Colorado’s 2023-2024 Budget
Colorado's 2023-2024 Budget
The approximately $40 billion FY 2023-24 Colorado state budget is finishing its legislative journey. Once signed by the governor, this budget will fund state activities throughout the coming year. Beyond serving a practical purpose, however, the document is also an embodiment of our state’s opportunities, challenges, and priorities.
In examining the proposed budget, several trends become clear. First, we are making progress on funding important priorities — many of which have been explicitly approved by voters. Yet, this progress comes at a cost. The restraints placed upon our budget by the Taxpayer’s Bill of Rights, or TABOR, mean that when we invest in one priority, it comes at the expense of another. This is a direct result of the restrictive cap TABOR places on allowable expenditures. If left unchanged, these challenging trade-offs will only become more acute in the coming years.
Valuable Community Investments
As alluded to above, the FY 2023-24 budget makes progress on long-recognized, important, statewide priorities. These include:
K-12 Education:
Currently, Colorado is 35th in the country for per pupil, K-12 spending. The FY 2023-24 budget however, provides for a $485 million increase in total K-12 funding, which is largely the result of increased property taxes at the local level. This will translate into about $900/student in additional funding.
Notably, the above-mentioned increase in K-12 funding does not take into account additional money which will be allocated in the forthcoming School Finance Act. It is expected that this annual piece of legislation will use dollars from the State Education Fund to pay down at least a portion of the Budget Stabilization Factor. We talk more about these nuances in our School Finance “In the Know”.
Implementing Voter-Approved Priorities:
Over the past several years, Colorado voters have approved several ballot measures that will strengthen the health and well-being of residents across our state. The FY 2023-24 budget provides funds to make these programs a reality:
- Universal Pre-K: As a result of Proposition EE, all Colorado four-year-olds are eligible for at least 15 hours of free preschool, starting this fall. This year’s budget allocates dollars to pay, support, and grow the capacity of universal pre-k providers.
- Free School Lunch: Through Proposition FF, which was on the ballot in 2022, students in participating districts can access free school meals starting next school year. Funding to support this effort was set aside in this year’s budget.
Setting Aside Money for the Future:
Finally, policymakers put away funds to protect against future economic uncertainty. By maintaining a 15 percent general fund reserve, this places the state in a better fiscal position should there be an economic downturn. As we document in our recent revenue base update, inadequate reserves deepen recessionary impacts, and heighten the accompanying negative impacts for families.
Implementing Voter-Approved Priorities:
- $30 million to fund additional pieces of legislation posed by current lawmakers
- $103 million to fund new and expanded workforce programs, including concurrent enrollment and free credentialing efforts
- $221 million to fund property tax relief and land use efforts
- $12.6 million to support implementation of the state water plan
Difficult Tradeoffs
Important as they are, the above-mentioned investments made by state policymakers come at the cost of other priorities, and will result in:
Increased Higher Education Costs for Students
Colorado’s 2022 Talent Pipeline report finds that over 70 percent of top jobs in the state require some type of education post-high school. With this in mind, policymakers increased allocations to higher education by 10 percent. However, this is less than the 11 percent rise in mandatory costs experienced within the higher education system. As part of the previously mentioned funding increase, lawmakers also allowed tuition to rise by 5 percent for most institutions.
Concerningly, shifting the cost of higher education to students is associated with decreased retention and graduation rates and higher student loan debt, particularly for students of color. All of these impacts can have long-term effects on the health and well-being of students, their families, and communities.
Higher, but Inadequate Provider Reimbursement Rates
This coming budget increases community provider rates (the reimbursement rates paid to private agencies which offer government-approved, community-based services) by 3 percent. This is a notable increase, and is higher than in many previous budgets.
Yet, questions remain about whether these increases are enough. Between January 2022 and January 2023, Colorado experienced a 6 percent inflation rate. As the Bell has long noted, when provider rates don’t keep up with rising costs, this contributes to a diminished social support network and, in-turn, a reduction in the availability and quality of necessary care.
Growing, but Still Lagging, Wages for State Employees
Finally, thanks in part to the tremendous work of Colorado WINS, the union representing state workers, those employed by the Colorado state government will receive at least a 5 percent pay raise. This is a historic investment in the individuals who make our government run. Notably, this pay increase is in line with those received in the private sector.
However, it’s important to note that, similar to community-based providers, the wages for government employees were starting at a deficit. In a study by Pew, researchers found that the 2021 yearly growth in hourly pay for private sector employees exceeded that for government workers by the largest amount on record. The consequences of these historic trends are being felt across our state government, as departments routinely cite hiring challenges for positions of all types – from case worker and corrections officers, to program administrators and support staff.
Challenging Times Ahead
In her concluding comments on this coming year’s budget, Joint Budget Committee Chair, state Sen. Rachel Zenzinger, remarked:
“There is a challenging budget to be written in the years ahead. We are facing a fiscal cliff… The certainty of that cliff, combined with the uncertainties of declining revenues, volatile inflation, and the ripple effects of national and global events might have you looking at this budget today and recognizing the effort that we put in implementation of the past and preparation for the future.”
This statement captures the revenue challenges facing Colorado. While these challenges are not new, they have more recently been masked by an influx of federal funds. As evidenced in this coming year’s budget, when these federal funds expire, the impact will be significant.
Approximately two-thirds of the annual growth in this year’s General Fund budget is attributable to the Department of Health Care Policy and Financing. During COVID, to support state budgets, the federal government increased its Medicaid match rate. This meant the federal government was paying a larger share of Medicaid costs than in prior years. However, as the federal health emergency comes to an end, so too does the enhanced federal support. As a result, Colorado must now increase its Medicaid costs. Medicaid is an essential part of the social safety net. However, as program costs increase, it limits investments in other parts of our state budget.
Concerningly, our budget challenges are projected to continue beyond FY 2023-24. This was made abundantly clear during the March, 2023 Economic and Revenue Forecast. In their presentation to the Joint Budget Committee, the Office of State Planning and Budgeting highlighted two important things:
- Our state is currently expected to bring in $1.2 billion over the TABOR cap in FY 2024-25. This is money the state will have collected through extant policy, but barring action by policymakers, will have to return to taxpayers.
- Colorado is facing a fiscal cliff – a phenomenon which has also been discussed in prior budget hearings. Unless action is taken to either cut existing obligations or collect additional money beyond what is allowed under the TABOR cap, our state will not have enough money in the years ahead to meet existing fiscal obligations.
Working within existing limitations, the FY 2023-24 budget makes prudent choices that prioritize K-12 education, and the financial and economic health of our state. However, these choices come at the expense of other programs, as our fiscal parameters necessitate an either-or approach to investing in community priorities. These choices will only become more difficult as federal COVID support wanes and the limitations of our TABOR cap become more pronounced. Looking ahead, our state policymakers will be faced with increasingly challenging decisions about how and where to invest limited funds.
