Denver city officials plan to lay off employees, institute a hiring freeze and require unpaid furloughs as they stare down a projected $250 million budget hole over the next two years, Mayor Mike Johnston announced Thursday.
It’s not yet clear how many layoffs will be necessary or how city services will be affected, but deep cuts are unavoidable, Johnston said. Sales tax revenue, which makes up more than half of Denver’s income, has slumped while the city’s costs are growing.
In an exclusive interview with The Denver Post ahead of the announcement, Johnston said the constraints couldn’t be addressed with small adjustments like saying, “Let’s buy fewer pencils.”
“These are structural problems,” he said.
Denver will collect $50 million less in tax revenue than expected this year, triggering some immediate cost-saving measures like the hiring freeze and limiting any unnecessary staff spending.
All 27 city departments have been told not to go over their allotted budgets and to look for any contracts that they can reduce.
Next year, Denver’s budget shortfall is expected to grow to $200 million.
Making matters worse is the ongoing threat from President Donald Trump to eliminate up to $200 million in federal grants the city receives annually.
The cuts come as Johnston says he will continue to press forward on projects such as a $70 million investment in a new women’s soccer stadium, an $800 million bond proposal and his homelessness initiative, which costs about $57 million per year. He hopes those projects will help jumpstart the city’s economy.
“There are only two solutions to this. One is you have to cut costs and the second is you have to increase revenue. You have to grow your way out of this,” he said.
The city’s reserves are also at a historic low, with only about 10% of the budget set aside as a “rainy day fund.” Johnston called that the “hard deck” and said without major changes to the budget, it would drop to 2%.
“No one’s ever gone below 10% before,” he said.
Each city employee — except for uniformed law enforcement, fire and 911 personnel — will be required to take at least two days of unpaid furlough before the year’s end. Those will all happen at the same time: the Friday before Labor Day and the Friday after Thanksgiving Day.
There will be additional, floating furlough days based on salaries, with the highest-paid employees, including the mayor and his senior staff, taking up to seven days without pay.
Projects that could be impacted
The mayor’s homelessness initiative, All in Mile High, is likely to see some reductions, but will proceed, Johnston said.
“We view this as an investment that’s driving economic growth at the same time as providing services to people who need it,” he said. “We will make overall program cuts in that, like we will everything else. They will probably be smaller than other departments.”
Public safety programs will see the smallest budget reductions, he said.
Johnston’s administration will move forward with a new 14,500-seat National Women’s Soccer League stadium in the Baker neighborhood, which includes plans for a mixed-use development. Under the deal, which the City Council tentatively approved this month, Denver agreed to put up $70 million to pay for the land and improvements to the area.
The stadium project will serve as a catalyst for economic growth, Johnston said. However, most economists disagree with the idea that public investment in sports stadiums provides much financial benefit for the cities where they are located.
The mayor will also proceed with asking voters this fall to approve the city’s $800 million Vibrant bond package, which would greenlight shovel-ready construction projects throughout the city. Johnston said that will create thousands of jobs.
Capital projects like the stadium and the bond cannot pay for personnel costs, city officials noted.
Over the coming months, each city department will be asked to look for ways it can reduce its workforce and be more efficient, including by using artificial intelligence and putting services online. Departments will also look for any regulations and red tape that can be eliminated.
Johnston said he has talked with each department head and has ideas of where they might be able to make cuts while maintaining services for residents.
“We are going to try in every way we can to avoid services being impacted,” he said. “I don’t know that it will be possible.”
Johnston said that while layoffs are a last resort, he doesn’t see any way to avoid them. He didn’t provide details on how many layoffs will be necessary, when they will take effect or which departments will be impacted.
How the city got here
There are several factors that led to the budget situation. One is worldwide economic uncertainty amid Trump’s aggressive tariff policy, which has led to a decrease in both consumer spending and related sales tax revenue. About 56% of the city’s budget comes from sales tax.
Revenue growth has been essentially stagnant in the past two years, whereas it was growing about 5% annually in the previous decade.
The city’s reserves, which are typically used to help backfill the budget during difficult times, are also depleted.
In eight of the past 10 years, Denver has spent more than it brought in, Johnston said. The city, mostly under Mayor Michael Hancock’s administration during that period, was repeatedly spending more than it brought in and backfilling the lost dollars using the city’s reserves.
Hancock said in an interview that his administration never let the reserves get below 15%, which was above city policy.
“We believe we performed soundly,” Hancock said Thursday. “We took very seriously the fiscal management of the city and we are proud of how we left the city, managed the reserves and restored reserves after the Great Recession.”
The American Rescue Plan Act helped cushion the city’s budget for a few years, but that federal COVID-19 relief money has since dried up.
Johnston’s office said it attempted to scale back the 2025 budget last year and still ended up with lower revenues than expected.
Based on historic projections, the city also initially estimated it would bring in an additional $100 million in revenue next year. Now, with flat revenue, that growth is unlikely.
Instead, costs increased by $100 million as the city government staff and personnel costs have grown, and contracts have gotten more expensive due to inflation.
The combined increase in costs and decrease in revenue growth creates the $200 million gap, said Laura Swartz, the communications director for the Department of Finance.
The city also stands to lose hundreds of millions of dollars in federal grants if Trump is successful in redirecting the dollars elsewhere.
The Federal Emergency Management Agency has already pulled back about $24 million in promised grant money that the city spent to shelter migrants. Denver is now suing the federal government over those dollars, which were intended as a reimbursement.
Trump has targeted Denver and Colorado, along with several other cities and states, over their policies that restrict how much local law enforcement can coordinate with federal immigration officials.
The U.S. Department of Transportation also recently sent a letter to the city saying it will only dole out grants to cities that agree with the president’s view that diversity, equity and inclusion policies are prohibited by federal law.
Most of the federal grants the city receives are for construction. If the city can’t get those promised funds, they will have to halt ongoing projects like the Colfax Avenue bus rapid transit project, Johnston said.
Over the next four months, department heads and Johnston’s cabinet will make the decisions around where the cuts will be before his proposed budget is due to the City Council on Sept. 15. They must approve a budget for 2026 by Nov. 10.
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