The Colorado legislature will finalize the state’s $46.8 billion budget over the next few weeks to close a roughly $1.5 billion shortfall.
The Colorado Sun has been following the budget-writing process since it began in late October, closely tracking the dozens of decisions made by the Joint Budget Committee — many of them funding cuts.
The JBC is a six-member, bipartisan panel that drafts the budget before passing it on to the full General Assembly for final approval. The committee finished its draft last week, later than expected because of how difficult it was to balance the state’s finances and address a gap between how much is available to spend and how much it costs to continue the state’s current level of programs and services.
The budget is a behemoth and it’s often misunderstood by the public. But in a year where lawmakers are moving so much money around, it’s more important than ever to know how it’s drafted, why the shortfall exists and where the cuts are being made.
That’s why I went on to Reddit to field and answer questions on everything from Medicaid reductions to state spending on highways. I even got Gov. Jared Polis to weigh in on the social media site.
Here are the top questions I answered about the budget, which takes effect July 1. (If you want to dive in even deeper, check out our full story on the budget draft here.)
Note: The following has been lightly edited for clarity and length.
Question: Given the huge deficit projections in the budget, where do we expect the biggest cost cuts to hit? Medicaid spending just by itself seems completely unsustainable.
Jesse Paul: Medicaid is definitely going to see a lot of cuts. That is driving the state’s budget deficit, with Medicaid costs far surpassing the annual growth in the state budget allowed by the Taxpayer’s Bill of Rights, the 1992 constitutional amendment approved by voters.
The legislature has also expanded Medicaid offerings in recent years, compounding the problem.
One thing that’s not really a factor in this year’s budget process: Medicaid changes made by Republicans in Congress last year through the One Big Beautiful Bill Act. Those changes will pose problems in future years, but not right now.
But it’s not just Medicaid that’s seeing cuts. The budget slashing is happening across the board: maintenance on state buildings, sexual education programs for kids, job retention programs. You name it, they’re cutting it.
To be clear: The budget will increase next fiscal year over this fiscal year. It’s just that the state doesn’t have enough money to continue funding everything given year-over-year cost increases.
Here are some stories we have written on the Medicaid reductions in particular:
- How Medicaid became such a drag on Colorado’s state budget
- Providing health care to immigrants who are children or pregnant is costing Colorado 611% more than expected
- How Medicaid cuts to balance Colorado’s budget will affect family caregivers that rely on state assistance
Question: How did Colorado double Medicaid expenditures in a short period? What are the root causes (factors / policy changes) that led to this unsupported growth? Is the legislature addressing these root causes? What other steps are being taken?
Jesse Paul: Since the 2018-19 fiscal year, the state’s cost of providing Medicaid has increased about 86%, or $2.6 billion. The budget for next fiscal year, 2026-27, hasn’t been finalized yet, so we don’t have that comparison, but spending will almost definitely increase.
There’s a federal share of funding to Medicaid, too, but for the purposes of the state budget shortfall that’s kind of irrelevant.
The state’s Medicaid costs have grown for a number of reasons, some outside the state’s control and some the result of decisions by lawmakers.
First, the cost of medical care is increasing generally. The accounting firm PwC estimates that inflation for private health insurance companies will be roughly 8% next year, in line with higher inflation trends following the COVID pandemic.
Second, the amount of care people use — what health care finance analysts call “utilization” — is increasing as well. Kim Bimestefer, who until April 10 leads the Department of Health Care Policy and Financing (which runs the state’s Medicaid program), said the trend took off after the pandemic as people went back to the doctor for care they had postponed during the shutdown.
Third, while the number of people covered by Medicaid has plummeted since the end of the pandemic, some of those who remain covered have a big impact on the budget. This is especially true of people who are disabled and people ages 65 and older who are in long-term care. (Medicare does not pay for nursing home care, but Medicaid does for those unable to afford it.)
You can read our complete story answering this question here.
Thanks to Colorado Sun health reporter John Ingold for helping me with this answer.
Question: How much are we as a state spending on highways and other car infrastructure versus on Bustang, trains and bike/pedestrian infrastructure?
Jesse Paul: Oh, gosh. That’s a tough question — and one best asked to the Colorado Department of Transportation. I don’t have those numbers in front of me. Jared Polis (Editor’s note: we tagged him on Reddit) do you know off the top of your head?
Gov. Jared Polis: About 17% of revenue to CDOT and the state’s transportation-related enterprises is directed to transit, rail and multimodal purposes, or about $375 million out of $2.3 billion. That funding is determined by laws the General Assembly has passed and that I’ve signed. While I am proud of the work we’ve done to expand state transit funding — it was paltry when we took office — it’s important to understand that the vast majority of state transportation dollars still goes toward roads and bridges. By the way, we’ve also increased road and bridge funding to the state by more than $200 million annually during my administration.
