LCS 2026-27 Budget Request Overivew.pdf (437 KB)

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Joint Budget Committee

Staff Budget Briefing FY 2026-27 Overview of FY 2026-27 Budget Requests Prepared by: Craig Harper, JBC Staff November 12, 2025

Joint Budget Committee Staff 200 E. 14th Avenue, 3rd Floor Denver, Colorado·80203 Telephone: (303) 866-2061 leg.colorado.gov/agencies/joint-budget-committee

JBC Working Document - Subject to Change Staff Recommendation Does Not Represent Committee Decision

Contents Overview of FY 2026-27 Budget Requests ................................................................................................................. 2 Submission of Budget Requests .............................................................................................................................2 Links to Access Each Department’s Budget ............................................................................................................2 Introduction ............................................................................................................................................................3 Another Shortfall, Fewer Options...........................................................................................................................3 Proposed Changes for FY 2025-26..........................................................................................................................7 Requests for FY 2026-27 Operating Appropriations ........................................................................................... 10 Appendix A: Operating Appropriations .................................................................................................................. A-1

Additional Resources To find the online version of the briefing document search the General Assembly’s website for budget documents (leg.colorado.gov/content/budget/budget-documents).

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Overview of FY 2026-27 Budget Requests Submission of Budget Requests The Governor submitted his FY 2026-27 budget request on Friday October 31. The Governor’s annual request is a comprehensive plan that consists of several elements: • •

• • •

Amounts requested by Executive Branch agencies for ongoing operations, to be appropriated through the annual general appropriation act (the “Long Bill”); Placeholders (assumptions) for amounts that will be appropriated for ongoing operations of the Legislative Branch, the Judicial Branch, and those Executive Branch agencies that operate under another elected official (the Departments of Law, State, and Treasury); Amounts the Governor is requesting to fund state facilities and infrastructure; Amounts that will be distributed or transferred pursuant to existing constitutional or statutory requirements; and Placeholders for amounts that the Governor is proposing be appropriated or transferred through separate legislation.

The Governor typically bases the budget request on the most recent revenue forecast prepared by the Office of State Planning and Budgeting (OSPB). The Governor used the September 2025 OSPB forecast as the basis for this year’s request and balanced the General Fund budget against the revenues anticipated in that forecast. Each of the Judicial Branch agencies, the Attorney General, the Secretary of State, and the State Treasurer all submit their own budget requests for the ongoing operations of their respective agencies. The OSPB does not review these agencies’ requests. Instead, the Governor typically includes “placeholder” assumptions for changes to General Fund appropriations to those agencies. The actual requests generally differ from the Governor’s placeholder assumptions.

Links to Access Each Department’s Budget The Governor’s budget submittal letter includes a list of all of the “decision items” (also called change requests) included in Executive Branch departments’ requests, along with placeholders for the Judicial and Legislative Branches and the Departments of Law, State, and Treasury. The Governor’s list of individual decision items by department (Attachment 11) is available on the OSPB website. The OSPB website also includes documents with more detail on individual decision items, requested changes related to prior year legislation and budget actions, and common policy requests. Please note that the OSPB website only contains budget documents submitted by OSPB. The following hyperlinks provide access to the remaining Executive Branch departments’ FY 2026-27 budget request: •

Department of Law

•

Department of State

•

Department of Treasury

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For the Judicial Branch, each agency (Courts and Probation and each of the ten independent agencies) submits its own budget request. Where available, links to those requests are below. •

Courts and Probation

•

Office of the State Public Defender

•

Office of the Alternate Defense Counsel

•

Office of the Child’s Representative

•

Office of the Respondent Parents’ Counsel

•

Office of the Child Protection Ombudsman

•

Independent Ethics Commission

•

Office of Public Guardianship

•

Commission on Judicial Discipline (not available at time of publication)

•

Office of Bridges of Colorado

•

Office of Administrative Services for Independent Agencies (ASIA)

Introduction JBC Staff has two major goals for this document as the Committee moves into the FY 2026-27 budget process. • •

The first section provides context for the budget request, the balancing proposals submitted with the request, and the magnitude of the estimated shortfall for both the current year and the FY 2026-27 budget. The second section provides a broad overview of the FY 2026-27 budget requests from the Governor, the Judicial Branch, and the statewide elected officials in relation to the most recent revenue forecasts from Legislative Council Staff (LCS) and OSPB.

Another Shortfall, Fewer Options For the second consecutive year, Colorado faces a significant budget shortfall. The Committee closed a gap of more than $1.0 billion for the initial FY 2025-26 appropriation and balanced the FY 2025-26 General Fund budget based on the March 2025 OSPB forecast. Based on the General Assembly’s actions in the 2025 regular session, JBC Staff projected in the FY 2025-26 Appropriations Report that the General Fund would end both FY 2024-25 and FY 2025-26 above the 15.0 percent statutory reserve requirement (by $20.1 million in FY 2024-25 and $9.6 million in FY 2025-26). That outlook has changed since the session with FY 2024-25 ending below the reserve requirement and a larger shortfall projected for FY 2025-26. As the Committee discussed at length during the FY 2025-26 budget process, a combination of factors drove the shortfall for FY 2025-26: 1 0F

•

Depletion of one-time funds that had allowed appropriations to exceed annual revenues from FY 2021-22 through FY 2024-25.

