Rosier forecast for Colorado budget, but cuts loom as state faces structural deficit

The governor's office says the Colorado's economy is strong but the legislature faces tough decisions on how to deliver a balanced budget for next year.

On Thursday, the Joint Budget Committee received the state's economic forecast, which revised next year's deficit from $1 billion down to about $750 million.

Gov. Jared Polis issued a statement saying, "Today's forecast shows that Colorado's economy remains strong, with excellent wage growth, slowing housing costs, and healthy reserves. While this economic forecast shows potential challenges could emerge, Colorado's budget environment remains tight, and the reality is that the legislature must make difficult decisions to deliver a balanced budget that makes Colorado safer, keeps our economy strong, and maintains solid reserves to protect Colorado's future."

Some members of the JBC say the governor's new funding formula for schools places inordinate pressure on districts with a declining school-age population.

State Sen. Barbara Kirkmeyer, a Republican from Larimer an Weld counties, said that the budget proposed by Polis in November is "cutting education, cutting provider rates, not increasing provider rates across the board, not fund our obligations fully to child welfare and child care, cut higher education, do that shell game of using one time funds to supplement cash funds for one year instead of using general fund, so we push that out for a year."

Meanwhile, the state has seen a number of departments grow in response to new commitments such as universal preschool and free school lunches. In a PowerPoint presentation legislative council staff wrote that, "Growth in Colorado's appropriated budget has been largely driven by growth in the largest 'Big 5' Departments combining for a 45 percent growth from FY21 to FY25."

"Over the last several years there've been bills done by this legislature and policies that have impacted our growth in expenses and we need to look at all of those new programs compared to existing programs and figure out what is working, what's not," said Mark Ferrandino, Director of the Colorado Office of State Planning and Budgeting.

The legislative council staff also presented updated figures for Colorado school enrollment, which this year is above what the state forecasted by 4,816 students. The state's schools this school year have 835,942 students enrolled.

Much of the unexpected growth was driven by the enrollment in 2024 of students who just immigrated to the country. The legislative council staff also said that enrollment could decline again if the federal government carries out plans to deport undocumented immigrants next year, and if housing affordability drives more families to leave Colorado.

See the forecast December 2024 Forecast Document - FINAL.pdf - Google Drive

Powerpoint presentation: 12.2024 OSPB Forecast Presentation FINAL.pdf - Google Drive

And Supplemental Materials: Supplemental Materials - December 2024 Forecast.pdf - Google Drive