The Joint Budget Committee is struggling to find $1 billion to plug a hole in the 2025-26 state budget and is asking state agencies to do more to help cover the shortfall.
The letter was sent last week to the governor, the departments of the treasury, attorney general, state and education, and the Colorado Supreme Court.
"The FY 2025-26 budget challenges are exacerbated by unexpectedly high Medicaid expenditures in FY 2023-24 and FY 2024-25 and voters' adoption of Proposition 130," the budget panel wrote. The latter is the ballot measure approved in November that dictates the state spend $350 million on public safety, although it did not set a timeline for those expenditures to be made. However, Gov. Jared Polis said he wants to see some of those funds started right away, in part to help a widow in Golden whose police officer husband died on the job last November.
The letter also asks that state agencies examine funds that might not have been spent in the 2024-25 budget year.
JBC Vice-Chair Rep. Shannon Bird, D-Westminster, explained that agencies often have funds unspent toward the end of the budget year due to vacancies or other issues. Agencies will try to spend that money to avoid lowered appropriations in the future.
In this budget year, the JBC wants the agencies to hold off on that spending.
The JBC wrote that agencies should refrain from end-of-year spending on non-essential items. If agencies have vacancies, projects, or grants that are not expended as anticipated, they ask that those funds be allowed to revert if feasible rather than being repurposed.
Additionally, if an agency sees an opportunity for a "significant" end-of-year FY 2024-25 reduction in appropriations, the JBC wants to know about it as soon as possible.
The JBC also wants agencies to consider whether one-time funds from the COVID-19 aid might not be "essential" and could be repurposed.
The committee acknowledged that one-time funds are not a big help for the state's structural budget deficit but can help the state "in transitioning to a lower level of ongoing spending."
It's a reversal of the JBC's position a year ago when they encouraged the executive branch to spend down those one-time dollars, consistent with the legislature's intent.
However, the fiscal picture has changed significantly, the committee said, suggesting that short-term programs could "look less valuable in the context of a structural budget deficit." Those funds should be reverted.
The committee explained what that could look like: a short-term program with a two-year cycle of grants, where only one year has been awarded. Those funds in the second or later years could be reverted rather than awarded.
The JBC noted that the governor's office had submitted information on Jan.15 on programs funded with American Rescue Plan Act (ARPA) dollars that could be scaled back. The letter said agencies should look for other opportunities, both from ARPA-funded programs and one-time general fund dollars.
The governor's Office of State Planning and Budgeting identified ARPA funds in the 2023-24 and 2024-25 budgets that could be reverted to the state budget. Their initial estimate back in November was about $4 million. That's now grown to about $24.6 million.
A JBC memo on Jan. 23 said those dollars "include both funds reverted because the spending period has passed and some funds that are proposed to be 'recaptured' because they are not expected to be spent."
Colorado received $3.8 billion in ARPA funds appropriated by the General Assembly during the 2021, 2022, and 2023 legislative sessions, according to the JBC memo, that led to 75 bills in six major categories: economic recovery and relief; workers, employers, and workforce centers; behavioral and mental health; affordable housing and home ownership; revenue loss restoration (allocated for general government services); and transportation.
The intent was to spend those dollars no later than January 2025.
Sign up for free: News Alerts Stay in the know on the stories that affect you the most.
Sign Up For Free View all of our newsletters. Success! Thank you for subscribing to our newsletter. View all of our newsletters. The Big Swap
In the 2024 session, the legislature passed HB 24-1466. Under that bill, federal ARPA funds previously allocated to specific ARPA-supported programs were used to "refinance" General Fund appropriations for personal services in the Departments of Corrections, Human Services, and Judicial for FY 2023-24 and FY 2024-25.
The memo explained that spending federal funds this way "freed" the General Fund for those programs. About $1.6 billion in ARPA funds were at risk of not being paid in time.
Most of those one-time funds were used to help balance the 2024-25 budget.
What's left to help balance the 2025-26 budget: about $24.6 million, with many of the reverted funds coming from programs with spending deadlines of June 30, 2026.
The programs those reversions will affect:
* $5.5 million for a healthcare worker recruitment program from legislation in 2022.
* Another million will come from a 2022 bill on a criminal justice intervention detection and redirection grant program.
* A 2021 bill to help people who have not completed their college education will lose just over $1 million. The "Finish What You Started" program was intended to help adults who left college before finishing their degrees return and get those diplomas.
* The student educator stipend program from 2022 will lose $4.7 million. That program was due to run dry in June 2025 and provided stipends to students in education professions to help with their finances while doing their clinical work.
* A Behavioral Health Administration grant program designed to award "community investment grants" for support services for children, youth, and families will lose just under $2 million, funds that were to be spent by Dec. 31, 2026.
Higher ed consolidation?
On Jan. 22, in another cost-cutting move, the budget writers asked the Department of Higher Education to consider consolidating some of its functions under the Department of Education.
It's not a novel concept: several states -- Delaware, New Hampshire, and the District of Columbia -- have placed their higher education systems under the Department of Education.
The JBC, however, isn't suggesting a wholesale move for the higher education agency. The letter said some of its administrative functions, such as budgeting, accounting, fiscal management, and IT system/data management, could be "more robust" under the Department of Education.
The letter did not indicate how much would be saved by making that change.
A response from the higher education department is expected next week.