For a more extensive discussion of the drivers during the FY 2025-26 budget process, see the JBC Staff Overview of the FY 2025-26 Budget Request. 1

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•

An underlying “structural deficit” where the State’s ongoing costs exceed annual revenues. 2 Caseload costs, particularly in Medicaid, are growing faster than revenues will allow without crowding out other uses of General Fund. For example, the following graph shows the growth rate of General Fund costs for Medicaid in the Department of Health Care Policy and Financing (HCPF) and the Department of Education (the second largest recipient of General Fund appropriations in the current year) relative to the growth rate of the TABOR/Referendum C limit. General Fund appropriations for Medicaid have generally grown faster than the TABOR revenue limit since the TABOR limit began in FY 1993-94. The difference grew after FY 2009-10 and has been more pronounced since FY 2021-22. 1F

General Fund appropriations for Health Care Policy and Financing (HCPF) are growing faster than the TABOR/Referendum C limit 1,000

HCPF

900 800 700 600 500

TABOR/Ref C

400 300

Education

200 100 0

93-94

97-98

01-02

05-06 09-10 Fiscal Year

13-14

17-18

21-22

25-26

Comparing to inflation alone gives another view. Since FY 2018-19, General Fund appropriations for Medicaid have grown far faster than inflation. Appropriations to most departments have roughly kept pace with inflation. The chart on the following page shows the change in General Fund appropriations since FY 2018-19 in constant FY 2025-26 dollars. 3 The Committee should note: 2F

•

The change for HCPF dwarfs the changes in all other departments. General Fund appropriations to HCPF have grown by $1.7 billion (a 42.9 percent increase) over that period even in inflation-adjusted dollars. That level of growth clearly restricts the General Fund available for other uses.

•

Higher Education has the second largest amount of growth at $378.3 million (29.0 percent) after adjsuting for inflation.

•

The change for Human Services is understated because significant funding was relocated to the new Department of Early Childhood during this period. Early Childhoood is not reflected in the chart because it did not exist in FY 2018-19 – but the growth rate for the programs remaining in Human Services would be higher than is relfected in the chart.

•

The decrease in inflation adjusted terms for the Department of Education has been possible because the State has used one-time funding in the State Education Fund to mitigate growth in General Fund

Legislative Council Staff and JBC Staff presented a joint memorandum on budget sustainability on February 12, 2025. Staff has excluded the Department of Early Childhood because it did not exist in FY 2018-19 and the Departments of State and Transportation because they did not receive General Fund appropriations in one or both years.

2 3

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appropriations. Barring other changes, General Fund appropriations will have to rise much faster beginning in FY 2027-28. •

Finally, the Committee will see in subsequent departmental briefings that some of the Departments showing small increases on this chart have grown much faster in percentage terms. For example, General Fund in the Department of Agriculture has grown by $6.1 million in constant dollars but that represents a 42.3 percent increase. Similarly, a $9.7 million increase in Labor and Employment equates to a 38.3 percent increase. Major growth relative to inflation has been focused in a handful of departments since FY 2018-19, with HCPF growing by $1.7 billion in constant dollars. (FY 2025-26 $ in millions) -$750

-$500

-$250

$250

$500

Health Care Policy & Financing

$1,000

$1,250

$1,500

$1,750 $1,669

Higher Education

$378

Judicial Public Health & Environment

$750

$149 $72

Human Services Public Safety Personnel Natural Resources Local Affairs Legislature Labor & Employment Revenue Law Corrections Agriculture Miltiary & Veterans Affairs Regulatory Agencies Governor Treasury -$687

Education

The Committee’s stated goal in balancing the FY 2025-26 budget was to make progress toward long-term balancing and create a “soft landing” to address the ongoing structural issue over a period of several years. The balancing actions for FY 2025-26 included a mix of ongoing and one-time changes to both reduce General Fund obligations and make additional General Fund available (largely through a combination of ongoing adjustments to the TABOR refund obligation and one-time transfers from a variety of cash funds). While the FY 2025-26 budget remained balanced at the end of the regular 2025 session under the March 2025 OSPB forecast, projections deteriorated for both FY 2024-25 and FY 2025-26 after the conclusion of the regular session. Those changes compound what was already going to be a challenging budget climate for FY 2026-27. As an overview to begin the analysis of the request, staff offers the following points to consider: •

The State used a lot of one-time balancing actions (e.g., cash fund transfers) for FY 2025-26 that are not available for FY 2026-27. The Committee faces yet another shortfall for FY 2026-27 but with fewer options available.

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• •

•

Looking beyond FY 2026-27, addressing the structural issues will require significant ongoing reductions to spending and/or increases in revenue. The request includes measures to reduce costs across nearly all departments, including a large number of cuts in Medicaid. However, one-time changes are critical to the overall proposal (e.g., $400 million assumed for the conversion of Pinnacol Assurance) and preliminary projections show another large shortfall in FY 2027-28 because the structural issues remain. The request proposes to reduce the statutory reserve requirement from 15.0 percent to 13.0 percent for FY 2025-26 and FY 2026-27 and then gradually increase back to 15.0 percent over five years. Reducing the reserve would add risk if the State experiences a recession, revenues fall farther, or costs continue to increase more than anticipated.

