Five Big Takeaways From the Governor’s Budget Proposal
What’s in Gov. Polis’ latest budget proposal?
Every year, the governor is required by law to make a proposal to the legislature for the upcoming budget year. While this is not a binding document, it does give Coloradans their first look at what the next budget will look like, and what areas the governor and lawmakers may focus on when the legislature’s convenes in January. Here are our top five takeaways from this year’s budget proposal:
#1 – Some progress towards fully funding K-12 public schools
While inflation is top of mind for most Coloradans because it’s squeezing their family budgets, it has a big impact on the state budget too. Colorado’s constitution dictates that per-pupil funding must grow by inflation, which is over 8% this year. Gov. Polis’ budget proposal calls for a 9% increase in per-pupil funding, which means K-12 funding would increase even accounting for inflation.
The proposal asks for $704 million over what the state spent in Fiscal Year 2022-23, which amounts to an additional $35 million towards eliminating the Budget Stabilization Factor. If you’re not a Colorado fiscal policy nerd, the Budget Stabilization Factor (formerly called the Negative Factor) is the number that shows how much the state is underfunding public education relative to the amount approved by voters under Amendment 23. This would allow a slight reduction to the size of 3% of funding for K-12. For some context, ten years ago (FY2012-13), the Budget Stabilization Factor was 16 percent of K-12 funding.
#2 – General Fund Reserve should help Colorado weather the next recession
While Colorado does not have a true “rainy day” fund like some states, the General Fund Reserve acts as a sort of de facto rainy day fund. To give some context, during the 2001 and 2009 recessions Colorado’s General Fund dropped 13% in one year. A 15% reserve will provide a necessary cushion to brace for the next recession, which many economists think is on the horizon.
Between 1986 and 2021, Colorado averaged a 4% General Fund Reserve. With such a small reserve, when the Great Recession came in 2009 we had to make big cuts to our schools (see BS Factor above). A healthy reserve should prevent that from happening again, but given how many unprecedented economic challenges we’ve faced in the last few years, we can’t rule it out.
#3 – Post-Marshall Fire, climate investments get a bump
Higher temperatures, droughts, and wildfires have wreaked havoc on the state in the past decade. The three largest wildfires in Colorado history happened in 2020, and the Marshall Fire burned hundreds of homes in Boulder County in late 2021. This year, the budget continues to make wildfire mitigation, response, and climate preparedness a priority by investing $38.3 million to help mitigate and recover from wildfires, including $13.8 million to increase aerial resources to fight fires from above and additional staff to coordinate efforts, $7.2 million to support local firefighters and local mitigation efforts, and $3.2 million to establish a statewide fire data system.
Population growth and lower precipitation and drought associated with climate change have also placed pressure on Colorado’s water resources. Gov. Polis’ budget proposal asks for investments to protect the quantity and quality of water resources: $17.6 million for the Colorado Water Plan grant program to support partners advancing high-priority water projects across the state, $1.9 million to protect our water rights under the Colorado River compact, and approximately $30 million towards the State match requirement for the federal infrastructure bill’s supplement to the Clean Water and Drinking Water State Revolving Funds.
The legislature made it a priority to allocate money from the 2021 federal infrastucture law towards improving our state power. The governor’s budget proposal requests a $1.5 million match needed for phase 1 of Hydrogen Hubs—a partnership with neighboring states to design, construct and deliver a hydrogen hub facility for alternative energy.
#4 – Another free month of transit in 2023
The Zero Fare for Better Air program passed this year offered free bus and light rail service in partnership with transit agencies in August 2022 and successfully increased RTD ridership by 36% year-over-year. This program saved riders more than $15 million in direct fare costs, on top of savings on gas. The governor’s budget proposal asks for $24.8 million to fund another month of free transit.
#5 – More investments in affordable housing
According to a 2022 Colorado Health Foundation poll, 88 percent of Coloradans say the rising cost of living is a serious problem in our state. In 2019, HB-1245 made changes to the vendor fee allowance, which resulted in $65 million of dedicated funding for affordable housing in 2022.
The Governor’s budget proposal allocates $15 million in affordable housing projects through the Public-Private Partnership Office, particularly focusing on building up workforce housing near transit and in rural areas. One major impact of this investment will be the construction of about 80 new workforce housing units in the Vail Valley.
Last session, the legislature invested over $200 million in homelessness reduction and solutions. The Governor’s budget increases those resources, including putting more money towards foster youth, at-risk adults, and the Fort Lyon Supportive Housing Program.
