Colorado legislature passes $43.9 billion budget
Colorado lawmakers on Monday gave final approval to a $43.9 billion spending plan that cuts funding for transportation projects, local governments and dozens of social programs in order to keep up with the rising costs of health care and education.
But as difficult as this year’s budget was, there was widespread acknowledgement that — one way or another — the state’s financial picture is only expected to get worse from here.
“Next year is going to be very bad,” said Sen. Jeff Bridges, the Greenwood Village Democrat who chairs the Joint Budget Committee. “The cuts will be much more deep and much more painful.”
The main budget bill passed the state House 43 to 21 and the Senate 24 to 11, with most Republicans opposed. From here it heads to Gov. Jared Polis, who is expected to sign it into law.
Lawmakers had to close a $1.2 billion shortfall to balance the budget — the equivalent of a 7% cut to the state’s $17 billion general fund for the 2025-26 fiscal year, which starts July 1. To do so, they cut government operations across the board, scaled back social programs and slashed funding for transportation projects and local agencies. But they were largely able to avoid deep cuts to three of the biggest spending areas: health care, K-12 and higher education.
“This Joint Budget Committee has been very clear on what our priorities are — it’s education, higher education, Medicaid provider rates and child welfare,” said Sen. Barbara Kirkmeyer, a Brighton Republican. “This budget demonstrates that we are still clear on those priorities.”
How they balanced the budget
Health care was the main driver of the state’s budget crunch, due to the cost of Medicaid rising faster than the state is allowed to spend under the Taxpayer’s Bill of Rights.
Next year, the TABOR cap will only allow state revenue to grow by 3.6%, while Medicaid premiums are up 5.7%, or $208 million, to cover the rising cost of long-term care for an aging population. The cost of Child Health Plan Plus — the state’s insurance program for children whose families make too much to qualify for Medicaid — is up 20%, in part because of rising enrollment.
The hospitals and clinics that treat Medicaid patients will effectively get a pay cut, once you adjust for inflation. The budget calls for a 1.6% increase to the state reimbursement rate for Medicaid providers, many of whom have been struggling financially as uncompensated care has risen in the wake of the pandemic.
K-12 school districts will get $150 million more from the general fund. Some top Democrats say that will be enough to fully fund schools under the constitution and begin implementing a new school finance formula.
Budget documents tell a different story in the future. Unless lawmakers can come up with even larger funding increases in the coming years, the state won’t be able to sustain the spending levels called for in the new formula without depleting the State Education Fund.
Public colleges and universities will get a $40 million increase, a 2.5% bump from this year. The budget allows colleges and universities to increase tuition by up to 3.5% for Colorado residents and out-of-state students alike.
State workers will also get a 2.5% pay bump next budget year, plus additional raises owed under the state’s new step pay plan. But they’ll have to pay more for health insurance than the union initially agreed to in its latest collective bargaining agreement.
To pay for all the increases, budget writers said they emptied out the proverbial couch cushions in the hunt for nickels and dimes worth of savings.
They cut more than $114 million earmarked for transportation over two years. They pulled back funding for local governments, and scaled back or eliminated a wide range of programs that lawmakers had started during the pandemic, including workforce development grants and social services. They cut $1 million from food pantries.
The union, Colorado Wins, also agreed to a 1.5% cut in the state workforce — savings that will come from leaving open positions unfilled, rather than through layoffs.
The budget maintains the state’s 15% general fund reserve — although lawmakers may still dip into it to fund $350 million in law enforcement grants approved by state voters.
But while budget writers were able to largely fund the legislature’s top priorities for another year, they didn’t solve the fundamental structural problems with the state’s budget. The costs of public services — namely health care and education — are simply rising faster than the constitution will allow the state to spend.
Budget panel rejected most changes
When the proposed spending plan landed in the two chambers earlier this month, lawmakers in the House and Senate approved more than a dozen amendments each to the budget package, agreeing on a handful of them.
But the JBC — serving as a conference committee, which reconciles differences between the chambers so a compromise measure can be passed into law — last week rejected most of the proposals from its colleagues.
They overruled a House amendment to continue a property tax relief program administered by the state Treasurer’s Office.
They nixed a Senate proposal to provide $1.2 million to a maternity program at the Arkansas Valley Regional Medical Center.
They even rebuked the legislature on some things both chambers agreed on. Bipartisan majorities in the House and Senate voted to fund a renovation project for the Colorado School for the Deaf and the Blind. But by a unanimous vote, the JBC said it was more important to spend the money on a fire protection system at the Denver Reception and Diagnostic Center, a key intake facility for new prison inmates.
Over and over, budget writers said that their colleagues simply weren’t grappling with the gravity of the trade-offs that they had been forced to make to close a $1.2 billion spending gap.
“While I have a huge heart for the school, I don’t want people who are locked in a cell to burn to death,” said Sen. Judy Amabile, a Boulder Democrat who serves on the JBC.
But even as JBC members sought to hold the line, they also made some concessions — partly out of fear that their colleagues would revolt.
For instance, the budget panel backed off its proposal to eliminate Medicaid coverage for community health services, which was supposed to begin July 1. Instead, the budget panel voted 4-2 to delay the program by six months, saving the state half of the $2.8 million that budget writers had hoped to cut.
Kirkmeyer and Rep. Emily Sirota, D-Denver, voted against the compromise, predicting that the JBC would simply have to cut it again next year — and it would be easier to eliminate the program before it starts.
In some cases, the legislature forced the JBC’s hand. As part of the sprawling 64-bill budget package, budget writers tried to repeal a Kidney Disease Prevention Task Force. But the House, in a bipartisan vote, rejected the bill entirely, forcing the JBC to find savings elsewhere.
TABOR fight looms
Democrats, who control both legislative chambers and the governor’s office in Colorado, have batted around ideas to alleviate the long-term funding crunch. But a consensus has yet to emerge among lawmakers and the outside groups whose support would be needed to mount a successful campaign.
Some, on the progressive left, want to ask voters to raise income taxes on higher earners. The move would require voter approval — not only for the tax itself, but also to amend the constitution to remove TABOR’s prohibition on tiered income tax structures.
Others want to take on the TABOR cap itself, by either changing the revenue cap, or asking voters to eliminate it entirely.
Some Democratic legislators have put forth a long-shot plan to have the General Assembly sue the state over TABOR’s constitutionality. But with the end of the legislative session approaching in a matter of weeks, it’s not clear the measure will get the support it needs from leadership to hold a contentious floor vote that’s sure to be protested at length by Republicans.
In the meantime, budget writers focused on trimming services as much as possible without disrupting major programs. But the overwhelming message from the JBC is they’re running out of things to trim without harming essential services.