The following sections summarize the current outlook for FY 2024-25, FY 2025-26, and FY 2026-27.

FY 2024-25 According to the September 2025 revenue forecasts, the General Fund ended FY 2024-25 approximately $94.8 million (0.5 percent) below the 15.0 percent reserve requirement (rather than $20.1 million above based on the March OSPB forecast). The most important change relative to the March forecasts for FY 2024-25 was a net overexpenditure of $68.6 million for Medicaid expenses in HCPF. Falling $94.8 million below the reserve requirement in FY 2024-25 meant that the State started FY 2025-26 “in the hole” by that amount. In addition, the issue compounds in FY 2025-26 because the unanticipated Medicaid costs are ongoing.

FY 2025-26 The outlook for FY 2025-26 shifted much more dramatically. Under current law (reflecting the 2025 regular and special sessions but not the Governor’s subsequent executive order), both of the September 2025 forecasts project that the General Fund would end the current year more than $300.0 million below the 15.0 percent reserve requirement ($306.7 million for LCS and $357.0 million for OSPB). The following chart shows the projected year end General Fund “excess reserve” balance (the amount above or below the reserve requirement) under current law from the OSPB forecasts from March 2025, June 2025, the August 2025 OSPB update incorporating the federal One Big Beautiful Bill Act (OBBBA), and September 2025 (including the Special Session). As shown in the chart, the August update including the OBBBA showed a shortfall of $783.1 below the 15.0 percent reserve requirement. After the special session, OSPB projected a shortfall of $357.0 million in the September forecast.

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OSPB's "curent law" projections of the FY 2025-26 General Fund excess reserve deteriorated after the 2026 regular session but improved following the August special session. ($ in millions) $200.0 $0.0

$9.6 -$40.9

-$200.0 -$400.0

-$357.0

-$600.0 -$800.0 -$1,000.0

-$783.1 Mar-25

Jun-25

Aug. Update for OBBBA

Sep-25 after special session

The Committee should note that these figures do not include $116.0 million in estimated General Fund reductions from the Governor’s August and October executive orders. They also do not include the $147.9 million in cash fund transfers proposed with the executive orders. Both of those changes would reduce the shortfall. On the other hand, the September forecast also did not account for caseload cost increases now expected for Medicaid and assumed in the FY 2026-27 request. The Medicaid cost increases make the shortfall worse. As with FY 2024-25, any shortfall in FY 2025-26 adds to the challenge of balancing for FY 2026-27.

FY 2026-27 Because there is not yet an appropriation for FY 2026-27, the shortfall is harder to quantify. For illustrative purposes, “Scenario B” in the September 2025 LCS Revenue Forecast (which estimates the cost of maintaining current levels of service while accounting for caseload changes and cost pressures) estimated a shortfall of $841.1 million below the 15.0 percent reserve target. That shortfall accounted for reductions assumed in the Governor’s August executive order but not the proposed cash fund transfers. And again, updated Medicaid caseload costs in the FY 2026-27 request are higher than the assumptions in Scenario B – which would add to the shortfall.

Proposed Changes for FY 2025-26 Current FY 2025-26 Appropriations The existing FY 2025-26 operating budget (excluding capital construction but including appropriation changes from the August 2025 special session) includes a total of $16.9 billion in General Fund appropriations. That represents an increase of $1.1 billion (6.4 percent) above the final $15.9 billion appropriation for FY 2024-25. Total appropriations from all fund sources increased by $1.8 billion (3.8 percent) from FY 2024-25 to FY 2025-26. As illustrated in the following graphic, nearly 90 percent of current General Fund appropriations are concentrated in six of the 23 departments (often referred to as the “Big Six”). Two of those departments (HCPF and Education) account for 60.4 percent, with HCPF receiving 32.8 percent. The Committee should also note that Medicaid costs are expected to increase at mid-year. 12-November-2025

FY 2026-27 Overview-brf

The Department of Health Care Policy and Financing represents nearly one-third of total FY 2025-26 General Fund appropriations. Health Care Policy and Financing

32.8%

Education

27.6%

Higher Education

9.9%

Human Services

7.8%

Corrections

6.4%

Judicial

5.2%

Other

10.3%

Based on the FY 2025-26 appropriation.

Including other fund sources (primarily cash and federal funds) both increases the total (to $46.7 billion reflected in current appropriations) and changes the distribution. •

•

HCPF accounts for 39.0 percent of total statewide appropriations, and Education falls to 16.5 percent. However, it is important to note that local tax revenues provide significant support for education funding statewide, and local education revenues are not reflected in the state budget. The Department of Transportation moves up to fifth in total appropriations because of the large amount of cash and federal funds in that department, representing 4.9 percent of the total budget. Corrections and Judicial, which have relatively little funding other than General Fund, both slip lower. The Judicial Branch falls to seventh and is captured in the “Other” category in the following figure. Health Care Policy and Financing represents 39 percent of total state appropriations in FY 2025-26. Health Care Policy and Financing

39.0%

Education

16.5%

Higher Education

13.8%

Human Services

5.7%

Transportation

4.9%

Corrections

2.5%

Other

17.6% Based on the FY 2025-26 appropriation.

