Decoding Federal Funding Streams in Colorado
Federal funding is central to many services Coloradans depend upon — from child care and K-12 education to meals on wheels and housing. This reality means that proposed federal budget cuts of up to $1.5 trillion over the next 10 years would inevitably have massive impacts in our state.
What many, however, don’t realize is that because the state government receives a significant amount of federal money, national funding cuts will impact state services. These reductions will be exacerbated by TABOR and its constitutional spending and revenue raising restrictions. The upshot is that, unlike in many other states, Colorado policymakers will face tremendous challenges making up for lost federal revenue and, in-turn, the services they support should national funding be reduced.
Below we take a deeper look at the intersection between federal dollars and Colorado’s budget, and the potential impact to state services if federal funding is cut.
An Overview of Federal Funds & Colorado’s Budget
In fiscal year 2024-25, Colorado’s total budget was approximately $43 billion. Nearly 30 percent of these funds, a little over $12.5 billion, came from the federal government. Notably, this figure only accounts for funds that were funneled through the state. It doesn’t include the millions of dollars that went directly to local governments, individual Coloradans, or community organizations like universities.
Looking at the state’s budget in more depth, it becomes clear that some departments — and the services they provide — are more reliant upon federal funds than others.
Of the many things that stand out in the above chart, it’s notable that several of the departments that receive the largest amount of federal dollars — including the Departments of Health Care Policy and Financing, Education, and Human Services — fund direct services that many Coloradans rely upon. This reality underscores the potential consequences to Coloradans of federal funding cuts.
Federal Funding Streams & the Services They Provide
An examination of federal funding at the state level shows its role in the aggregate. However, doing so glosses over the many individual programs and services these dollars support. Below, we dive into some of the individual state departments to explore what federal funding covers and its impact on the lives of Coloradans.
Department of Health Care Policy & Financing – Medicaid & CHIP+
Far and away, national support for two health care programs — Medicaid (which covers Coloradans with low incomes) and CHIP+ (which covers children and pregnant women from families that make too much to qualify for Medicaid) — account for the largest influx of federal dollars into Colorado. In total, these two programs, but mostly Medicaid, make up over half of all money that comes into the state budget from the federal government. The two programs are jointly funded by the state and federal government, with the federal government paying at least 50 percent of all beneficiary costs. As of the start of 2025, Medicaid and CHIP+ covered approximately 22 percent of all Coloradans, including 40 percent of all births in the state.
Notably, over the past several months there have been growing concerns that federal-level program and funding changes will significantly impact Medicaid and CHIP+. As documented by the Colorado Center on Law and Policy, many of the proposals under consideration would lead to reductions in the number of Coloradans enrolled in these programs and/or would cut services for beneficiaries.
Department of Education – K-12 instructional quality, disability and english language support, and free/reduced lunches
Though K-12 education is primarily funded at the state and local levels, the federal government also provides support. Several of the more prominent K-12 funding streams which go through the state include:
Much of the federal funding that supports K-12 education originates in the Department of Education. However, at the end of March 2025, President Trump signed an executive order to begin closing this department. While the administration has stated that the largest funding streams will not be cut, concerns still exist as to the reliability of these dollars in the coming years, especially as the staff in charge of ensuring the accuracy and timeliness of these dollars continues to be reduced.
Department of Transportation – Highways and mass transit
Over 40 percent of the Colorado Department of Transportation’s (CDOT) budget comes from federal funds. Most of these dollars (an estimated $738 million in FY 2022) come from the Highway Trust Fund (HTF). This fund is primarily supported by an 18.4 cent/gallon federal fuel tax. HTF dollars are used for two purposes – to fund highways and support mass transit needs. This large funding stream is especially important to the state given that Colorado is ranked 43rd in the country for its road conditions.
HTF dollars are distributed to states via a combination of established formula and need-based grants. In recent months, however, the Trump administration has suggested changes to how these funds are allocated. As has been noted, if implemented, these changes are expected to reduce federal transportation dollars to Colorado.
Department of Public Health and Environment – Vaccinations, maternal and early childhood support, public health preparedness, and disease prevention
Colorado’s Department of Public Health and Environment (CDPHE) is responsible for a diverse range of activities which support Coloradans’ health and safety, from responding to health emergencies and providing vaccines to advancing maternal health. Grants from the Centers for Disease Control and Prevention (CDC) play a vital role in supporting these many services. In 2023 alone, CDPHE received more than $127 million from the CDC. Some of the activities that were funded include:
In addition to the above-mentioned CDC grants, CDPHE also received approximately $86 million in 2023 from the US Department of Agriculture to support WIC, a program which provides pregnant women, mothers, and young children food, education, and support.
As the COVID pandemic demonstrated, a public health infrastructure capable of rapidly responding to evolving needs is essential. The many activities which fall within CDPHE’s purview — and are funded by the federal government — are essential to the development of a system that embodies these qualities and protects Coloradans’ health and safety.
Department of Human Services – Social services for the state’s most vulnerable
Similar to CDPHE, the Colorado Department of Human Services (CDHS) provides a host of services, many of which directly benefit the state’s most vulnerable residents. Federal revenue, including the following sources, support many of these supports:
