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A view of the capitol building through a window.
The Colorado State Capitol as seen from the Ralph L. Carr Colorado Judicial Center in July 2021 in Denver. (Olivia Sun, The Colorado Sun)
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Gov. Jared Polis calls his proposed spending plan for next year a return to a “normal Colorado budget.”

On Thursday, lawmakers on the state’s powerful Joint Budget Committee got a taste of what that actually means.

Creative solutions to balance the state’s $16 billion general fund. Little margin for error. And rising concern about what programs the state can afford in the future, as federal pandemic relief dollars dry up and lawmakers try to keep their promise to fully fund Colorado’s school finance obligations.

Legislative budget staff on Thursday presented the budget-writing committee with their independent assessment of Polis’ proposal, which he released earlier this month.

One troubling takeaway: If Legislative Council Staff forecasts are correct, the state would face a $44 million budget shortfall this year, and fall an additional $330 million short next year.

“The take-home message here is that under LCS forecasts, the budget does not appear to be balanced as submitted,” said Craig Harper, the new JBC staff director.

Notably, Harper added, this year’s budget was based on separate economic forecasts from the governor’s budget office, which do show a balanced spending plan in both years. And, he cautioned lawmakers not to put “too much stock” in today’s estimates, anyway. There are months to go before lawmakers have to adopt the 2024-25 fiscal year budget in the spring.

“We will have a lot better information in hand before you’re making any of these decisions,” Harper said.

In the meantime, however, lawmakers face immediate decisions that could have an outsize effect on state spending, and limit their ability to adjust down the road.

At Polis’ request, the General Assembly convenes Friday for a special session in which lawmakers will consider cutting property taxes and increasing state spending on schools, fire districts and other local governments.

$200 million unaccounted for

During the special session, lawmakers plan to take as much as $200 million from the state’s general fund to offset the impact of property tax cuts on schools, fire districts and some local governments.

If that number sounds familiar, there’s a reason: if Proposition HH had passed, it would have set aside $200 million this year for the same purpose.

Voters, of course, rejected the ballot measure. And as a result, that $200 million isn’t reflected in this year’s budget, JBC documents show. Instead, Polis put a placeholder to spend that money next year.

Move that money up to this year, as lawmakers intend, and the current 2023-24 budget could face a shortfall even under the governor’s more optimistic forecast.

Democrats have also proposed spending $30 million from the general fund on rental assistance before July 1. That would add even more spending to the current budget year that would have to be accounted for through mid-year adjustments.

Conor Cahill, the governor’s spokesperson, said in a statement the administration would work with lawmakers to “accomplish the goal of relief in fiscal year 2023-24 and ensure we have a balanced budget.”

Democratic lawmakers: state reserves off limits

The simplest way to balance the budget is to tap the state’s reserve fund, which today is set at 15% of general fund spending, or $2.2 billion.

Polis has said he’s open to doing so to cover the cost of property tax cuts. Republicans support dipping into the reserves, too.

But Democratic budget writers Thursday reiterated their opposition.

“Not only is the reserve something we should not be cutting, it’s something we maybe should look into increasing,” said Sen. Jeff Bridges, D-Greenwood Village. A study from Moody’s Analytics found that Colorado would need a 19% reserve to weather a recession.

Even maintaining a 15% reserve next year could cost more than Polis’ budget suggests.

One way the governor balances his budget next year is by exempting some general fund spending from the reserve requirement, Harper said, including $42 million to address a funding disparity that gives state-authorized charter schools less money than other K-12 public schools.

“If the goal is to fully fund (charter school tax) equalization, not having a reserve against it seems risky,” Harper said.

Brian Eason writes about the Colorado state budget, tax policy, PERA and housing. He's passionate about explaining how our government works, and why it often fails to serve the public interest. Topic expertise: Public finance, tax policy,...