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Mid-year Changes to FY 2025-26 Appropriations, Revenues, and Reserve Appropriations The Governor and the independent agencies will submit official supplemental request in January and February 2026. However, to date, the Committee has approved five interim supplemental requests impacting General Fund appropriations. In total, those requests authorize an additional $30.8 million General Fund (see Table 1). Based on those approvals, the Committee is committed to introduce supplemental bills carrying those appropriations in 2026. Staff anticipates additional information regarding whether the full amounts have been necessary for requests related to the federal government shutdown (for the Food Assistance Grant Programs in Human Services and the Women, Infants, and Children Program in Public Health and Environment). Table 1: FY 2025-26 Interim Supplemental General Fund Increases Item Human Services - Food Assistance Grant Programs (SNAP related) Personnel - Employee Benefit Fund solvency Public Health and Environment - WIC Program Corrections - private prison caseload Public Health and Environment - lab renewal Total

FY 2025-26 Increase $10,000,000 9,801,682 7,500,000 2,778,484 703,262 $30,783,428

In addition to the interim supplementals, the FY 2026-27 request includes a number of specific proposals and placeholders (anticipating future requests) for changes to the current year budget, including: •

•

A placeholder for a net increase of $112.9 million in General Fund appropriations through supplemental bills in addition to the $33.8 million approved for interim supplementals. The request anticipates significant reductions to some appropriations, including $116.0 million identified in the Governor’s October 31 Executive Order. But anticipated supplemental increases (largely in Medicaid) more than offset those reductions and result in a net increase of nearly $113 million. An increase of $8.2 million associated with a legislative proposal related to the Relative Guardianship Assistance Program in the Department of Human Services.

Revenues In order to assist with balancing, the request proposes $199.4 million in additional transfers and diversions to the General Fund in FY 2025-26 (Table 2). The largest is a diversion of $110.0 million in Proposition 123 funds from the Office of Economic Development and International Trade to the General Fund. JBC Staff assumes that the Committee will take up these requests as part of the supplemental and/or figure setting processes for the impacted departments in 2026. Table 2: FY 2025-26 Cash Fund Transfers Assumed in FY 2026-27 Request Item OEDIT - Diversion of Proposition 123 Funds OEDIT - CLIMBER Fund Local Affairs - Local Government Severance Tax Fund Higher Education - CollegeInvest Administration Fund Discretionary Account of ARPA Refinance State Money Cash Fund Public Health and Environment - Community Impact Cash Fund

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FY 2025-26 Transfer Amount $110,000,000 15,000,000 13,305,993 9,200,000 5,400,000 5,162,373

FY 2026-27 Overview-brf

FY 2025-26 Transfer Amount 5,000,000 4,152,996 4,152,996 4,000,000 3,000,000 21,000,000 $199,374,358

Item Labor and Employment - Disability Support Fund Natural Resources - Severance Tax Perpetual Base Natural Resources - Severance Tax Operational Account Public Health and Environment - School and Child Care Clean Drinking Water Public Health and Environment - Mobile Home Park Water Quality Placeholders for Future Items Total

Reserve Requirement Making the changes assumed in the request would leave the General Fund roughly $300 million short of the current 15.0 percent reserve requirement under both of the September revenue forecasts ($288.4 million short under the LCS forecast and $338.8 million under OSPB). Facing that shortfall, the request proposes to reduce the statutory reserve requirement from 15.0 percent to 13.0 percent for FY 2025-26 and FY 2026-27. The request proposes to begin a gradual increase in the reserve requirement beginning in FY 2027-28 to build back up to a 15.0 percent reserve over five years.

Requests for FY 2026-27 Operating Appropriations Table 3 summarizes the current (total) operating budget for FY 2025-26 and the change requested by each department for FY 2026-27, resulting in the total operating appropriations requested for the coming year. The Committee should note that this table includes all requests submitted as decision items. This table does not reflect legislative placeholders identified by the Governor but not submitted as decision items. Staff has sorted the table based on General Fund change, from the largest dollar increase (Health Care Policy and Financing) to the largest decrease (Public Health and Environment). Table 3 focuses on requested incremental changes. See Appendix A for the total request for each department for FY 2026-27. Table 3: Requested Changes in Appropriations for FY 2026-27, by Department and Fund Source Sorted by Incremental General Fund Change Total Funds

General Fund

Cash Funds

$16,941,614,180

$12,898,989,852

$16,941,614,180

Reappropriated Funds

Federal Funds

FTE

$2,899,091,508

$13,970,226,820

67,277.8

$12,898,989,852

$2,899,091,508

$13,970,226,820

67,277.8

434,529,053

454,959,208

790,014

1,467,184,945

18.5

FY 2025-26 APPROPRIATION: Total

$46,709,922,360

FY 2026-27 Requested Appropriation FY 2025-26 $46,709,922,360 Appropriation Health Care 2,357,463,220 Policy and Fin. Judicial 98,948,805

79,089,022

23,290,397

-3,430,614

124.7

Corrections

58,180,556

60,931,957

421,611

167,991

-3,341,003

29.2

Education

181,665,811

42,493,881

136,759,297

861,569

1,551,064

-0.9

Human Services

-14,426,617

37,921,532

-11,846,863

-10,551,712

-29,949,574

13.4

Public Safety

42,229,049

13,360,053

26,259,311

2,264,704

344,981

15.2

Treasury

111,340,238

13,171,568

97,381,433

787,237

7.0

Revenue

17,522,658

7,913,646

9,004,888

604,124

30.5

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Total Funds

General Fund

Reappropriated Funds

Cash Funds

Federal Funds

FTE

Personnel

9,918,080

6,041,530

11,009,665

-7,133,115

25.9

Legislative

4,714,540

0.0

Law

12,181,080

4,326,311

1,085,432

6,532,050

237,287

4.8

Early Childhood Natural Resources Governor

9,361,263

3,652,836

8,817,322

-211,692

-2,897,203

21.9

-34,530,933

3,145,282

-38,858,890

992,884

189,791

33.3

10,881,662

2,757,160

-3,432,443

12,313,938

-756,993

-11.2

Higher Ed.

