This story was produced as part of the Colorado Capitol News Alliance. It first appeared at coloradosun.com.
Gov. Jared Polis said Thursday he will reverse the state’s plans to increase reimbursement rates for health care providers who see Medicaid recipients to help address a roughly $750 million hole in the state budget caused by the Republican federal tax and spending bill.
That will save the state about $38 million by forgoing a planned 1.6% rate hike. That’s the single biggest cut made by the governor.
Polis also said he will slash spending on higher education (by some $12 million) and grants (like $2 million to tackle health disparities) as part of $252 million in total cuts and redirected spending to help balance the budget this fiscal year, which began July 1. The governor said he is making changes to about 20 budget line items.
“My two commitments in managing these cuts — we’ve kept them both,” he said. “We are not cutting our public schools one dime. K-12 funding is held harmless. We also have zero cuts to public safety.”
The governor told reporters of his budget-cut plans Thursday morning and is set to present to the legislature’s Joint Budget Committee later in the day. Lawmakers wrapped up a special legislative session Tuesday to partially close the hole by increasing the taxes paid by businesses and business owners.
The General Assembly also passed a bill letting the state sell tax credits to raise $100 million to offset the deficit. The credits, which will effectively let the companies that buy them prepay their taxes through 2033 at a discount, will be sold at least 80 cents on the dollar.
The governor’s office also told the JBC on Thursday that the budget situation is even worse than they previously thought because of higher than expected Medicaid enrollment. As a result, Polis plans to tap about $325 million of the state’s budget reserves to make up the difference.
“We will have a reserve north of 13% after all these actions are done,” Polis said, “and that is more than twice the reserve than when I took office.”
During the special session, the legislature passed a bill ceding the responsibility of cutting the budget to the governor’s office, saying the executive branch was best positioned to slash spending quickly. But the move also had the political benefit of shuffling a hot financial potato onto a lame-duck governor in Polis, who is term-limited and leaves office in early 2027.
The legislation requires the governor to notify the JBC of his spending cuts, but it gives him unilateral authority to slash the budget. The cuts start to take effect Monday.
Mark Ferrandino, the director of the governor’s Office of State Planning and Budgeting, said Polis made as many cuts as possible to programs where more money was allocated than needed. That includes $3.7 million to a program providing gender affirming care to transgender prison inmates.
That spending is required under a lawsuit settlement, but Ferrandino said the state budgeted more money for the line item than the actual cost, which allowed for the cut.
“We had to guess what it would cost,” Polis said, “and we guessed it would cost more than it actually cost.”
Some of the cuts (totaling $102.5 million) and redirected spending (totaling $146.7 million) by the governor include:
- About $105 million collected through Proposition 123, the affordable housing funding program approved by voters in 2022, will be redirected to the state budget. “Prop. 123 as a whole has over $380 million of funding,” Polis said. “Without Prop. 123, we’d be talking about cuts to education funding here today.”
- About $9.5 million that was supposed to go to state colleges and universities is being clawed back, including about $97,000 for Colorado Mountain College and about $116,000 for Aims Community College.
- About $200,000 that was supposed to go to the state psychiatric hospital in Fort Logan and about $1.5 million that was supposed to go to the state psychiatric hospital in Pueblo is being cut.
- $3 million that was supposed to go from the state to local public health agencies.
- $4 million leftover from a program aimed at ensuring kids have clean drinking water.
- $500,000 that was earmarked for reproductive health care for people living in the country illegally was cut, as was $131,250 in “health benefits for children lacking access due to immigration status.”
- $2.5 million from a program that provides dental care for people on Medicaid is being cut.
The governor’s office anticipates the state will save $3 million from a hiring freeze he put into effect through the end of the year.
The Medicaid provider rate increase will be halted starting in October, Polis said. “So they will see the benefit of some of those increases,” Polis said.
The governor also cut spending on Medicaid prior authorization, which allows patients to get care before reimbursement is approved by insurance.
This is a developing story that will be updated.
