Engage Colorado - Colorado's Spending Is a Big Red Flag to Investors

Newsletter — Issue 33 — Tuesday, July 28, 2026

This newsletter has been published by Engage Colorado.

The Drivers Series — Category 3 · Factor 3c

Colorado's Spending Is a Big Red Flag to Innovators

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.

When founders, business leaders, and investors evaluate whether to build or expand in a state, they do not just look at today's tax rate. They look at where the state's spending is heading — because spending growth determines whether taxes and costs will hold.

And when they look at Colorado, the trend they see is scary.

We are completing our walk through Category 3 — The Cost of Doing Business — from The Honest Assessment. This issue covers 3c — The Forward Spending Trajectory, the final factor in Category 3.

As with the broader Innovation Vision and The Honest Assessment, I led the preparation of this section, and it reflects only my views.

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.

Factor 3c

What the Forward Spending Trajectory Actually Means

Factor 3c of The Honest Assessment is the forward spending trajectory — where a state's spending is heading, whether the state has fiscal discipline, and how much confidence founders and investors have that today's tax rate and cost structure will not deteriorate over the coming decade.

Founders do not evaluate a state's fiscal condition on this year's budget. They evaluate the ten-year and twenty-year projection. A state whose spending is growing faster than its economy signals that tax rates will have to rise — or that budget crises will force painful adjustments. Either outcome adds risk to a decades-long location decision.

That is why 3c evaluates three questions:

A state with an upward spending trajectory and weakening constraints is a state that will be under pressure to raise taxes over the coming decade.

The Scoring

Factor 3c · scores are out of 5  ·  current → trajectory

Colorado's current position of 3.0 is better than the Departure average (1.7), but well below the Destination average (4.0). And Colorado's trajectory of 2.2 is downward — the state is drifting toward Departure territory.

Where Colorado's Spending Trajectory Is Coming From

Three specific dynamics account for Colorado's 2.2 trajectory score:

1. Spending has grown faster than the economy for over a decade. That gap compounds, and it is unsustainable without either sustained tax increases or eventual budget restructuring.

2. TABOR erosion. Colorado's Taxpayer's Bill of Rights caps state spending growth and requires voter approval for tax increases. Ongoing efforts by the state legislature and the courts to weaken TABOR — through reinterpretation, exemptions, and legal challenges — signal that this structural constraint may not hold. Founders read that as a sign that Colorado's fiscal discipline is not durable.

3. Growing unfunded liabilities. Colorado's Public Employees' Retirement Association (PERA) carries a substantial unfunded liability, meaning future taxpayer revenue is already committed to prior obligations. State-level healthcare, education, and infrastructure commitments compound the picture. Founders and fund managers evaluating Colorado see these obligations as pressure on future tax rates.

The combined signal: Colorado's forward spending trajectory is upward, its structural constraints are weakening, and its unfunded liabilities are growing. For founders and executives making decade-long location decisions, this is yet another red flag on the Colorado dashboard.

What This Means for Colorado — On Forward Spending

Cost is where founders make relocation decisions. The forward spending trajectory is where they make retention decisions. A founder who is happy with Colorado today can still be priced out in ten years if Colorado's fiscal picture forces higher taxes or higher operating costs.

Reversing this trend requires Colorado's Governor, legislative leadership, and business community to:

Colorado's political leaders are doing the opposite today. But if they want Colorado to once again be a mecca for tech and innovation, they will need to evolve their mindsets. And if they do, it will be to the benefit of every Coloradan.

What Comes Next

The next issues in this series move into Category 4 — The Regulatory Landscape — from The Honest Assessment:

After Category 4, these newsletters will pivot from explaining the problem to focusing on the solution — what Colorado's leaders, business community, and voters can actually do to reverse this trajectory.

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, it 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.

Go Deeper

— Dan Caruso, Engage Colorado

Managing Director of Caruso Ventures, Host of The Bear Roars Podcast, and Board Chair of Tulagi | Boulder Roots