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Colorado’s $40.6B budget is nearing final passage. Here’s what’s in it

Spending plan invests heavily in state workers, health care services, K-12 and higher education
The Colorado State Capitol is covered in snow early March 14 in Denver. (KMGH via AP)

After weeks of debate and over two dozen amendments, Colorado budget writers Wednesday put the finishing touches on a $40.6 billion budget that increases spending on state workers, health care services, K-12 and higher education.

But the spending plan leaves a number of unanswered questions for the final month of the legislative session – including how the Democratic majority will pay for property tax cuts, a major priority for Gov. Jared Polis and top lawmakers.

The budget for the 2024-25 fiscal year, which starts July 1, still has a few procedural hurdles to go, but no further changes are expected. The Joint Budget Committee on Wednesday rebalanced the budget after the House and Senate passed different versions over the last two weeks.

Next up, the two chambers will be asked to agree on the compromise bill, before it can be sent to the governor’s desk to be signed into law.

The proposal would achieve a long-standing goal of both parties – the elimination of a school funding shortfall that dates back to the Great Recession. Known as the budget stabilization factor, the funding deficit has cost schools more than $9.9 billion since 2010.

“Of all the budgets that I have proudly helped to craft over the years, this one will stand out in my memory years from now,” Sen. Rachel Zenzinger, an Arvada Democrat and the JBC’s vice chair, said in a statement. “The hard work has been worthwhile: we eliminated the budget stabilization factor that we inflicted upon our schools a decade ago, and now K-12 is fully funded. What a joy to make that statement.”

Eliminating the funding shortfall effectively resets K-12 spending to what it was in 1989, when adjusted for inflation and enrollment – a level that many education advocates say is insufficient. Nonetheless, it’s a major milestone for school funding in a state that has long ranked near the bottom of the country in teacher pay.

Institutions of higher education would receive a $132 million bump, enough for public colleges and universities to limit tuition increases to 3% for Colorado residents and 4% for out-of-state students.

Polis, a Democrat, praised the budget plan through a spokesperson.

“The Governor is thrilled that Colorado is finally fully funding our schools, creating pathways for new housing that Coloradans can afford near job centers and transit, and continuing to increase support for crime prevention and auto theft reduction to help make Colorado one of the 10 safest states,” spokesperson Shelby Wieman said in a statement.

The JBC on Wednesday struck most of the amendments lawmakers added to the bill across two weeks of floor debate. The final budget includes $2 million each in additions for crime victim services, school security grants and a ninth grade success program. The JBC agreed to a $500,000 increase for the Tony Grampsas Youth Services program, which provides grants for community groups that work with at-risk children.

Budget writers also restored $8.8 million in affordable housing vouchers that they had previously cut from the budget.

The additional spending was paid for in part by cutting $26 million from a placeholder for future housing legislation.

Here are four other things to know about the budget.

General fund spending is up 7%, even as economic growth slows

General fund spending, which accounts for most of the state’s operating budget, is set to increase by $1 billion next year under the proposal. But tax collections have flattened after booming growth in the wake of the pandemic.

As economic growth slows, general fund revenue is expected to grow just 1.2% next year – just over $200 million. Nonetheless, the state will have much more money to spend.

The main reason: high inflation and steady population growth means the state’s revenue cap under the Taxpayer’s Bill of Rights will grow 5.8% in the 2024-25 budget, after 8.5% growth last year.

The growth in spending drew a rebuke from many Republicans, who have voted in near-lockstep against the budget, with a handful of exceptions.

“I hope you’re asking yourself, ‘did my constituents see a 5% increase in their take-home pay?’” Rep. Lisa Frizell, R-Castle Rock, said during debate on the House floor this month. “We have told the citizens of Colorado to tighten their belts while we here in this building go on a spending spree year after year after year.”