92,791,921

1,827,286

92,115,955

-1,158,523

7,203

1.3

Agriculture Regulatory Agencies State

1,550,803

243,547

1,128,134

5,363

173,759

0.6

6,067,390

155,818

5,692,404

284,713

-65,545

-2.0

-1,389,777

1.9

-2,245,368

39,213,547

-2,450,000

-39,008,915

1.2

463,683

-317,843

-134,755

916,281

0.9

Transportation Military and Veterans Affairs Local Affairs

14,475,461

-527,771

8,156,320

6,447,811

399,101

-2.1

20,582,479

-1,714,036

10,116,708

-99,375

12,279,182

13.8

17,739,467

-3,538,109

19,808,640

1,016,123

452,813

27.5

$49,725,407,831

$17,651,791,443

$13,788,547,396

$2,907,124,998

$15,377,943,994

67,633.2

Increase/Dec.

$3,015,485,471

$710,177,263

$889,557,544

$8,033,490

$1,407,717,174

355.4

Percent Change

6.5%

4.2%

6.9%

0.3%

10.1%

0.5%

Labor and Emp. Public Health and Env. Total FY 202526 Request

The request for FY 2026-27 (including the independent agencies) represents an increase of $3.0 billion total funds (6.5 percent) and $710.2 million General Fund (4.2 percent). •

•

The increase for Health Care Policy and Financing ($434.5 million) represents 61.2 percent of the total General Fund increase statewide. That increase is extremely forecast/caseload driven. The five forecastrelated division items (R1 through R5) represent an increase of $631.4 million General Fund. The rest of the Department’s decision items represent a net decrease of $217.6 million General Fund and offset a portion of the forecast increase. HCPF’s budget request will be discussed in more detail in Staff Briefing documents presented by Emily Pope (Dec. 5), Eric Kurtz (Dec. 10) and Tom Dermody (Dec. 15). The Judicial Branch is requesting an increase of $79.1 million General Fund. The Governor’s budget assumed an increase of $51.0 million for the Judicial Branch for balancing purposes. The actual request is $28.1 million above that amount. Total compensation is a major driver for the increase, including $24.1 million for salary survey and $14.8 million for health, life, and dental insurance increases. Staff briefing documents by Scott Thompson (Dec. 8) and Amanda Bickel (Dec. 11) will discuss the Judicial Branch agencies’ budget requests in greater detail. The Department of Corrections is requesting a net increase of $60.9 million General Fund. That amount includes $14.9 million for salary survey increases, $14.5 million for private prison per diem increases, $13.8 million associated with caseload, and $7.9 million for health, life, and dental insurance increases. Justin Brakke is scheduled to present the JBC Staff briefing on Dec. 19. The Department of Education’s proposed increase of $42.5 million is driven by a $50.0 million increase for school finance that is partially offset by other changes. Amanda Bickel and Andrea Uhl are scheduled to present the briefing documents on the Department of Education on Nov. 19 and Dec. 2, respectively.

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•

The Department of Human Services is requesting an increase of $37.9 million. The biggest driver is a request associated with Supplemental Nutrition Assistance Program Administration. Emily Pope and Tom Dermody are scheduled to present briefing documents on the Department of Human Services on Nov. 21 and Dec. 5.

Finally, staff has highlighted below two of the significant statewide common policies that are reflected in departments’ requests for FY 2025-26: •

•

Total Compensation: The total compensation (salary and benefits) request includes an increase of $290.7 million total funds and $112.0 million General Fund for FY 2026-27. The Governor is proposing $66.4 million General Fund for salary increases for state employees, including a 3.1 percent across-the-board salary increase and additional funding for step increases. In addition, the request includes significant increases for health, life, and dental insurance expenses (including increases of more than 20.0 percent in some departments). The health, life, and dental request adds $39.9 million General Fund. Mitch Burmeister will discuss compensation common policies in more detail in the briefing document scheduled for Nov. 18. Provider Rates: The Governor is requesting zero increase in common policy provider rates and is proposing targeted reductions to certain provider rates in HCPF. Therefore, any provider rate increases would require additional reductions elsewhere to balance the budget. The Committee is scheduled to hear from the Medicaid Provider Rate Review Advisory Committee (MPRRAC) on Nov. 18.

Overall, the request includes 368 decision items that impact appropriations (including non-prioritized items that are shown in one department but actually driven by decisions in a separate department). Of that total, 140 propose increases to General Fund appropriations and 118 propose decreases. That count is deceptively low, however, as a single decision item may include multiple components. One request (HCPF R6) proposes a reduction of $196.1 million General Fund for FY 2026-27 – and includes more than 30 separate components.

