Gov. Jared Polis sent his wish list for the next state spending plan to the General Assembly's Joint Budget Committee Monday, with a request to put $1.3 billion toward the lingering effects of the pandemic.
The governor's $40 billion request is 3.9% higher than the current state budget.
In a news conference, Polls said the budget's "historical investments" have four key elements:
- Fiscal responsibility.
- Investments in education and the workforce.
- Putting money into Colorado's paychecks and support for businesses.
- Providing for healthy and safe communities.
The governor's requests — which still must be meted out by the legislature in the four-month session that begins in January — included a major one-time investment to shore up the state's unemployment trust fund, as well as the first state investments toward addressing homelessness.
The budget letter sent to the JBC asks for $1 billion more in spending from discretionary funds and $1.3 billion through the American Rescue Plan Act, which sent money to the state by the federal government. The budget letter estimates that Colorado, in total, would receive about $39 billion, with $5.9 billion of that flowing through state government. The General Assembly would appropriate $3.8 billion.
Lawmakers, in passing the state budget bill last May, increased the statutory reserve (state government's version of a rainy day fund) to a record $1.74 billion, equivalent to about 13.8% of the state operating budget.
In his Monday letter, Polis asked the General Assembly to increase the reserve to 15% to better prepare the state for economic uncertainty. That will put the reserve at around $2 billion.
Polis said, however, that even with that general fund reserve, the state still faces additional budget challenges. That includes its ability to deliver services for healthcare, behavioral and mental health, quality education and a living wage, which he said in the budget letter "is constrained by an outdated formula that does not account for the inflationary pressures our state faces."
That formula and projected growth in operating costs for state services put Colorado into a "structural deficit" in future years.
To address that deficit, Polis proposed spending $1.84 billion to prepay state obligations, most of it over the two budget years that start in 2023-24.
Among those obligations:
- $330 million to the State Education Fund
- $58 million to delay employer/employee paid leave premiums for six months
- $71 million to fund an agreement with Colorado WINS, the state employee union
- $354 million for universal preschool
- $147 million for affordable housing (a three-year request)
- $270 million for three years of Colorado Department of Transportation payments
- $380 million to prepay the state's obligation to the Public Employees Retirement Association
- $220 million in maintenance
Some of those prepaid dollars would come from ARPA, according to the budget letter.
Polis told reporters Monday he's prepared to work with lawmakers on which items to prepay but $1.8 billion is the right amount.
The business-minded Common Sense Institute issued a report this year citing some addressed by the spending ideas the governor presented.
"It is encouraging to see the governor’s proposed budget at least partially addresses three of the four large fiscal challenges we identified in our April report," Chris Brown, the institute's vice president of policy and research, said Monday. "Committing $600 million to partially pay off the loans to the federal unemployment insurance trust fund will go a long way in reducing payroll tax increases for years to come.
"The influx of federal funds made this task much easier but still an encouraging sign for employees and employers alike."
He also proposed using $150 million to reduce the state's debt to K-12 schools, based on a level required by the state constitution. The debt began in 2009, when the previous recession started. That would reduce the debt, which reached a high of $1.2 billion in 2020, to about $422 million.
That drew plaudits from Amie Baca-Oehlert, a high school counselor in Adams County and the president of the Colorado Education Association.
“There’s a lot to love for public education in the state budget released by Governor Polis today," she said in an afternoon statement. "Educators working hard every day to make every classroom a place with exceptional teaching and learning are pleased with the short-term priorities.
She added, "While these are great first steps in prioritizing public education, we foresee some dark years ahead. In just three years, we will face an education budget fiscal cliff when federal relief funds run out, [Taxpayer's Bill of Rights] refunds go out and various tax reduction measures we expect to see from corporate special interests and the ultra-wealthy pass."
The governor's newest standalone state agency, the Department of Early Childhood, would get its first full-year funding, $13 million, under the proposal, including $5.1 million from the state operating budget. Another $30 million in one-time funding is proposed to renovate state-run child-care facilities.
Higher education is tagged for a $42.6 million boost for operating funds, along with $9.8 million for student financial aid, plus $139.8 million for capital maintenance and improvements.
Polis' proposal for one-time investment in workforce, unemployment insurance and COVID-19 business relief includes:
- $600 million in unemployment insurance premium relief. The state's unemployment insurance fund is running $1 billion in the red, and that's led to concerns that businesses would have to make up that shortfall through higher unemployment insurance premiums
- $104 million in "fee relief" for individuals and businesses, including to cover paid family and medical leave premiums, allowing a 10% reduction in employee and employer premiums for the first six months of the program that goes into effect Jan. 1, 2023. The one-time funds also would help individuals and businesses assistance with starting a business
- $5 million to help workers find in-demand job opportunities, including through the Office of New Americans
- $7 million to invest in current and future workforce needs, which would provide financial support for workers seeking "in-demand" non-degree credentials at state community and area technical colleges
- $2.5 million for the Colorado Equity Office, another new agency created in the past year, which will have 19 full-time equivalent employees tasked with furthering "equity, diversity and inclusion efforts throughout the state"
For state employees, Polis proposed a 3% across-the-board salary adjustment, a minimum $15 per hour wage, an increase in annual leave accruing after 36 months on the job, increases in shift differential rates and the addition of a paid state holiday, which Polis suggested should be Juneteenth, which commemorates when the last American slaves learned they had been freed on June 19, 1865.
Polis' other signature issue, health care, would see significant investments. That includes $10 million to hire 100 more staff to cover 44 beds at the Colorado Mental Health Institute at Pueblo, which has struggled with lack of beds and staff. Rural hospitals and clinics could benefit from another $30 million from federal recovery funds, with the hopes that they can expand services, update physical or technological infrastructure or improve affordability of health care.
The biggest investment in health care is $550 million in one-time federal funds to address behavioral health needs in four areas: matching funds for local governments and local partners for innovative community-based programs, support for providers, investments in services for children and youth, and "investments in behavioral health workers," although what that would look like is not defined in the budget letter.
Polis said the one-time money from the federal government gives the state a first-ever opportunity to address homelessness.
"The state has turned a blind eye to homelessness," Polis said. "No longer."
Under his proposal, the state would partner with communities struggling with homelessness issues — such as Denver, Colorado Springs and Aurora — with $200 million from ARPA to leverage local funding to reduce homelessness.
That includes $100 million for competitive grant programs, focused on emergency shelters, transitional housing, recovery care and related residential programs; $50 million to Denver and $45 million to the state-owned Ridge View site for "supportive residential recovery campuses," similar to the one at Fort Lyon in Bent County; and $5 million for intervention strategies.
The budget letter said these investments, out of the Economic Recovery and Relief Cash Fund set up by the General Assembly this year (funded by federal recovery dollars), would build a system to provide housing and services to get people off the street and into a home, as well as substance abuse or behavioral and mental health treatment if needed.
Polis also proposes $113 million in public safety investments, including grants for programs that would reduce corrections costs, hospitalizations and recidivism; and funding for forensic and investigative resources. Polis also said the money would go toward community policing programs.
Secretary of State Jena Griswold, in a news release Monday afternoon, noted waiving state fees for businesses would cost about $17 million. The waiver package would reduce fees in five areas to just $1 each, to cover credit card transaction fees. The fees in the waiver package target new business registrations, annual renewals, registration of new business trade names, updates to business information and renewals of trade names.
The Joint Budget Committee, which will craft the budget, begins its hearings on Nov. 10.