The full Colorado legislature this week began debating a $36 billion state budget proposal that, buoyed by a strong economic recovery from the coronavirus pandemic and a flood of federal stimulus dollars, would boost funding to K-12 and higher education, give state employees a 3% raise and expand state efforts to improve public safety and monitor air quality.
The fiscal year 2022-23 spending plan, which will go into effect July 1, is about $2 billion larger than the budget for the current year. For the current year’s budget, lawmakers restored some of the drastic financial cuts made in 2020 as the state braced for the effects of the pandemic. Those reductions amounted to some $3.3 billion, almost all of which have been replaced.
“We’ve been in recovery mode these last two years and now we get to return to a sense of normal,” said Rep. Julie McCluskie, a Dillon Democrat and chair of the Joint Budget Committee, which writes the budget and has been working on the proposal for months. “While it may be a new normal, it is certainly one that is more routine, that instills again our values but also our priorities and what we want to see happen in Colorado state services and programs.”
The $36 billion figure, the most the legislature has ever spent, doesn’t include $2.6 billion in federal coronavirus stimulus the legislature is also distributing this year.
Fifteen percent of the budget, about $2 billion, is set aside in a rainy day fund. Before the pandemic, the state had about 7.25% in reserves, an amount that didn’t cover the cuts made in 2020 and 2021, McCluskie said while presenting the draft budget to House Democrats Tuesday.
“By doubling that number, putting aside roughly $2 billion in our reserves, we are far better prepared for an economic downturn or recession,” McCluskie said.
Republicans, meanwhile, complain the budget is too big and spends too much on expanding state agencies and the state’s workforce.
“The budget is growing tremendously,” said Rep. Kim Ransom, a Douglas County Republican who also sits on the budget committee. “It’s going to be difficult moving forward to keep up with all the additions and all the growth that we’ve had this year.”
Some aspects of the budget remain in flux, including $700 million that has been set aside for legislation that is still being debated, McCluskie said, as well as $200 million for potential property tax relief.
Here are some of the highlights of the budget:
Education spending gets a big boost
Democrats and Republicans alike are excited about how much money next year’s budget is dedicating toward education.
The budget would pump $7.2 billion into K-12 education, an 11.7% increase over the current fiscal year and an amount that slashes the state’s unpaid debt to school districts by hundreds of millions of dollars.
The Colorado constitution requires that education funding increase each year to reflect inflation and population growth, an obligation lawmakers have not met for more than a decade in the wake of the Great Recession. That I.O.U. — called the budget stabilization factor or negative factor — is around $571 million. It will be reduced to $321 million this year — a 3.7% reduction in the total amount owed to schools, McCluskie said.
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“We were … feeling the pressure to buy down the budget-stabilization factor,” said Sen. Rachel Zenzinger, an Arvada Democrat who sits on the budget committee. “We wanted to do it all this year but we would have to carry that forward next year plus inflation.”
The budget invests another $80 million in special education, said Sen. Chris Hansen, a Democrat and vice chair of the Joint Budget Committee.
A 2021 report found school districts spent $742 million on special education services in the 2019-20 fiscal year that was not reimbursed by the state, which spent $243 million on special education that year.
“That doesn’t get us to full funding but it will be protected going forward,” Zenzinger said.
McCluskie called it the “biggest investment” lawmakers have made in special education in years.
Funding for higher education also would go up by $223 million to $5.4 billion. That includes more money for scholarships and support for first-generation and low-income students, said Rep. Leslie Herod, a Denver Democrat who sits on the budget committee.
“We’re proud to be able to continue our work around equity, to increase more funding for our access institutions like (Metropolitan State University of Denver) to ensure that funding gets to those who really need it,” she said.
The legislature plans to cap tuition increases for most in-state, undergraduate students at state-run higher education institutions at 2%. Chalkbeat Colorado reports that tuition would rise by 3% for out-of-state students and that the University of Colorado system would increase tuition for its students by 4.3% for first years and then freeze tuition for them for four years.
The budget also dedicates more than $8 million to a newly created early childhood department, Zenzinger said.
Pay raises and fee reductions
State employees would get a 3% pay hike under the budget, which stems from an agreement made with the state employees’ union, Colorado WINS.
The budget also includes a 2% increase in pay for state-contracted health care workers, including those providing home health care and services for those with intellectual and developmental disabilities.
The spending plan also calls for additional rate hikes for some providers with particularly low reimbursement payments, aiming to bring them up to 80% of what Medicaid pays, McCluskie said. That includes an increase for emergency medical transportation, like ambulances.
The budget also would increase the amount of money paid to halfway house operators each day and conversely remove a requirement that those in halfway houses pay $17 a day for treatment, which Herod said is difficult to collect and leaves offenders in debt as they try to transition back into society.
Meanwhile, the budget sets aside $157 million for fee relief for Colorado residents and businesses, including about $50 million to lower rates under the state’s new paid family and medical leave plan. Lawmakers also, at the behest of Gov. Jared Polis, plan to delay implementation of a new 2-cent-per-gallon gas fee enacted by the passage of a bill last year.
Another $200 million has been set aside for property tax relief, McCluskie said. The details for how that relief will be offered, however, have not been worked out.
Republicans are raising concerns that the budget is growing too quickly, especially through the hiring of new state workers, setting the state up for a future deficit.
“It’s just way past anything we’ve ever done before,” Sen. Bob Rankin, a Carbondale Republican, said of the spending plan. “Almost every department is growing overhead. I think we’re spending too much money, for sure.”
Democratic budget drafters said the spending plan would add about 800 new full-time employees, which would represent a 1.3% increase. They described the growth as appropriate and characterize concerns about the increases as political posturing from Republicans in an election year.
Much of the budget’s increase this year — approximately two-thirds of the spending boost, McCluskie said — will be used to backfill federal Medicaid funding that will be ending. The federal government provided about $819 million in the 2021-22 fiscal year to help cover more of the costs of people covered by Medicaid, a public insurance program, during the pandemic. The state is expecting that funding to stop around July, with the costs shifting over to the state, McCluskie said.
“When I look at the budget, it felt like the right investments in the responsible way,” McCluskie said. “Not excessive new programs or initiatives.”
There is also significant growth in spending toward the state’s public health and environment department, $66 million more than last year representing a 9.5% increase. That’s tied to responding to the state’s deteriorating air quality after the worst ozone year in recent history on the northern Front Range, including through new monitoring initiatives. The increase includes a plan to hire about 66 new employees next year, a few of which are expected to be temporary. Fees are expected to cover some of the ongoing costs after this budget covers the startup tab, McCluskie said.
How it works
The budget will head to the House floor for debate on Wednesday, where lawmakers from both parties will offer amendments. The spending plan is expected to clear the chamber before the end of the week.
The Senate will then debate the budget next week and make its own changes.
The Joint Budget Committee will reconvene to decide which alterations to adopt before sending the bill back to the full legislature for full approval and then the governor’s desk to be signed into law.
Passing a state budget is a legal requirement of Colorado lawmakers, and the budget must be balanced, meaning it can’t be passed with any deficit spending.