General Fund Overview Under September OSPB Forecast The Governor based the October 31 budget request on the September 2025 OSPB revenue forecast. Given that, and that the two September forecasts are very similar (more money is actually available under the September LCS forecast), this section of the document only addresses alignment with the OSPB forecast. Updates later in the budget process will include comparisons to both forecasts for decision-making purposes.

General Fund Balancing Using the assumptions in the Governor’s request, the request is nearly balanced to the proposed 13.0 percent reserve requirements for both FY 2025-26 and FY 2026-27. However, as noted above, the actual Judicial Branch request is $28.1 million higher than the Governor had assumed. The Department of Law request also exceeds the Governor’s assumptions by $2.4 million. After those adjustments and minor changes to assumptions for FY 2025-26, JBC Staff estimates that the total request would fall $5.0 million short of the proposed 13.0 percent reserve requirement in FY 2025-26 and $37.4 million short in FY 2026-27 (Table 4 below). •

As with FY 2025-26, the request proposes reducing the reserve requirement to 13.0 percent for FY 2026-27. JBC Staff estimates that implementing the full request (including Judicial, etc.) would require a reduction to 12.8 percent. With a 15.0 percent reserve requirement for FY 2026-27, the shortfall would jump to $377.5 million under the OSPB forecast (or $311.7 million under the LCS forecast).

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FY 2026-27 Overview-brf

•

For informational purposes, staff has included a very preliminary estimate for FY 2027-28. Highlighting the ongoing nature of the State’s challenges, staff currently estimates a shortfall of approximately $1.0 billion below an assumed 13.4 percent reserve requirement. That estimate includes projected outyear impacts of all of the decision items and legislative components in the request along with JBC Staff assumptions of other costs. Available revenues grow each year in the forecast (line 1) but the growth does not keep up with projected costs (line 2). The reserve held in the General Fund drops by nearly half in FY 2027-28. Table 4: Status of the General Fund Reserve Under the FY 2026-27 Request (September 2025 OSPB Forecast, $ in millions)

Line 1 2 3 4 5 6

Item Total General Fund Available (See Table 5) Less: Total General Fund Obligations (See Table 6) Year-end Reserve in General Fund Plus: Year-end Reserve in PERA (SB 25-310) Total Year-end Reserve Statutorily Required Reserve Percent

7 8

Required Reserve Amount2 Year-end Reserve Above/(Below) Requirement

FY 2025-26 $19,810.9 18,187.5 $1,623.4 500.0 $2,123.4 13.0%

FY 2026-27 $20,156.9 18,508.4 $1,648.5 500.0 $2,148.5 13.0%

FY 2027-28 $20,717.0 19,839.5 $877.5 500.0 $1,377.5 13.4%

$2,128.4 -5.0

$2,185.6 -37.4

$2,385.4 -1,007.9

The majority of changes to General Fund obligations for FY 2026-27 (line 2) are proposed for the Long Bill and embedded in the departmental requests in Table 3 above. However, a number of proposals require separate legislation outside of the Long Bill and may not be embedded in the departmental figures. The following sections break down the changes impacting General Fund balancing that are not included in Table 3 above. In some cases, they are placeholders for future supplemental and budget amendment requests. The rest would require separate legislation. Staff has broken those components into two basic categories: • •

Changes to make more General Fund available. Changes to General Fund obligations through appropriations, transfers, and the TABOR refund.

Changes to Revenue The request includes a number of proposals to add revenue to the General Fund. Table 2 above shows $199.4 million in proposed transfers for FY 2025-26. For FY 2026-27, the request proposes seven items adding a total of $427.0 million to the General Fund, including: •

•

$400.0 million (93.7 percent of the total) from the proposed conversion of Pinnacol Assurance (Statewide R1). The Committee should note that the Governor’s letter rhetorically links the conversion of Pinnacol to the ability to pay for the Homestead Exemption and Controlled Maintenance projects in FY 2026-27. While there is no direct connection between those items, the Pinnacol request is a major part of the Governor’s package to balance the General Fund. $27.0 million from six cash fund transfer proposals, including $15.0 million from severance tax revenues (Statewide R4) and $12.0 million from other cash funds.

Table 5 shows the assumptions affecting the amount of General Fund revenue available each year under the OSPB Forecast and the Governor’s request.

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FY 2026-27 Overview-brf

Table 5: General Fund Available for FY 2025-26 through FY 2027-28 (September OSPB Forecast, $ in millions) Line 1 2 3 4 5 6 7 8 9 10 11 12 13

Item Beginning Reserve Held in the General Fund Gross General Fund Revenue (September Forecast) FY 2024-25 Reversions and Interest Reflected in FY 2025-26 Transfers from Other Funds (September Forecast) Requests Affecting Revenue to the General Fund Pinnacol Conversion (Statewide R1) Severance Tax Transfers (Statewide R4) Supplier Database Cash Fund (Personnel R9) Opportunity Next Transfer (Forecast Update) Discontinue Gaming Funding for CHECRA (Higher Education NP3) Peace Officers Mental Health Grant (Local Affairs R3) Childcare Facility Grant Program Repeal (Local Affairs R5) Total General Fund Available

