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Colorado lawmakers are finalizing a budget that boosts K-12 and health care

Abby Olsen, a science teacher at Denver East High School, holds a sign as state legislators and educators celebrate historic education funding for schools Feb. 29, 2024, at the Colorado Capitol. In addition to teaching, Olsen holds a second job as a business administrator for a medical diagnostic company. (Olivia Sun/The The Colorado Sun shirttail via Report for America)
Facing a $170 million shortfall at the start of the week, lawmakers on the Joint Budget Committee slashed spending

Colorado’s state budget panel early Friday morning approved a spending plan for next fiscal year that would invest heavily in state workers and medical services, eliminate Colorado’s K-12 funding shortfall and limit college tuition increases to 3% for in-state students.

But it took a lot of cutting – and some creative accounting maneuvers – to get there.

Facing a potential $170 million shortfall at the start of the week, lawmakers on the Joint Budget Committee dipped deeply into various state cash funds in order to balance the budget, pulling money out of a number of programs to cover the spending gap.

The JBC also rejected a number of Gov. Jared Polis’ proposals to expand social services, workforce housing and public safety programs in order to redirect money to their own priorities. Chief among them were Medicaid providers and higher education, two areas lawmakers insisted had been underfunded for far too long.

The six-member budget panel backed a $132 million increase for higher education, which they said would be enough for colleges and universities to limit tuition increases to 3% for Colorado residents and 4% for out-of-state students. Amid widespread nursing shortages, health care providers would receive an across-the-board 2% increase to the state’s Medicaid reimbursement rate, down from the 2.5% bump the committee had previously approved. Lawmakers also approved a number of large targeted increases for some specialties.

State workers would get 3% across-the-board raises under the proposal, plus additional pay bumps as government agencies implement a new pay plan under the state’s collective bargaining agreement.

The proposed 2024-25 spending plan, which would take effect July 1, now moves to the Colorado House, where it could be debated next week.

For months, Polis and top lawmakers had been warning that the state would face a tight budget year as federal stimulus funding runs out and economic growth slows. But state revenue forecasts released in March left the Joint Budget Committee with even less money to spend than expected.

That set off an eleventh hour scramble this week to close the $170 million spending gap in order to balance the budget without depleting the state’s $2.2 billion general fund reserve.

“I feel good about it,” JBC chair Shannon Bird, a Westminster Democrat, told The The Colorado Sun shirttail after the budget was completed around 2 a.m. Through the budget balancing maneuvers, she said, “we made sure we actually grew the amount of money available to implement important programs for our constituents.”

The budget is still subject to change; the spending plan must pass the House and Senate before Polis can sign it into law.

Here’s some of what made it into the proposed spending plan – and what didn’t:

General fund spending will increase by over $1B

The JBC opted to use the economic forecast from the governor’s Office of State Planning and Budgeting for the second year in a row as the foundation of the budget.

The decision gave lawmakers an extra $54 million to spend over the Colorado Legislative Council Staff forecast – arguably a departure from the JBC’s typical practice, which is to adopt the more conservative of the estimates to avoid midyear budget cuts.

The total size of the budget won’t be known until JBC staff analysts complete their calculations and lawmakers introduce the long bill on Monday. But early figures show general fund spending increasing to more than $16 billion from $15.2 billion, even as tax collections are relatively flat.

General fund revenue, which is primarily made up of income and sales taxes, has grown slower than inflation in recent years after booming growth during the coronavirus pandemic. General tax collections are expected to drop 0.7% this budget year to $17.3 billion, before increasing 1.7% in the 2024-25 fiscal year to $17.5 billion.

Nonetheless, the state will be able to spend more next year due to 5.8% growth in the state’s revenue cap. Under the Taxpayer’s Bill of Rights, state revenue can only increase based on the combined rate of inflation and population growth. Anything beyond that must be refunded to state taxpayers in the following year.

The state will issue $3.6 billion in TABOR refunds this spring, and expects to have a $2 billion TABOR surplus in the current budget year. The surplus is expected to shrink to $1.3 billion in 2024-25, under the proposed budget.

Property taxes, cash stockpiles fuel education spending

One of the linchpins of the budget was a tax the state doesn’t even collect.

Years of rising property tax collections at the local level enabled lawmakers to meet their promises to fully fund K-12 education for the first time since the Great Recession – achieving a long-standing goal of lawmakers in both parties without increasing general fund spending on education to do it.

“It’s historic,” Sen. Rachel Zenzinger, an Arvada Democrat who sits on the JBC, said after the vote. “It’s taken many years of budget actions to get here.”

Local property tax dollars covered over 75% of the $526 million increase needed to eliminate the K-12 funding shortfall, with the State Education Fund providing the rest.

Lawmakers relied heavily on cash funds to balance the budget.

They dipped repeatedly into the State Education Fund for K-12 expenses, authorizing $44 million to cover increases to so-called categorical programs, like special education. They used $22 million to increase funding for state-sponsored charter schools, which receive less local tax dollars than other K-12 schools. And they added funding to a voter-approved school meals program that wasn’t generating enough tax dollars to cover its cost.

To free up money for higher education, lawmakers transferred huge sums of cash that had been earmarked for other programs, including $17.4 million in interest earnings from a maintenance fund and $10 million from a little-used grant program aimed at helping former college students or applicants finish their degrees.

Lawmakers also adopted some budget balancing recommendations from the governor’s office that they had previously criticized when Polis first proposed them in November.

The list included exempting certain fees related to unemployment insurance from the state TABOR limit and withdrawing $32 million in cash from the state’s TABOR reserve, which is set aside for emergencies such as wildfire response. (The JBC voted to replenish the reserve using hard assets, such as a building and a parking garage. Doing so is technically allowed, though such assets are difficult to convert to cash in a true emergency.)

The JBC approved more than $100 million in placeholders for various priorities, including housing, education and rural hospitals.

JBC nixes workforce housing, autism funding

Lawmakers didn’t fund everything they or Polis wanted.

The JBC rejected a number of the governor’s priorities and drastically pared back others, including a $16 million request for workforce housing for the Department of Corrections. The JBC approved just $360,000 to fund a housing project already underway in Buena Vista.

On a split vote, the JBC also rejected a plan from the administration that would have hired lawyers to prosecute federal gun crimes.

They declined to vote on a proposed bill to expand coverage for autism treatment under the state’s Child Health Plan Plus program, citing financial constraints.

Sen. Barbara Kirkmeyer, a Brighton Republican who is a member of the JBC, was the lone “no” vote against the committee’s decision to limit the state’s Medicaid provider rate increase to 2% from the 2.5% the JBC had initially approved.

Lawmakers worked late into the night to finish the proposal, meeting in small groups behind closed doors with legislative budget staff and the governor’s office to negotiate the final details.

But it wasn’t immediately clear whether they wrapped up in time to draft the legislation package for its scheduled introduction in the House on Monday – a key deadline that, if missed, could derail the legislative calendar as the session heads into its home stretch.

Read more at The Colorado Sun

The Colorado Sun is a reader-supported, nonpartisan news organization dedicated to covering Colorado issues. To learn more, go to coloradosun.com.