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Newsletter — Issue 29 — Thursday, July 16, 2026
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This newsletter has been published by Engage Colorado.
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The Drivers Series — Category 2 · Factor 2b
Worse Than the Losing States: Colorado's Federal Friction
This Engage Colorado Newsletter reflects the personal opinions of Dan Caruso, written with the support of the Caruso Ventures team. The Ensuring Colorado's Innovation Future Coalition did not review and has not endorsed this Engage Colorado Newsletter.
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This is the second newsletter in the “drivers” series and continues the walk through Category 2 — The Business and Political Climate — from The Honest Assessment. Issue 27 covered 2a — Political Rhetoric Toward Business. This issue covers 2b — State–Federal Friction. The next issue will cover 2c — State Investment in Economic Development.
As with the broader Innovation Vision and The Honest Assessment, I led the preparation of this section. It has not been formally reviewed nor endorsed by the full coalition that signed The Open Letter.
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A reminder before you dive in: we cannot address what we have not diagnosed. That is why this series exists. And as I said in “Take a Deep Breath, Colorado” — please don't beat up the messenger.
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Factor 2b
Where Colorado's Most Surprising Finding Lives
Category 2b of The Honest Assessment is state–federal friction — whether the state government works with Washington or against it, and what that costs companies operating in the state.
This matters because many of the major businesses in Colorado — from aerospace and quantum to climate, energy, and AI infrastructure, plus much of the biotech and federally-funded research — depend on stable, predictable relationships with the federal government. Business investments run across decades, not election cycles. A state government that treats every federal administration it disagrees with as an adversary to be litigated creates a level of uncertainty that founders and investors factor into their decisions about where to build.
A pragmatic posture toward Washington is a business asset. Pushback on specific federal policies, when necessary, should be surgical — on identified issues, not as a systemic ideological stance.
On this factor, Colorado scores worse than the average Departure Geography — on both current position and trajectory.
Factor 2b · scores are out of 5 · current → trajectory
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Destination Geographies
A pragmatic, stable posture toward Washington.
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4.0 → 4.0
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Departure Geographies
A broadly adversarial posture toward the federal government.
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▼ 2.0 → 1.5
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Colorado
Worse than the average Departure Geography — on both current position and trajectory.
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▼ 1.8 → 1.3
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Multiple times a week, aggressive rhetoric against the Republican Party and the Trump administration is shared or posted by most of Colorado's Democratic political leaders — including both U.S. Senators, the current Attorney General (also the Democratic nominee for Governor), and the current Secretary of State (also the Democratic nominee for Attorney General). Colorado has filed a large number of lawsuits against the Trump administration. And in 2024, Colorado's courts, supported by the Secretary of State and the Attorney General, attempted to remove the Republican presidential nominee from the state ballot based on an insurrection allegation the candidate had not been charged with, let alone convicted of.
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Colorado's Federal Exposure Is Unusually Large
For companies caught between state and federal directives, this creates real costs: complicated federal contracting, additional hurdles in winning federal grants, security clearance complications, uncertainty about which rules apply, and reputational risk.
The exposure spans nearly every innovation-economy sector Colorado has:
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• Aerospace and defense — Colorado's aerospace and defense industry accounts for 55,000 direct jobs, 184,000 indirect jobs, and $38 billion in federal contracts in 2024 — one of the largest concentrations of federal-contract exposure in the country.
• Quantum — Colorado hosts one of the deepest quantum tech clusters in the country, tightly integrated with federal R&D grants and Department of Energy partnerships, and anchored by Elevate Quantum, NIST, and JILA.
• Energy — from oil and gas to wind, solar, battery storage, and climate tech, Colorado's energy sector operates under federal regulatory frameworks that shift with every administration and depends on federal permitting, DOE partnerships, and grid policy.
• AI infrastructure — Colorado is home to multiple major data-center operators, the world's leading fiber and bandwidth infrastructure providers, and related critical-infrastructure companies (battery storage, generators) — all of which depend on federal permitting, grid access, federal grants, and federal energy policy.
• Biotech and federally-funded research — much of Colorado's research economy runs on NIH, NSF, and DOE grants.
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Under each of these industries sits a robust ecosystem of tech startups and scale-ups. These are the companies most at risk — the ones deciding whether to form in Colorado in the first place, or whether to scale here rather than somewhere else. Their location decisions are the most sensitive to how the state is perceived, and their departure is the loss Colorado can least afford.
Every time Colorado adopts a broadly adversarial posture toward the federal government, the founders and executives of those companies and institutions register the signal — and they are already reading it.
This is harmful to every Coloradan.
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What This Means for Colorado — On State–Federal Friction
Reversing this trend requires Colorado's Governor, Attorney General, and Congressional delegation to actively work with Washington rather than against it — regardless of which party holds the White House. Business investment decisions run on 10-, 20-, and 30-year horizons. If Colorado's political leadership treats Republican administrations as adversaries to be litigated, the state signals to founders and investors that it is not a safe place to build long-term.
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What Comes Next
The next issue in this series covers 2c — State Investment in Economic Development:
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Factor 2c — State Investment in Economic Development
Whether Colorado has an apparatus that competes for capital and jobs the way Texas, Florida, North Carolina, and others do.
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If We Work Together, We Can Reverse This Trend
If we work together, we can reverse this trend. But first, we have to diagnose the source of the problem — which is why this information is being shared.
If Colorado takes the appropriate steps, Colorado can be the most attractive innovation ecosystem in the world — and every Coloradan will share in the economic and cultural prosperity that leadership creates. This is the Innovation Vision for Colorado.
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