Question: Is there any political will to truly solve this issue? It’s easy to sit back and blame TABOR as a way of absolving oneself of digging deeper to fix this. How many more fees can they implement? Property taxes have been going up at the local level.
Maybe folks are gonna have to vote to raise their income taxes?
Jesse Paul: Democrats have been eyeing changes to TABOR for a long time. For the most part, voters have rejected their proposals.
There are a pair of measures that could be on the ballot in November that would 1) raise the TABOR cap, letting the state keep and spend more of the money it already collects (story here) and/or 2) enact a graduated income tax system and let the state keep the new revenue generated by the change regardless of the TABOR cap (story here).
The first ballot measure is coming from the legislature and has a decent chance of being on the ballot. The second one is being run by liberal groups outside of the Capitol and whether it makes the ballot is less clear.
The groups may not have enough money to collect the 125,000-ish signatures needed to get the question before voters. Even if they do get on the ballot, it’s not clear they then have enough money to run a campaign against a well-funded opposition in the form of conservative political advocacy groups.
And even if both measures make the ballot and pass, it’s not clear they would raise enough money to totally erase the shortfall. Additionally, that revenue wouldn’t solve the problems facing the legislature right now.
Fees are another ballgame, more or less unrelated to the state’s current budget problems, because Colorado law dictates that fee revenue can’t be spent on just anything. It must be spent on something related to how it was collected — like state park fees must be spent on parks and wildlife-related programs.
Property taxes are determined by a combination of state and local decisions. Your local tax rate can’t go up without voter approval. Your tax bill, however, increases when the value of your home goes up.
Property taxes are also collected on the local level. While they can affect how much the state spends on education, they’re more or less unrelated to the budget conversation happening at the Capitol now.
As for solving the state’s structural deficit, yes, there is some will to address it, either by raising revenue or reducing spending — or both. But right now the legislature is kind of limping year to year to meet the constitutional requirement that it passes a balanced budget.
I think we will see some big discussions in the interim — after the legislature adjourns for the year in May and before it returns next year in January — about Medicaid spending and how to rein it in.
Question: Since the shortfall has been caused by Republicans on a federal level cutting federal taxes for the wealthy and their corporations, which ends up reflected in the state tax code since they mirror each other, has the state considered uncoupling the two? As in, cuts at the federal level would no longer impact state tax code because the state would no longer automatically reflect federal tax code.
Jesse Paul: Complicated answer.
When the One Big Beautiful Bill Act was passed by Republicans in Congress last year and signed into law by President Donald Trump, it immediately reduced state tax revenue by about $1.2 billion because of how Colorado’s tax code is linked to the federal tax code. (More on that here.)
Now, keep in mind before H.R. 1 passed on the federal level, lawmakers already had to close a more than $1 billion shortfall in the cost of continuing existing government programs and services and the amount of money they had to spend. That’s known as the structural deficit.
The budget shortfall this year is mostly because of that structural deficit, not H.R. 1 — aka the One Big Beautiful Bill Act. (See more here.) And the structural deficit mostly has to do with Medicaid costing more and more.
I have asked legislative leaders about why the state hasn’t just decoupled from the federal tax code, and they’ve mostly sidestepped the question.
But the reality is that even if H.R. 1 had not passed, the state would still be facing a budget shortfall this year of about $1 billion, probably a bit more.
The cost of government programs and services is simply outpacing tax revenues and running into the annual TABOR cap on government growth and spending.
Question: Why are we issuing TABOR refunds when there are budget shortfalls?
Jesse Paul: For the current fiscal year, which ends June 30, there is not enough TABOR surplus for refunds. We’re projected to be hundreds of millions of dollars below the TABOR cap, which is determined by annual changes in population and inflation. So for the 2026 tax year, the taxes you’ll file by April 15, 2027, (assuming you don’t get an extension) there will not be refunds.
Next fiscal year, the surplus is forecast to return. That may result in refunds for tax year 2027 — those are the taxes you’re paying by April 15, 2028.
The state doesn’t really have an option when it comes to refunds. If there is a surplus, Colorado is required to refund it under the Taxpayer’s Bill of Rights, which is in the state constitution. It was put in the constitution by voters in 1992.
The legislature cannot override a constitutional provision. It would take a vote of the people to eliminate TABOR or to just eliminate the TABOR cap, ending refunds.
There is a proposal out there that would kind of eliminate the cap, at least temporarily. Check out our reporting on that here.
As an aside: Colorado taxpayers will get a small refund for the 2025 taxes they are paying now because there was a surplus in the 2024-25 tax year, which ended June 30, 2025. But as I’ve explained, this isn’t money that the state can just keep when it faces a deficit.
Colorado Sun Director of Audience and Engagement Stephanie Rivera contributed to this report.