‘A lot of uncertainties’ remain as Colorado lawmakers craft state budget

Gov. Polis’ economic stimulus package assumes bigger general fund than forecasts predict

The Colorado Capitol. (Chase Woodruff/Colorado Newsline)

New members of Colorado’s powerful Joint Budget Committee met for the first time Nov. 11, marking the start to what’s sure to be an especially arduous and complex process: designing the state budget for the 2021-2022 fiscal year.

Sen. Dominick Moreno, D-Commerce City, will helm the JBC following the Nov. 6 election of the former chair — Rep. Daneya Esgar, D-Pueblo — to House majority leader.

Rep. Julie McCluskie, D-Dillon, will serve as vice chair, replacing Moreno in that position.

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“I’m obviously honored by the trust of my colleagues to lead the JBC, but it’s certainly not going to be the easiest of times to be the chair of the JBC,” Moreno said, citing the unprecedented decline in state revenues caused by the pandemic.

Dominick Moreno
State Sen. Dominick Moreno, D-Commerce City, succeeds Rep. Daneya Esgar, D-Pueblo, as chair of the Joint Budget Committee. (Colorado Assembly photo)

That decline forced lawmakers last session to close a $3 billion gap in the state budget — slashing funds across state departments and programs.

“We have been thrown a lifeline, though,” Moreno added. “We closed out (fiscal year) 19-20 in a much better shape” than anyone thought possible, he said.

Rounding out the JBC are new member Rep. Leslie Herod, D-Denver, and returning member Sen. Chris Hansen, D-Denver. Sen. Rachel Zenzinger, D-Arvada, won reelection to the Colorado Legislature but will not be reprising her role on the JBC.

On the Republican side, Sen. Bob Rankin of Aspen and Rep. Kim Ransom of Lone Tree returned as committee members.

The first topic of discussion: Gov. Jared Polis’ budget request for mid-year adjustments and for the 2021-2022 fiscal year. Next year’s request totals $35.4 billion, an increase of $3 billion, or 9%, over the current year’s budget.

Polis proposed mid-year adjustments to the current year’s budget, encompassing a $1.3 billion “one time-stimulus and investment package” paid for through general fund expenditures and transfers. That package includes $168 million for $375 one-time payments to certain unemployed workers, which the governor already distributed through an Oct. 28 executive order. (Eligible Coloradans can expect to receive the money beginning in early December.)

To pay for the stimulus checks, Polis banked on the lower-than-expected Medicaid enrollment for the current fiscal year. The rationale was that given lower enrollment, the Department of Health Care Policy and Financing would need $149 million less funding than it was originally budgeted — and Polis’ executive order redirected that money to the disaster emergency fund to help cover the $375 payments.

Moreno told Newsline that the executive order allocating the stimulus payments was “completely within (Polis’) statutory authority” to make, and he suggested the lower-than-expected Medicaid enrollment could be due to the fact that many of those newly unemployed are younger adults working in retail and food service, who might not have felt it necessary to get medical insurance right away if they lost the coverage provided by their employer.

Still, Moreno worried that lower enrollment than expected so far might be part of a “lag effect,” and if the economic situation doesn’t improve, more people could end up signing up for Medicaid and increasing HCPF’s caseload later.

During committee staff’s briefing on the budget request, Ransom questioned whether lawmakers could expect that a surplus in Medicaid funding would actually be available in the budget.

“What happens if (Medicaid funding isn’t available) and then we’ve already sent out the money in stimulus payments, and then we’re trying to find money to fix the fires, plus more people are signing up for Medicaid?” Ransom asked. “I mean, what are the ramifications if it doesn’t happen the way the current forecasts are saying?”

“You’re facing a lot of uncertainties,” Carolyn Kampman, JBC staff director, replied. “I would underscore that whether you’re looking at revenue forecasts or needs for addressing COVID, needs for addressing wildfires, there’s a lot of uncertainty.”

Kim Ransom
State Rep. Kim Ransom, R-Lone Tree, serves on the Joint Budget Committee. (Colorado General Assembly)

Kampman added that a JBC briefing scheduled for Nov. 12 could shed more light on HCPF caseload and funding, and pointed out that the latest economic forecasts predict a bigger general fund reserve than lawmakers and staff had anticipated when they approved the current budget in May.

“That reserve is available to help act as a contingency both for this year and next to account for some of those unanticipated expenditures,” Kampman said.

However, the latest two economic projections — a September forecast created by Legislative Council Staff and a more optimistic forecast from the governor’s Office of State Planning and Budget — both predict general fund revenues that would “fall short of covering” the entire $1.3 billion mid-year stimulus package that Polis requested, according to a summary document prepared by staff for the Joint Budget Committee on Nov. 11.

“Thus, under both forecasts, the Governor’s proposed package of ‘stimulus’ appropriations and transfers draws from the balance available in the General Fund reserve,” staff wrote. “The key question facing the General Assembly is whether these investments would be successful in stimulating the economy and strengthening future revenue collections.”

Besides using anticipated Medicaid savings for the one-time $375 payments, Polis’ proposed $1.3 billion stimulus package would draw general fund dollars for broadband investments, emergency housing and cash assistance, grants for child care assistance, and wildfire mitigation and recovery.

Ballot measures create new benefits, challenges

Meanwhile, voters’ approval of Proposition EE could make the process of designating state funding for next year slightly easier for legislators on the Joint Budget Committee.

Proposition EE increased taxes on cigarettes and tobacco products and created a new tax on nicotine products. It’s expected to generate $177 million in revenue for budget year 2021-2022.

Of that money, about $119 million will go toward K-12 education, $30 million to rural school districts and $11 million to affordable housing grants or loans, according to a fiscal analysis prepared by legislative staff.

But legislators also face new challenges following the Nov. 3 election.

Colorado Gov. Jared Polis, seen in May 2019. (Michael Ciaglo/Getty Images)

The passage of Proposition 116, an income tax cut that saves individual Coloradans an average of $37 each, is expected to shave $154 million off of the state’s 2021-2022 budget.

Colorado is also facing its most severe wave of COVID-19 cases — a trajectory that shows no signs of slowing — which could affect the state’s economic situation. The next forecasts from Legislative Council Staff and the Office of Public State Planning and Budget are due in December.

The main question for lawmakers to consider this session, Moreno said, will be: “Do we try to do a state-level stimulus that has been proposed by the governor, (or) do we try to save a lot of those funds to mitigate the damage going forward?”

On top of that, he added, lawmakers on the JBC will have to decide whether or not to restore some of the priorities they cut last session.

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