Governor’s proposal leaves major decisions about Medicaid, education, and long-term funding unresolved as voters prepare to weigh in on competing tax measures.

DENVER — For the third consecutive year, Colorado faces significant budget challenges. But Gov. Jared Polis’ final budget proposal leaves some of the state’s most difficult fiscal decisions unresolved, according to the Colorado Fiscal Institute (CFI).

The governor’s proposed fiscal year 2027-28 budget outlines measures intended to reduce spending growth by approximately $1.5 billion, including reductions to Medicaid, cuts to agency operating budgets, and reliance on one-time funding solutions.

“It’s a vague punt,” said Kathy White, executive director of the Colorado Fiscal Institute. “The governor has presented a balanced budget, but Colorado is still facing the same structural challenges that have forced lawmakers to make difficult decisions year after year.”

Several areas of the proposed budget raise questions:

• Medicaid: The governor proposes limiting Medicaid General Fund spending growth to 4.3%, compared with projected growth of approximately 15%. While the budget identifies nearly $300 million in General Fund reductions, additional proposals won’t be submitted until January. The proposed changes already include eliminating adult dental coverage and reducing behavioral health payments. These reductions come as Colorado is already experiencing coverage losses from H.R. 1. The state estimated that approximately 5,900 Coloradans, including refugees and asylum seekers, would lose Medicaid coverage beginning Oct. 1 because of new federal immigration eligibility restrictions. Starting in January, approximately 377,000 Medicaid members are also in the population potentially affected by new federal work requirements and more frequent eligibility checks, raising concerns about additional coverage losses.
• Public education: The proposal continues implementing Colorado’s new school finance formula but incorporates an enrollment-smoothing approach that raises questions about funding for districts experiencing declining enrollment. The administration also acknowledges that the State Education Fund could become insolvent in fiscal year 2028-29 if General Fund contributions fall to their five-year average.
• Child care: The proposal includes a potential $100 million investment in the Colorado Child Care Assistance Program, but that additional funding depends on converting Pinnacol Assurance. The governor is also proposing tax changes to support child care and preschool, leaving questions about how the state will sustainably expand access to affordable care.

These challenges come as federal tax changes under H.R. 1 have significantly reduced corporate income tax revenue and shifted additional costs for health care and food assistance onto Colorado.

“For three Novembers in a row, we’ve had the same conversation about budget shortfalls, spending cuts, and what Colorado can no longer afford,” said Chris Stiffler, senior economist at CFI. “We keep figuring out how to make the numbers add up without addressing why they never add up in the first place. At some point, we have to stop treating the budget crisis like an annual tradition and figure out how to sustainably pay for the schools, health care, and other services Coloradans need.”

Election Results Could Reshape Colorado’s Fiscal Outlook

The governor’s proposal comes just one day before Colorado voters decide two competing income tax measures that could shape the state’s fiscal future.

Amendment 87 would replace Colorado’s flat income tax with a graduated structure. According to nonpartisan Legislative Council Staff estimates, the measure would generate approximately $2 billion in additional annual revenue in the coming fiscal years, dedicated to public education, health care, and early childhood care and education.

Proposition 136 would establish a statutory maximum income tax rate of 4.4% for individuals and corporations. If both measures pass, their conflicting provisions could require resolution by the legislature or courts.

The outcome of these measures could significantly affect Colorado’s fiscal outlook and the choices lawmakers face in January. While Amendment 87’s revenue would be dedicated to specific services rather than the General Fund, it could provide additional resources for education, health care, and early childhood programs facing continued funding pressures.

Polis has publicly opposed Amendment 87, even as his administration acknowledges continued pressure on the state’s ability to fund essential services.

CFI believes the governor and state lawmakers must explain how they intend to address these challenges under different revenue scenarios.

If Amendment 87 passes and takes effect, how will the state incorporate its additional dedicated revenue into future spending decisions? If it fails, what alternatives will lawmakers pursue to address continuing budget pressures? And what will either outcome mean for the proposed reductions affecting Colorado families?

Those questions will remain relevant well beyond Election Day.

CFI will closely monitor the results of Amendment 87 and Proposition 136, their implications for state revenue and spending, and how the next administration and General Assembly respond as they develop the final fiscal year 2027-28 budget.

“Balancing the budget is a legal requirement, but it’s not the same as solving Colorado’s long-term fiscal problems,” Stiffler said. “The choices lawmakers make in the coming months will determine what services Colorado can provide and how those services are funded for years to come.”