Gov. Jared Polis looks to plug $640 million hole with “belt-tightening” state budget request

Colorado Gov. Jared Polis is proposing a year of “belt-tightening” to make up for softening inflation and higher Medicaid costs.

He presented his budget proposal for the upcoming fiscal year on Friday afternoon. It doesn’t account for Tuesday’s elections, which include some potentially costly measures on the state ballot. The next legislature, which is also being elected Tuesday, will ultimately pass the budget for the upcoming fiscal year, which begins July 1.

Polis, a Democrat in his final term, sought to cover a projected shortfall of about $640 million shortfall that was largely driven by high caseload costs for Medicaid patients. The state also projects less money than expected because inflation has softened.

The state budget cap under the Taxpayer’s Bill of Rights is tied to inflation, so government can keep less money during low-inflation years, since the cap increases more slowly.

“For the state budget, (softening inflation) makes it challenging, but for Coloradans and their checkbooks, it makes it better,” Polis said during a news conference.

Polis is requesting spending of about $17.8 billion in the general fund, which is the source for most state program funding. The overall state budget would amount to $46.1 billion. He will make a supplemental request in January to account for new economic forecasts and to reflect the election results.

Polis said he hoped to largely account for the shortfall by slow-walking the implementation of the state’s new school-funding formula passed by lawmakers in the spring and staggering its implementation in line with property assessment cycles. Property taxes drive school funding, and new assessment cycles typically lead to higher tax collections due to higher valuations.

The new formula is set to gradually increase state funding for schools, while generally providing more money for rural school districts and those with higher rates of students in challenging circumstances. But despite the delays, his budget request would keep overall school funding to the level required in the state constitution — meaning no return to the budget stabilization factor, an adjustment that’s been used to shortchange education to pay for other priorities.

House Minority Leader Rose Pugliese, a Colorado Springs Republican, took umbrage Friday with Polis’ proposed delays in implementation of the school-funding factor, which would add a year to the six-year timeline.

“While I appreciate the governor’s commitment to avoiding the budget stabilization factor, there is still much more work to be done to address Colorado’s education needs fully,” Pugliese said in a statement. “Unfortunately, the school finance reforms we have pushed for will not take effect soon enough. Colorado families can’t wait seven years for an updated formula to roll out — our students deserve real support now.”

Polis also plans to tap high interest rates collected on cash funds — the pools of money generated from specific services, to be used on those services — to ease the general fund burden by about $118 million. And he asks for “targeted cuts” to some Medicaid provider rates that were “excess increases” passed by the legislature last year.

Mark Ferrandino, the governor’s budget director, said the administration is asking to roll back some pay increases for adult dental care providers, for example.

Polis also wants to spin off Pinnacol Assurance, the state’s workers compensation insurer, into a private-sector business. The agency now is a quasi-independent part of state government.