Colorado lawmakers, worried that a key source of money for water projects is too easily tapped for other programs, want to create a special task force to examine ways to stabilize and boost funding for things like new water pipelines and conservation programs.
Under Senate Bill 40, a nine-member panel would examine new options to replace severance tax money that is collected on nonrenewable resources, such as oil and gas and some minerals, and is highly variable. A portion of the revenue is used to help Colorado address looming water shortages.
According to state forecasts, by 2050 those shortages could be as high as 740,000 acre-feet of water, under a worst-case planning scenario, or much lower if growth slows and climate change impacts are less than expected. One acre-foot of water equals nearly 326,000 gallons, enough water to serve at least two urban homes for one year.
Like other Western states, Colorado is racing to shore up aging water systems and make existing supplies stretch further as drought and rising temperatures shrink water supplies.
The bill comes as lawmakers wrestle with how to cut $1.2 billion from a state purse hurt by slowing growth and revenue caps.
The measure, sponsored by Sen. Dylan Roberts, D-Frisco, Sen. Cleave Simpson, R-Alamosa, Rep. Karen McCormick, D-Longmont, and Rep. Matthew Martinez, D-Monte Vista, is stalled in the Senate appropriations committee until the legislature completes its budget work, Roberts said.
Roberts said the current budget crisis and previous fiscal storms have resulted in severance tax revenue being tapped to help resolve budget shortfalls in nonwater programs, a situation that hits hard at the state’s ongoing efforts to ensure there is enough water to go around.
“The joint budget committee has swept severance taxes in the past. Not too often, but I worry that it will become a common practice. I and my cosponsors want to get the best minds together on how we better plan for the future,” he said.
Lawmakers plan a new tax force to find ways to replace the state’s reliance on severance taxes. Credit: Colorado Legislative Council
The Colorado Water Conservation Board is the state’s primary water planning agency, and helps fund an array of water projects and planning initiatives. Its revenues come from interest on loans, money from the state’s general operating fund, sports betting tax revenues, and severance tax revenues, among other sources.
Late last year, Gov. Jared Polis proposed a budget that largely shielded water programs from major cuts, but it is lawmakers who will make the final decision on how the state’s budget will be balanced this year.
The severance tax has generated $412 million for the CWCB over the past 10 years, according to Kirk Russell, the CWCB’s finance section chief. Most of that goes into a revolving loan fund that helps finance such things as irrigation ditch repairs and pipelines. It isn’t typically used to finance the water agency’s operating budget.
But he said the severance tax fund experiences “a great deal of variability” from year to year.
A bright spot in the funding picture, according to Roberts, is the growth in revenue collected from gambling on sports. According to the Colorado Division of Gaming, sports betting has generated $98 million in revenue since May 2020, when sports betting became legal in Colorado. The majority of that money is now used to help fund the Colorado Water Plan.
Roberts said lawmakers are open to considering a range of options to stabilize water funding, and he said there may be potential to expand the revenue generated by sports betting. In January, the program hit a new high, generating $4.4 million. The previous high occurred in January 2024, when $4.1 million was generated, according to the Division of Gaming.
If the bipartisan task force measure is approved, members would be selected this summer and a final report would be due back to lawmakers by July 15, 2026.
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