FY 2025-26 $2,263.7 17,041.0 96.6 210.2 199.4

$19,810.9

FY 2026-27 $1,623.4 18,078.7

FY 2027-28 $1,648.5 19,038.8

27.8 427.0 400.0 15.0 6.4 3.0 2.1 0.4 0.1 $20,156.9

27.6 2.1

2.1

$20,717.0

General Fund Obligations (Appropriations, Transfers, and TABOR Refunds) Table 6A summarizes projected General Fund obligations for each year under the request. The subsequent tables break down the specific changes in the request depending on whether they affect General Fund appropriations, transfers from the fund, or the TABOR refund obligation. Table 6A: Requested General Fund Obligations (September OSPB Forecast, $ in millions) Line 1 2 3 4 5 6 7 8 9 10 11 12 13

Expenditure/Obligation General Fund appropriations Requests affecting appropriations subject to reserve (Table 6B) Less: Appropriations for rebates and expenditures (Forecast) Total General Fund appropriations subject to reserve Rebates and expenditures (Forecast) Request to eliminate business personal property tax Transfers to transportation funds (Forecast) Transfers for Capital Construction and IT Capital Transfers to other funds (Forecast) Requests affecting transfers to other funds TABOR refund obligation [Article X, Section 20 (7)(d)] (Forecast) Requests affecting TABOR refund (Table 6C) Total Expenditures/Obligations

FY 2025-26 $16,941.6 151.9 -403.7 $16,689.9 835.8 42.7 170.6 448.6 0.0 $18,187.5

FY 2026-27 $17,651.8 -106.0 -416.3 $17,131.7 528.9 -18.6 61.0 180.3 442.4 0.3 363.9 -181.5 $18,508.4

FY 2027-28 $18,608.8 -85.9 -413.6 $18,109.4 335.1 -18.6 110.5 261.8 487.4 721.1 -166.7 $19,839.9

Appropriations Subject to Reserve: Table 6B shows the requested changes to General Fund appropriations that are subject to the reserve requirement that are not embedded in departmental requests. These items are either placeholders for future requests or legislative placeholders outside of decision items. In total, the request assumes that the proposals would reduce appropriations subject to the reserve requirement by $103.8 million in FY 2026-27 and $85.9 million in FY 2027-28. The Committee should note that a placeholder for $124.3 million in reductions in Medicaid (to hit a 5.6 percent growth target) drives the decrease in both years. If that reduction does not materialize, this group of placeholders would result in a net increase in appropriations.

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FY 2026-27 Overview-brf

Table 6B: Assumed Changes to General Fund Appropriations Under the Oct. 31 Request ($ in millions) Line 1 2 3 4 5 6 7 8 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

Item Approved interim supplementals (Table 2) Placeholder for additional supplementals Placeholders for FY 2026-27 budget items Hold for future obligations Human Services - adoption and relative guardianship Corrections - medical caseload Public Safety - Community Corrections caseload HCPF - Additional resources for federal compliance HCPF - OBBBA mitigation Human Services - joint county administration HCPF - joint county administration HCPF - placeholder to hit 5.6% growth target Unfunded liability amortization reduction (Statewide R3) Judicial - PERA contribution reduction HCPF - DOJ settlement CAT vouchers Placeholders for other FY 2026-27 legislation General Assembly Priorities Higher Education - ZTC OER continuation Revenue - transportation and housing zones Public Safety - Division of Forensic Services Tax policy legislative placeholder Public Safety - CCJJ successor Governor - shared services assessment Governor - direct sales raw milk Public Health - update mobile home water quality Labor and employment - workforce dev. Council Total - Changes to Appropriations Subject to Reserve

FY 2025-26 $30.8 112.9 $8.2 8.2

$151.9

FY 2026-27

FY 2027-28

-$108.0 18.7 8.2 5.0 3.0 2.3 2.0 0.6 0.2 -124.3 -16.2 -4.0 -3.5 4.2 2.2 1.1 0.5 0.4 0.4 0.3 0.3 0.2 -1.0 0.0 -$103.8

-$89.7 18.7 8.2 5.0 3.0 2.3 2.0 0.6 0.2 -124.3 0.0 -1.0 -4.5 3.8 2.2 1.1 0.5 0.4 0.2 0.3 0.0 0.2 -1.0 0.0 -$85.9

Appropriations Not Subject to Reserve: In addition to the changes that are subject to the reserve requirement, the request includes a legislative placeholder to eliminate reimbursements to local governments for business personal property tax exemptions. Based on the September OSPB forecast, that proposal would decrease General Fund obligations by $18.6 million in FY 2026-27.

Transfers from the General Fund: The request includes two proposals that would impact transfers from the General Fund to other funds, for a net increase of $0.3 million in transfers from the fund in FY 2026-27: •

•

A transfer of $684,297 to support additional broadband deployment in the Department of Corrections (Corrections R5). The request seeks one-time funding to instrall broadband infrastructure at the Trinidad Correctional Facility. Justin Brakke will present this request with the Department of Corrections briefing on Dec. 19. A proposed diversion of $400,000 in interest earnings that would otherwise be credited to the Mobile Home Park Resident Empowerment Loan and Grant Program Fund (Local Affairs R2). One could consider this a transfer from that cash fund to the General Fund or a reduction to the transfer of interest to the cash fund. The request has classified it as a reduction in the transfer of interest to the cash fund for accounting purposes. Regardless, the request proposes to capture $400,000 per year in interest earnings for General Fund balancing for the next seven years. Andrea Uhl will address this request in the Department of Local Affairs briefing on Nov. 13.

