if the state lost a lawsuit over HB 1419.

Sobetski said it would depend on the remedies ordered by the court. He added that, if HB 1419 were struck down, the refund obligation wouldn’t go away.

The first fiscal consequence, he said, would deal with the $153 million placeholder put into the 2026-27 budget.

A lot would depend on the timing of the lawsuit, according to bill drafter Pierce Lively of the Office of Legislative Legal Services.

If the lawsuit were filed before there were any impacts to the refunds for the 2026-27 fiscal year, there wouldn’t be much of a consequence, he told the committee.

If the lawsuit was filed after the first year of the reduction, a penalty equal to the reduction could be imposed, along with interest.

If it were filed after two years and the state loses, it would be the full amount, plus interest and attorneys’ fees, Pierce explained.

Throughout the meeting, Kirkmeyer repeatedly pressed the same question: Was closing the books for 2024–25 simply an accounting error or was it done in a way that violated accounting principles?

Bridges noted that because H.R. 1 was signed after the close of the 2024-25 fiscal year, the law’s impacts were not accounted for in that year.

“We had a revenue loss associated with H.R. 1 because of its retroactive nature. And so what this bill does is adjust TABOR refunds moving forward as we do under current law,” he said.

At that point, things started getting testy.

Committee Chair Sen. Judy Amabile, D-Boulder, tried to shut down the exchange between Kirkmeyer and Bridges. Kirkmeyer, a Republican candidate for governor, insisted.

“This is the committee of reference” for the bill and the only opportunity to have a public hearing on the bill and for her to ask questions, Kirkmeyer said.

Amabile told Kirkmeyer she had asked the same question repeatedly, to which Kirkmeyer responded she hadn’t gotten an answer.

“The answer that you just got is the only answer you’re going to get,” Amabile responded.

Kirkmeyer claimed the bill would jeopardize the “clean opinion” on the 2024-25 books, pointing out that current statutes, TABOR, the constitution, and general accounting principles “said we closed our books and there was no over-refund.”

“So, you’re changing current law with this bill,” she said.

That puts the state at legal risk and, without a clean opinion, makes it harder for the state to get bonding, as well as jeopardizes the public’s trust in government, Kirkmeyer told the committee.

“I don’t believe we are doing any of those things,” Bridges replied.

The committee also took testimony from Natalie Menten of the TABOR Foundation, who pointed out that JBC staff had recommended against the bill.

Kirkmeyer noted that the 2024-25 refund was certified in accordance with TABOR law and aligned with state and general accounting principles. There was no over-refund and no error, she said.

She elicited from Lively that he and his office are unaware of the legal basis for the changes contained in HB 1419.

As to whether the bill would affect the state’s “clean opinion,” that’s a question for the state auditor, according to Sobetski. He explained that he did not believe the bill would change the accounting for the 2024-25 fiscal year, but that it could change the state’s accounting for 2025-26.

HB 1419 passed on a 4-3 party-line vote and now awaits action from the full Senate.