Slower growth and a rising TABOR cap also mean the state will owe fewer refunds to taxpayers over the next two years. This spring, Colorado refunded a record $3.7 billion to taxpayers, through a mix of refund checks, property tax breaks and tax credits. This budget year, the state is expected to owe an estimated $2 billion that would go out in the 2025 tax year, while the proposed budget for 2024-25 anticipates $1.3 billion in refunds in 2026.

Health care, social services account for the bulk of the new spending

The Department of Health Care Policy and Financing, which administers Medicaid and other public health programs, was responsible for about half of Colorado’s general fund budget growth. The proposal calls for HCPF to get $512 million more than in this fiscal year’s operating budget, an 11.5% increase.

Add in the $204 million bump for the Department of Human Services – which administers social services including behavioral health and child welfare programs – and just two of the state’s 23 departments accounted for 67% of the budget increase, noted Rep. Rick Taggart, a Grand Junction Republican, who serves on the JBC.

“Let that sink in for a second – $700 million has to do with those two departments,” Taggart, who voted for the budget, told the House this month. “It has to do with our underserved populations across this state. Ladies and gentlemen, that’s a symptom (of broader social problems). And that symptom is going to get worse and worse.”

The jump in health care spending came despite dropping enrollment in Medicaid, the federal health care program for low-income people, as a pandemic-era expansion wound down. Next budget year, which starts July 1, enrollment is expected to drop to 1.3 million recipients – down from 1.4 million this budget year, and 1.7 million at its peak.

Nonetheless, state spending on Medicaid services is still projected to rise by $325 million in next year’s budget proposal. The reason is that those losing coverage tend to be younger and healthier, according to legislative budget documents. Meanwhile, health care costs for seniors and those with disabilities are rising faster than what the state expects to save from falling enrollment.

Meanwhile, enrollment in Colorado’s Child Health Plan Plus, or CHP+, is on the rise. The public health insurance program was designed for pregnant women and parents with young children who make too much money to qualify for Medicaid. So now that Medicaid enrollment is dropping, families are signing back up for CHP+ in large numbers.

The spending plan also calls for $68 million to help reduce the state’s waitlist for psychiatric beds, addressing a top priority of Polis and budget writers alike. Department of Human Services officials say the money would help the state open three forensic health units and provide dozens more beds that had closed due to lack of staffing.

Worker shortages loomed large

The proposed budget provides the largest pay raises to state workers in at least a decade, increasing salaries by 6.7% on average.

That includes a 3% across-the-board increase, plus additional raises as the state implements a new longevity-based pay plan negotiated with the state workers’ union, Colorado WINS.

But lawmakers fear it still might not be enough to fill some critical positions. The budget calls for large signing bonuses to lure corrections officers, prison nurses and mental health care workers, among other positions with widespread vacancies.

Additionally, most Medicaid providers would receive a 2% increase in reimbursement rates in the proposed 2024-25 budget, as lawmakers look to address private sector health care worker shortages and clinic closures.

Medical specialties up for a rate review this year, including autism treatment and dentistry, would get another $61.5 million in targeted increases. Lawmakers also plan to increase the minimum wage for those who work in home and community-based services, which help the elderly and people with disabilities live independently.

Large chunks of the budget remain undecided

Lawmakers set aside $46 million in placeholders for pending legislation, much of it earmarked for housing. But negotiations on what bills to fund with that money are still ongoing.

The budget doesn’t set aside any money for property tax relief, even as top Democrats insist they still plan to cut taxes. That leaves lawmakers with limited options to reimburse schools and local governments for lost tax revenue.

Finally, expect a lengthy debate over how to distribute taxpayer refunds under TABOR. Legislative Democrats have proposed tapping the TABOR surplus to provide new tax credits to those in poverty. Polis and Republicans have said the state should cut income taxes instead, which would give more money back to higher earners who pay the most in state taxes.

Lawmakers are also expected to look to the TABOR surplus to cover the cost of property tax cuts.

The legislative session ends May 8.

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