A Smaller Federal Budget and Workforce Means a Harder Time for Coloradans

Since assuming office, the Trump Administration has fired over 20,000 probationary workers, has taken steps to make it easier to fire federal workers, and instructed federal agencies to prepare for large-scale layoffs. Additionally, efforts are underway to slash key funding sources for anchor institutions that support Colorado’s thriving economy – including medical and research facilities, which receive hundreds of millions in National Institutes of Health (NIH) grant funding. While many of these recent and proposed actions remain held up in the courts, it is a timely reminder that decisions about the federal workforce and budget have a big impact on our communities. 

While the job cuts are portrayed as a way to reform Washington D.C. and “restore accountability,” the layoffs are occurring largely outside of D.C. Countless federal employees are located in Colorado, and countless more depend on the many services federal funding provides. Despite the portrayal of “optimization,” these actions – whether through actual headcount reductions or declines in procurement spending – will ultimately make life less efficient for Coloradans. 

Federal Employees: Community Members and Contributors to Local Economy 

Layoffs of federal employees in Colorado are an economic hit to individuals and the local economy they live in. 

Federal Employees: Stable and Predictable Income Source.

Colorado has a combined 57,000 employees spread across the entire state. Federal jobs offer steady paychecks regardless of economic ups and downs, helping families plan their budgets with confidence and supporting local businesses that rely on consistent spending from residents. Federal jobs thus have a stabilizing impact on the economy. In Colorado, this means that when federal employees, with average salaries of $101,000 a year, spend money in their communities, it creates a ripple effect that strengthens the overall economic health and helps cushion the area against economic downturns. 

Ancillary Roles and Services of Federal Employees

In addition to their reliable income, federal employees not only support many ancillary services through their spending power but also help sustain necessary facilities in the local regions where they work. The presence of federal agencies in a region can lead to the establishment of essential services, such as hospitals, childcare centers, and public transportation, which attract both workers and residents. For example, the Schriever Space Force Base in Colorado Springs is home to over 8,000 military and civilian employees and indirectly contributes an estimated $1.3 billion to the local economy. Similarly, the Denver Federal Center in Lakewood is home to over 6,000 workers employed in 28 different agencies. These major centers of employment provide necessary resources that enhance the quality of life, make the area more attractive, and contribute to a thriving local economy for both the federal workforce and broader Colorado communities. 

Federal Cuts Mean a Less Efficient Colorado 

For individuals who interact with the Internal Revenue Service (IRS) – which is to say, nearly all taxpayers in the state – we can anticipate lower levels of service this filing season. In fact, roughly 7,000 employees are expected to be laid off, and the Trump Administration plans to close more than 110 Taxpayer Assistance Centers. This follows an impressive string of successes in customer service at the Internal Revenue Service (IRS) in recent years. Last filing season, for instance, the IRS cut call wait times from 28 to three minutes, saving taxpayers 1.4 million hours of hold time. More importantly, cuts to the IRS could delay tax returns. For many Coloradans, this is money that is expected and needed – for bills, to pay down debt, or make a necessary purchase. In particular, if you are a working family receiving the Child Tax Credit (CT)C or Earned Income Tax Credit (EITC), getting your tax refund in a timely fashion is crucial. It’s not a random $20 you found in your coat pocket, it’s hundreds or thousands of dollars that can mean all the difference between financial stability and crisis.

For Coloradans who work in science and health, recent federal decisions to freeze or cut research funding from the NIH and limit indirect cost reimbursements to 15% could dramatically impact not just professors and scientists but local research institutions, the health of our communities, and Colorado’s economic wellbeing. NIH funding supports many projects that focus on improving the quality of life for all people, from developing vaccines to helping fight and prevent diseases like Alzheimer’s, Parkinson’s, cancer, heart disease, and different viruses. In Colorado, major institutions like Colorado State University (CSU), CU Anschutz, and CU Boulder rely on these funds to research conditions such as cancer, brain injuries, and mental illness and to develop vaccines for diseases including HPV, rabies, hantavirus, MERS, and Zika. If NIH funding is cut or frozen, these efforts could slow down, or disappear altogether, putting new health solutions and public safety at risk. 

The Role of Indirect Costs. Indirect cost funds are crucial because they cover the everyday expenses like electricity, building maintenance, and administrative support that are necessary for running research labs and facilities. Currently, universities and research institutes recover a much higher percentage of these costs than the proposed cap of 15%, which might not be enough to keep the labs running and the lights on. This shortfall could reduce funding for innovative research and force institutions to make difficult budget cuts that would affect not only scientists but also patients on medical campuses, staff, and students.

Economic Effects on Local Communities. Research institutions are powerful engines of local economies: they create high-paying jobs, support nearby businesses, and foster innovation. In Colorado, our largest research institutions have a sizable economic impact on our state economy. If federal funding is reduced, Colorado could experience job losses from cutbacks in research projects and fewer funds to support administrative costs, including university personnel. When universities have less money, the ripple effects can include reduced financial aid to students and cuts to community programs that benefit everyone. For communities in Colorado, these changes are not abstract – they affect local schools, healthcare, and job opportunities that residents rely on every single day.  

Tax Concerns Beneath the Surface. The objective of reducing government spending conflicts directly with the Administration’s proposed tax cut extensions. According to the Department of the Treasury, the full extensions of the provisions that cut income and estate taxes under the 2017 Tax Cuts and Job Act (TCJA) would cost over $4.1 trillion from 2026 to 2035, and the benefits would flow largely to the most well-off. The top 0.1% of earners, for instance, would receive a tax cut of $416,000. That’s enough to purchase the median-priced single-family home in Mesa County! Allowing tax cuts that flow exclusively to high-income and high-wealth families while simultaneously cutting services that the broad swath of American people rely on is neither efficient nor equitable.

Take action with us today to fight back against federal cuts and unite against tax handouts to the rich.