A bill that would allow Pinnacol Assurance to formally sever its remaining ties with the state appears unlikely to emerge anytime soon, as House leaders juggle a massive budget shortfall, unresolved negotiations with key stakeholders, and growing doubts about whether the insurer’s proposed $400 million payment could be counted on to help balance next year’s budget.

The House is expected to begin work on the 2026–27 state budget in the next week or two. But its approval is far from certain. The Joint Budget Committee, the six‑member bipartisan panel that drafts the budget, has yet to produce a balanced plan. As of Wednesday, the committee was grappling with a nearly $1.5 billion shortfall in the general fund.

A Pinnacol source told Colorado Politics the group hasn’t seen a draft of the proposed measure nor spoken to House Speaker Julie McCluskie, D-Dillon, the bill’s likely sponsor.

McCluskie pushed back on the claim of lack of outreach on Thursday, telling reporters she’s been working on the issue since last fall and has been meeting with Pinnacol.

But she also said that she hasn’t met with the parties involved for the last six to eight weeks. Instead, she said, she had been doing research on the issue. She she hasn’t shared a draft, she said. 

“I am working on a bill, but I am not yet ready to bring anything forward,” she said, pledging she wouldn’t introduce it “cold.”

McCluskie noted Gov. Jared Polis’ interest in severing Pinnacol’s official ties to the state.

The governor has included the Pinnacol issue as part of his budget-balancing recommendations for the 2026-27 budget. Under his proposal, Pinnacol would pay the state about $400 million, with half of that to be used to cover the cost of the senior and disabled veterans’ homestead exemption in the budget. 

That program would have to be paid for with general fund dollars, as there will be no Taxpayer’s Bill of Rights surplus in 2026, which normally pays for it. 

McCluskie said, given the governor’s proposal, she feels that it is the legislature’s responsibility to explore it and that she wants to take the time to get it right.

With the budget nearing the time it must be reviewed by the legislature, the question is whether that $400 million — assuming the bill passes and is signed into law — would be available in time to provide that funding for the 2026-27 budget. 

And that’s without the threat of litigation if any of the interested parties — which, in addition to Pinnacol, includes organized labor and workers’ compensation attorneys — aren’t happy with the final result. 

McCluskie indicated she’s aware of that risk.

“Part of the reason I don’t want to just throw something into the system is I do want to make sure that whatever we propose has a viable path. How it impacts our budget or complements the budget will be important,” she said.

The Joint Budget Committee (JBC) on Wednesday began working through a list of 150 potential general fund cuts to begin covering the nearly $1.5 billion general fund hole. Among those proposed cuts is the senior homestead exemption, which would require legislation. 

That deficit is the result of several factors, notably an explosion in the cost of the state Medicaid program, which faces claims of fraud and abuse in some areas. Democrats have also blamed the federal budget for changes to the tax code, which they said have resulted in Colorado’s revenue shrinking. Republicans have countered that actions by the Democratic majority, including overspending, are the culprit for the state’s fiscal woes.

The JBC must budget in accordance with current law and, as a result, cannot include a placeholder for the Pinnacol money.

But the likelihood of the JBC sponsoring a Pinnacol bill is considered remote, given that such a bill would require unanimous consent by the committee and several members have expressed serious misgivings about the proposal, as well as relying on one-time Pinnacol money to help balance the budget. 

McCluskie noted that there have been several past instances when lawmakers canceled the exemption, most notably during the Great Recession of 2008. They also considered it during the COVID-19 pandemic, she pointed out. 

“It’s a weighty decision,” she said, adding that she knows seniors on fixed income rely on that property tax exemption and that she’s been talking with the JBC about that potential decision.

“Obviously, our partners in labor matter and we’re listening to them and considering their concerns,” she said. But, she added, it’s also the legislature’s responsibility to consider every possible option for balancing the budget.

While the potential for Pinnacol money to find its way into the 2026-27 budget seems remote, McCluskie also advocated for the JBC to maintain the state’s general fund reserve at 13%, down from its current 15%, since about $250 million of the pot was tapped to cover the general fund budget shortfall in the 2025-26 budget — action taken by Polis following a special session in August.

The House speaker noted that during the pandemic, the reserve dropped to 7.25%, and funds were also tapped to cover an expected shortfall. She indicated she worries about the potential for even a low-to-moderate recession, which the reserve is intended to cover. 

State economists updated their expectations for a moderate recession to about 40% last week, down from 50% in December. 

The idea of allowing Pinnacol to fully separate from the state has floated around the Capitol for decades, dating back to 2002, when the state directed the group to operate as an independent mutual insurance company under the ownership of its members. However, Pinnacol, the state’s workers’ compensation insurance of last resort, is still considered a quasi-state entity.

And that keeps the insurer from offering workers’ compensation insurance to Colorado companies with workers in other states. While the insurer is still the largest workers’ compensation insurance provider in the state, with about a 50% market share, that share has dropped substantially in recent years, and the change would be key to the insurer’s long-term success.

“We’re trying to ground folks” on the dollars, said Wes Parham, vice president for public affairs at Pinnacol.

The state shed its liability for Pinnacol in 2002, when the company became a mutual insurance company. Since then, the law has been clear — the state assumes no risk or liability for Pinnacol’s financial condition, and the company is solely funded by employers’ premiums.

He noted that the $80.8 million transferred to Pinnacol in 2002 is valued at around $147.7 million today.

Of greater concern, Parham said, was the unexpected repeal of the regional home office tax during last August’s special session, given that Pinnacol is the biggest insurer headquartered in Colorado. Once the company separates from the state, that could cost Pinnacol about 1% of premiums, or about $5 million annually, he estimated

That change was not expected when the conversations about separating Pinnacol from the state started last year, he said.

Waiting in the wings is a ballot measure proposed by Colorado Succeeds, a coalition of business CEOs, that would allow Pinnacol to separate without payments to the state that could be used for balancing the budget. Under that proposal, Pinnacol would pay $150 million into a state-managed skilled workers and trades fund for workforce training.

The ballot measure was approved for its title on March 18. The title could be challenged for a rehearing in one of the title board’s final two hearings of the 2026 election season on April 1 or April 15.