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FY 2026-27 Overview-brf

Changes to the TABOR Refund: Finally, Table 6C shows the eight proposals intended to modify the TABOR refund amount from FY 2026-27 and FY 2027-28 revenues. As a whole, the proposals would reduce projected TABOR refunds from FY 2026-27 revenues (paid in FY 2027-28) by $181.5 million. JBC Staff assumes that the proposals would reduce the TABOR refund from FY 2027-28 revenues (paid in FY 2028-29) by $166.7 million. •

•

By far the largest change is a proposal for legislation to reduce the TABOR refund obligation by $148.0 million each year for FY 2026-27 and FY 2027-28 (Statewide R2). The request argues that the timing of the enactment of the OBBBA resulted in an overrefund of FY 2024-25 revenues because the fiscal year had closed and the TABOR certification did not account for the federal legislation’s impact on FY 2024-25 revenues. The request also includes a legislative placeholder to reclassify $29.0 million per year in aviation fuel tax revenue as “collections for another government” because those revenues support local districts rather than State operations. Similar to legislative actions in the past two sessions, that would remove those funds from the State’s TABOR revenue. Third, the request proposes to eliminate the Colorado Disability Opportunity Office (CDOO) fee revenue for FY 2026-27 only as part of Department of Labor R1 (which proposes a number of changes to the CDOO including converting the office to a special purpose authority). Phoebe Canagarajah will discuss this request with the Department of Labor briefing scheduled for Nov. 14. Table 6C: Requests Impacting the TABOR Refund Obligation ($ in Millions) Line 1 2

Item TABOR refund (September OSPB Forecast) Requests impacting TABOR refund

FY 2026-27 $363.9 -$181.5

FY 2027-28 $721.1 -$166.7

Public Health - stationary sources fee increases

7.0

Transportation fuel deduction - 2 percent to 1 percent

3.3

Higher Education - DPS fee request

0.0

TABOR overrefund correction (Statewide R2)

-148.0

Aviation revenue reclassification (Legislative)

-29.0

8 9 10

Labor and Employment - eliminate CDOO fee Higher Education - PSEP Program Projected refund with requests (paid in following year)

-14.7 -0.1 $182.4

$554.4

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FY 2026-27 Overview-brf

Appendix A: Operating Appropriations Requested for FY 2026-27 Requested Operating Appropriations for FY 2026-27 Department

Agriculture Corrections Early Childhood Education Governor Health Care Policy and Financing Higher Education Human Services Judicial Labor and Employment Law Legislative Department Local Affairs Military and Veterans Affairs Natural Resources Personnel Public Health and Environment Public Safety Regulatory Agencies Revenue State Transportation Treasury OPERATING TOTAL

12-November-2025

TOTAL $79,844,265 1,248,437,003 812,102,843 7,871,069,600 563,812,786 20,574,754,166 6,517,672,854 2,658,464,843 1,250,701,453 516,602,748 164,608,648 84,846,623 583,126,015 155,352,472 501,183,142 312,528,462 886,508,806 830,645,531 144,712,696 574,828,743 47,573,294 2,271,150,645 1,074,880,193 $49,725,407,831

General Fund $20,807,950 1,146,960,903 322,078,543 4,712,488,079 55,870,444 5,988,845,075 1,686,176,155 1,360,563,143 958,035,638 33,333,717 33,176,052 82,898,396 61,467,863 17,697,355 60,226,184 41,204,937 136,504,484 285,897,311 3,270,400 162,849,627 4,254 0 481,442,537 $17,651,799,047

A-1

Cash Funds $51,071,635 51,838,514 287,901,218 2,250,994,372 102,171,403 2,485,238,785 3,519,953,361 451,126,126 227,205,205 229,697,684 26,599,685 5,000 356,188,968 2,438,368 387,556,690 38,296,531 360,656,474 380,852,817 131,544,055 401,077,649 47,569,040 1,488,245,698 510,107,721 $13,788,336,999

Reappropriated Funds $3,071,611 49,637,586 16,395,696 56,776,229 397,672,718 144,810,897 1,284,790,837 220,613,242 61,035,610 24,037,985 100,660,633 1,943,227 40,126,248 26,042 10,580,417 233,026,994 64,480,331 93,419,522 7,908,147 10,049,335 0 2,731,756 83,329,935 $2,907,124,998

Federal Funds $4,893,069 0 185,727,386 850,810,920 8,098,221 11,955,859,409 26,752,501 626,162,332 4,425,000 229,533,362 4,172,278 0 125,342,936 135,190,707 42,819,851 0 324,867,517 70,475,881 1,990,094 852,132 0 780,173,191 0 $15,378,146,787

FTE 332.7 6,420.2 265.0 750.5 1,261.1 861.7 28,036.2 5,580.9 5,849.5 1,767.4 671.6 449.2 252.2 2,338.8 1,840.7 521.8 1,881.1 2,399.2 726.6 1,849.8 176.3 3,329.7 71.0 67,633.2

FY 2026-27 Overview-brf