Gov. Jared Polis on Wednesday proposed a $38 billion state budget that would completely pay off Colorado’s 14-year-old IOU to K-12 schools, accomplishing a long-standing goal of the General Assembly.
“We’ve been working towards this goal for several years,” Polis told reporters at an afternoon news conference at the governor’s mansion in Denver. “We’ve made progress in reducing the underfunding of our schools, and this year we’re fully funding our schools for the first time” since 2009.
The governor is required to present a budget proposal each November to the General Assembly, but it only serves as a starting point for discussions. Lawmakers on the Joint Budget Committee ultimately write the document that will become the state’s official spending plan, and the full legislature has to give final approval.
Polis’ wishlist for the 2024-25 fiscal year calls for a 6.5% increase in General Fund spending, but he insisted it included few new programs.
“This is more of a tight budget year,” said Polis, a Democrat. “The big goal of this budget is fully funding education. So the discretionary money (that exists) goes to meet our commitment to fully fund our public schools in the state of Colorado.”
Polis said his budget also prioritizes housing and public safety.
The school funding deficit dates back to the Great Recession, when lawmakers cut K-12 spending $1 billion below levels set in by the state constitution. For years, lawmakers have sought to pay down that debt, known as the budget stabilization factor. And they made slow progress until the pandemic drove it to a new high of $1.1 billion in 2020.
Since then, the state’s budget picture has brightened considerably thanks to a booming economy and federal stimulus funding, enabling lawmakers to pay down most of it in the last few years.
Paying off the rest would cost the state $141 million next fiscal year — on top of the $423 million increase that’s needed just to keep up with the projected growth in the state’s funding obligations. Polis’ proposal also calls for an additional $42 million to provide financial parity between state-authorized charter schools and other K-12 schools. Currently, district-authorized charter schools get a cut of locally raised tax dollars, but state-authorized ones don’t.
Notably, Polis said his budget is based on current law. If two tax measures on the November ballot, Propositions HH and II, are approved by voters on Tuesday, he said he would offer a revised budget proposal in January.
Proposition HH would lower the projected increase in Coloradans’ property taxes, increase the amount the state can spend under a state revenue cap and add new school and local funding obligations to the state budget. Proposition II would allow the state to keep all the money it collects from tobacco and nicotine taxes, rather than refund it to taxpayers.
Nonetheless, the governor’s proposal does rely on some tax changes to fund his education plans. His budget reiterates his support for taxing many short-term rental homes at a higher rate than other residences. The resulting increase in local property tax revenue would reduce the state’s school finance obligations, making it easier to close the K-12 funding gap.
Here’s what else you need to know about Polis’ plan for the 2024-25 budget year, which starts July 1:
New money for housing, public safety
Polis’ budget calls for $137 million for housing, much of it focused on building new supply across the state.
It includes $70 million to spur transit-oriented developments and a $30 million expansion of the state’s affordable housing tax credit. Additional funding would support workforce housing projects for state workers and incentivize the construction of accessory-dwelling units, which Polis views as a key to increasing density and alleviating housing costs across the state. The proposal would redirect $18 million in marijuana tax collections to subsidize local fees and provide financing to help homeowners with the cost of adding housing units to their property.
The budget also calls for $40 million in new crime-prevention spending, including $1 million in grant funding for nonprofits, including Jewish temples and Muslim mosques that he said could be targeted by a rise in hate crimes in the wake of the Israel-Hamas war.
Tuition hikes held below inflation
Polis said he hoped to keep tuition increases to 2% next year for the state’s public colleges and universities.
His budget calls for $33 million in financial assistance to universities to prevent additional tuition hikes. It also provides $9 million in additional scholarship funding, some of which would target students who have experienced homelessness.
Balanced budget relies on accounting maneuvers
The proposal would maintain the 15% general fund reserve established in the current budget year. But Polis’ administration relies on some financial maneuvering to get there while still paying for his priorities.
The budget includes $272 million in “balancing proposals,” like redirecting $22 million in unspent federal stimulus money to other programs and converting existing housing grant programs to tax credits.
The governor also plans to ask the General Assembly to reclassify $32.1 million in gambling and cigarette revenue as exempt from the state spending cap under the Taxpayer’s Bill of Rights. Doing so would allow the state to spend more money, but that means that less would be given back to taxpayers through annual TABOR refunds.