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How Colorado can – and cannot – spend $5.7 billion in federal coronavirus stimulus

The Colorado State Capitol is pictured during the first day of Colorado's 73rd legislative session in Denver on Wednesday, Jan. 13, 2021. (Andy Colwell, Special to The Colorado Sun)
The state, counties and cities could receive payments within days

Mental health? Yes. Transportation? No. Broadband infrastructure? Sure. Tax cuts? Definitely not.

The Biden administration on Monday released its rules for how states, counties and cities can spend billions of dollars in coronavirus-relief money from the $1.9 trillion American Rescue Plan. For Colorado — recipient of $5.7 billion, $3.8 billion of which will go toward state government coffers — there’s good news and bad news.

The U.S. Treasury Department said, broadly, that the dollars can be spent on five different areas:

The Fox Theater in Montrose is closed as life in Colorado shuts down in response to the new coronavirus. (William Woody, Special to The Colorado Sun)
  • To backfill revenue loss.
  • To support public health expenditures, by funding COVID-19 mitigation efforts and medical costs. The money can also be used to cover mental health and addiction treatment.
  • To address negative economic impacts caused by the pandemic, including by rehiring public-sector workers, providing aid to households and offering small business assistance.
  • To support an equitable recovery by addressing not only the immediate harms of the pandemic, but its exacerbation of long-standing public health, economic and educational disparities.
  • To invest in water, sewer and broadband infrastructure.

Transportation funding, notably, is not on the list of acceptable spending, which is bad news for Republicans at the Colorado Capitol who wanted as much as $2 billion of the state money dedicated to that cause. Democrats also appeared to be planning to direct some of the money to transportation, though not as large an amount.

The silver lining is that lawmakers and local governments can use some of the funds for transportation if they route it through the backfill-revenue-loss category. But state Sen. Dominick Moreno, D-Commerce City, who leads the Joint Budget Committee, said Colorado’s state tax revenue dropped only about $220 million because of the pandemic. Gov. Jared Polis’ office was working this week to determine what that exact figure is.

Senate Majority Leader Steve Fenberg, D-Boulder, said Tuesday that one option is for the state to calculate how much gas-tax revenue was lost because people weren’t driving as much and then backfill those funds with stimulus dollars.

Senior Biden administration officials say states, counties and cities could see money flowing to them in a matter of days. All of it will come at once as long as Colorado’s unemployment rate remains more than 2 percentage points higher than it was in February 2020.

Colorado’s unemployment rate was 6.4% in March. The rate was 2.5% in February 2020.

“I think you can interpret it in different ways and every state will do it differently,” Fenberg said. “I think we are just at the front of interpreting the guidance and figuring out the best way to make it work for Colorado.”

It’s not clear, however, if there’s enough time in Colorado’s 2021 lawmaking term – which only has about 30 days left – to distribute the funds. Thus, a special session still is on the table.

“Obviously, we are reaching the end of session,” Fenberg said. “A lot of (the spending decisions are) going to have to be discussions throughout the interim on how we want to invest this money over the next several years. I’m not sure when the money will physically land in our accounts, but we want to be thoughtful and make sure we are addressing actual gaps and needs.”

House Speaker Alec Garnett, D-Denver, speaks at a news conference to roll out a major transportation fee and spending bill at the Colorado Capitol. (Jesse Paul, The Colorado Sun)

House Speaker Alec Garnett, D-Denver, is less bullish on the possibility of a special session to spend the money, but he’s already thinking about where the dollars should go.

“I kind of visualize how we move forward with these dollars in three ways,” he said. That includes distributions to shore up the state budget in future years; to fill gaps left after previous federal aid came to Colorado and in the $800 million state stimulus package currently being debated at the Capitol; and to find “transformational solutions” to big issues facing the state.

The money must be spent before 2025. Polis, Treasurer Dave Young and state lawmakers in recent weeks have taken input from across the state about where the money should be spent.

The senior Biden administration officials said states such as Colorado may also use the stimulus money to buy down their unemployment trust-fund debt. Colorado’s fund is in a $1 billion hole, which businesses will be forced to make up through additional charges from the state.

“There have been a lot of talks about that,” Garnett said.

The money expressly cannot be used as a way to cut taxes and keep revenue flat. It also can’t be used to backfill or bolster pension funds.

The Colorado Sun is a reader-supported, nonpartisan news organization dedicated to covering Colorado issues. To learn more, go to coloradosun.com.