DENVER — When Colorado lawmakers return from their holiday break and start a new legislative session, they'll have to come up with a way to fix a massive state budget shortfall.
The latest projection shows the state will face a nearly $700 million shortfall. That’s a slight improvement over an earlier forecast which estimated the shortfall would be nearly $1 billion.
Colorado Gov. Jared Polis attributed the shortfall to a combination of declining inflation and increasing Medicaid expenses.
Polis said while lower inflation is good, it impacts the growth of the state budget. He said lower inflation means smaller increases in state spending.
The governor said costs for Medicaid have been higher than expected.
“That was really due to the sort of unprecedented Medicaid expansion roll off,” Polis said. “The number of people is about what was projected, but the caseload is higher.”
Medicaid accounts for 36% of the state’s total operating budget and 32 percent of General Fund spending, according to the governor.
Unlike the federal government, Colorado must balance its budget.
Despite the challenges, Polis said his administration was committed to fiscal responsibility.
“We’re continuing, of course, to make good on our promises in this tight budget environment,” Polis said.
In November, the governor unveiled his budget proposal to address the shortfall. It calls for freezing Medicaid reimbursement rates, privatizing a state-affiliated workers’ compensation insurer of last resort, modifying how K-12 student counts are calculated, and slowing the implementation of a new school funding formula. The proposal also calls for a 1% cut to state personnel services.
“The focus of this budget is really maintaining the progress we’ve had and making sure that we can tighten our belts,” Polis said.
However, the governor’s plan has faced criticism.
State Sen. Barbara Kirkmeyer, one of two Republicans on the six-member Joint Budget Committee, dismissed the governor’s proposal as “not serious,” citing ongoing structural issues with state spending.
“This is not just a one-year problem,” said Kirkmeyer, R-Brighton. “We’ve been spending year over year, which has been masked by the number of federal funds that have just flowed into our budget.”
Some Democrats have also expressed concerns about the governor’s budget proposal, particularly over the potential impact on vulnerable populations.
“There are a couple of components of this budget request that give me real pause,” State Rep. Emily Sirota, D-Denver, said to the governor at a Joint Budget Committee hearing in November.
Sirota said she was concerned with the proposal to roll back Medicaid rates and privatize the state’s workers’ compensation insurer of last resort, Pinnacol Assurance.
“I appreciate your efforts in trying to come up with solutions across the board. I am concerned about some of these aspects related to vulnerable populations,” said Sirota.
State Sen. Jeff Bridges, the chair of the Joint Budget Committee, said he had “serious concerns” about the governor’s suggestion to privatize the state’s workers’ comp insurer and was trying to keep an open mind.
Ultimately, it will be up to lawmakers to approve the state budget.
But given the massive shortfall, they first decision they will have to make is deciding what to cut.
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