As I’m writing this, the House is hearing the “long bill,” which lays out the entire Colorado budget for the coming year. As many of you know, Colorado is facing a more than $1.5 billion budget deficit for the next fiscal year, FY26-27. We’re working hard to preserve essential services and lower costs for Coloradans, but serious cuts are coming to balance the budget this year.
The federal tax changes Congress passed this summer in H.R. 1 cut taxes for wealthy households and companies, significantly shrinking Colorado’s tax revenue. Several state tax credits for working families will be unavailable this year because of built-in mechanisms that turn them off when state revenue dips too low. Practically, this will mean a tax increase on low- and middle-income families because they won’t be able to claim those credits. H.R. 1 cuts also wiped out this year’s surplus, which is usually how the state funds the veterans and senior homestead property tax exemption. To keep the exemption active, we will need to backfill $200 million in normal state funds that would usually be used for roads, schools and health care.
To deal with the deficit, we’ll be reducing the General Fund reserve from 15% to 13% for this year and next, transferring and spending down cash funds, and making significant cuts to state programs. Of the $17.4 billion in the General Fund, over 75% goes to just three areas – education, Medicaid and prisons, which are at full capacity. All the other 20 state departments combined cost about $4 billion in total. This means that, while we’re making cuts across departments, major cuts must happen in education, Medicaid and corrections to balance the budget.
For Medicaid, the state budget will reduce payments to medical providers by 2%, though neonatal intensive care and maternal health services are exempt. We will be making reductions to some Non-Emergency Medical Transportation reimbursements and limiting dental benefits for adults to $3,000 per year. The state will also be capping the number of hours of home- and community-based services and coverage under Cover All Coloradans to control costs. The budget will ramp up audits and interventions to crack down on improper or fraudulent billing to make sure every dollar goes toward Coloradans’ care. However, even with these reductions, spending on Medicaid will still increase more than twice as much as the increase in spending for any other department because of rising health care costs and the state’s aging population.
On education, we’ve managed to protect the base funding for schools, holding it the same as last year, so any increases in funding will have to come from the separate State Education Fund. In the coming weeks, we’ll decide how much to draw down those cash funds in the School Finance Act, which passes separately from the budget.
During the special session in August, I sponsored changes to Proposition MM to direct extra funds in the Health School Meals for All program to the Supplemental Nutrition Assistance Program. Prop. MM passed with wide support, allowing us to direct $38 million to SNAP administration this year and $50 million next year. Most of these funds will go toward making up for federal cuts to SNAP.
We’ve worked hard to minimize the effect of cuts on essential services, but I will not sugarcoat the impacts. Combined with the federal cuts to Medicaid and SNAP rolling out over the next two years, these measures are going to devastate our rural hospitals and human services. They also put us in a worse position for the coming years, with little cushion if a recession hits. In the coming months and years, Coloradans will have opportunities to decide what kind of state we want to be – one that must cut services for vulnerable populations or one that can fully fund the programs and services that allow every Coloradan to live a good life.
Katie Stewart represents House District 59 in the Colorado Statehouse, which encompasses Archuleta, La Plata, and San Juan counties and most of Montezuma County. Reach her at katie.stewart.house@coleg.gov.
