Gov. Jared Polis released his recommendations for Colorado’s 2026-27 state budget on Oct. 31, outlining another difficult year ahead for lawmakers. The proposal sets the stage for the Joint Budget Committee and full General Assembly to begin crafting the state budget in January. Facing an estimated $840 million shortfall, the governor’s plan reflects ongoing challenges tied to caseload growth, inflation, and the limits of available revenue.
The governor’s budget recommendation makes the first attempt at bridging that shortfall by taking aim at Medicaid and trying to privatize the state’s workers’ compensation program, among various nondescript moving pieces thrown at the wall.
Here are the top-line items in the budget recommendation:
Even on the K-12 front, the proposal hides some trade-offs. The governor recommends reaching 30% implementation of the new school finance formula—a positive step—but also shifts to a three-year pupil count average instead of four. That quiet change effectively amounts to a $30 million reduction in school funding, even if it isn’t labeled as one. One big unknown is property tax revenue, which covers roughly 45% of the more than $10 billion in total school funding. If the local share comes in lower when numbers are finalized on Dec. 15, the state will have to make up the difference—money the current budget doesn’t seem to have.
Much of the discussion of the budget proposal centered around the growing Medicaid budget—that program jointly funded with state and local dollars for low-income individuals’ medical services. Over the last 10 years, Medicaid spending has risen on average 8.8% a year. And the TABOR math doesn’t work, since TABOR restricts state revenue growth to inflation plus population growth—which is a lot less than 8.8%.
The governor’s plan would tap the brakes on Medicaid spending, holding growth to 5.6% in fiscal year 2026-27. That’s a big slowdown from the double-digit jumps of recent years—though still faster than almost anything else in the state budget. But it’s not easy to cut Medicaid, as much of it is driven by need and an aging population.
Gov. Jared Polis has proposed privatizing the state’s workers’ compensation insurer, Pinnacol Assurance, and selling off the state’s ownership stake. The administration frames the move as a way to generate one-time revenue and modernize the system, but the sale would also mean giving up a long-term public asset that has historically provided stable coverage and dividends to employers. While the details are still emerging, the plan raises a question of what happens to Colorado’s workers’ compensation market once the state steps out of it. The governor’s plan assumes the Pinnacol sale would help close roughly $400 million of the budget shortfall—but that’s only if the proposal is approved. A similar idea was floated last year and failed to gain traction despite the governor’s backing. It’s a bit like selling your snowblower in July—sure, you get a quick infusion of cash, but you’ll be the one shoveling in the future.
The governor’s proposal may be technically “balanced,” but that word deserves an asterisk. A balanced budget under TABOR doesn’t mean Colorado is adequately funding its core priorities—it only means the state has balanced within an arbitrary cap. Budgeting to the TABOR limit is often presented as fiscal responsibility, but it’s really a false choice: The cap’s growth rate—roughly 4%—simply can’t keep up with the real costs of running a state. Medicaid alone is growing at about twice that rate, and so are the needs in public education, transportation, and infrastructure. In other words, we’re balancing on paper by quietly underfunding the very systems that keep Colorado functional. Yes, Colorado’s budget has been made worse by the passage of H.R. 1 (the federal Big Beautiful Bill), but that’s another distraction taking away from the conversation we need to have if we still want schools, roads, medical care, and public safety: The state needs more revenue.
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