As Colorado slipped in its economic competitiveness over the past few years, state lawmakers face a tough road ahead to improve the business environment.

A day before the 2026 legislative session was set to begin, the Denver Metro Chamber of Commerce hosted the state’s top lawmakers from both parties to discuss what new legislation and hot topics set to be debated at the Colorado state Capitol could affect the business community during the Business Legislative Preview event at the Denver Art Museum.

The big theme this year? The budget shortfall.

Colorado is facing another year of budget constraints, this time up to $850 million in the fiscal year. And that comes after last year’s deficit, when state lawmakers had to make up more than $1 billion.

The state’s top Senate leaders from the Democratic and Republican parties said lawmakers will have to make difficult cuts, and both mentioned that this includes sacrificing past programs they themselves sponsored on the floor over their years in office.

The chamber’s leadership told lawmakers at the event it is essential to continue the work to relieve businesses from regulations and make the state’s economy more competitive again.

“This year, the stakes are high,” said Leslie Oliver, vice president of external affairs at the Denver Metro Chamber of Commerce, about the budget shortfall. “Closing this gap must not close the doors on jobs and growth.”

The business lobbying group released its “2026 Toward a More Competitive Colorado” report on Tuesday, stressing the need for better laws to support the state’s economy. It detailed how Colorado is still earning high marks in quality of life, talent pipeline and renewable and non-renewable energy production.

But the state fell in national rankings for affordability, cultivating homegrown talent and tax competitiveness.

Colorado fell in employment growth from 16th place to 46th in a year. The unemployment rate dipped from 28th to 38th. Colorado’s cost of living ranking slightly improved from 39th to 37th. Colorado’s overall tax climate fell from 32nd to 33rd.

“Further declines in these rankings risk undermining Colorado’s business-friendly reputation and have the potential to discourage continued investment in the state, if not addressed,” the report said.

The main issue businesses faced in 2025 was uncertainty due to changing interest rates, tariffs, geopolitical issues and rising unemployment, said Mowa Haile, the chamber’s board chair and president of Sky Blue Builders.

“So, with all this uncertainty, what we need from you is some certainty, some balance,” Haile told lawmakers.

Speaker of the House Julie McCluskie, D-Dillon, said the state’s budget — legally tied to inflation and population growth — is connected to the economy.

“Yes, we need to foster an economy that is business-friendly and worker-friendly,” she said. “When we see working families unable to meet the expenses, the challenges of housing, healthcare and childcare, we know we’ve got a problem.”

But with more reductions, the House speaker said the most vulnerable Coloradans are at risk if more social safety nets are cut.

She said this year will require state leaders to reexamine how the state funds its most critical services. As Colorado’s population is aging, she said figuring how to fund Medicaid will be one of the largest issues the state has to tackle in its budget problems.

McCluskie also said it’s time to question whether 30 years of Colorado’s Taxpayer’s Bill of Rights (TABOR) is still working for the state — emphasizing it doesn’t mean getting rid of TABOR or not properly controlling government spending.

“It just means we’ve got to do it in a better, more effective way so that we’re meeting the priorities that clearly we’re hearing about from our constituents,” she said.

TABOR limits the power of the state and its political subdivisions to raise revenue. Under TABOR, any new tax must get the voters’ approval. Supporters have touted it as an antidote to unchecked government spending, arguing it has kept, to some extent, taxes low. Critics countered that it has hampered the government’s ability to pay for its priorities.

Senate Minority Leader Cleave Simpson, a Republican from Alamosa, said the state should examine its programs to limit government spending.

“There’s almost 200 programs and offices that we really should sit down and evaluate the efficacy and the value in some of those programs,” Simpson said.

He also mentioned taking a break from regulations, saying the state has added many new laws over the past five years and businesses are still trying to catch up.

The Colorado Chamber of Commerce found the state was the “sixth most regulated in the nation,” according to a report from 2024.

“We really should take a two-year suspension on any new rulemaking,” Simpson said.

The minority leader, who will have to work with the majority Democrat-controlled government to pass proposals, said he’s working to give businesses some “breathing space,” though it’s not as much as he’d prefer.

One example of regulatory hurdles is energy policy. As Colorado aims to get 80% of electricity to come from renewable sources by 2030, Republican lawmakers said it’s not enough time to have a reliable grid.

Minority Leader Jarvis Caldwell, R-Colorado Springs, compared the state’s energy policy to a classroom of children told to run a mile. The students won’t all get there at the same time, he said.

He said Colorado Springs is facing a problem of working toward those energy goals, but it also has to provide power for its military installations, and it’s a matter of national security to ensure it’s done in a way that’s reliable and cost-effective.

“Nobody’s saying that we shouldn’t be in solar or nuclear or any of these things,” Caldwell said. “We’re just saying, ‘Look, you’re really forcing a very fast transition at a time when we feel like we are working towards it, but we just need a little bit more time.’”

The state is going to look deeper into which regulations are working for the state or not, said Senate President James Coleman, a Democrat. He said they worked on a bill to make state departments regularly review their rules to make sure policies aren’t outdated or causing more harm than good.

“This is a bill that many in the business community have been asking for,” Coleman said.

He said it’s not about getting rid of regulation completely, but rather finding the ones that are “maybe draconian.”

“We want to find a way to identify regulation that is not necessary, that is burdensome,” the Senate president said. “And you have our commitment this year to do that.”