Colorado governor presents optimistic new budget but expects dark days to follow

Colorado Gov. Jared Polis on Monday presented an optimistic budget request for fiscal year 2021-22, proposing to restore some “painful” cuts made early in the pandemic, add a $1.3 billion economic stimulus program and and increase the state’s reserves in anticipation of tough budget cycles to come.

The $35.4 billion proposal for July 1, 2021, through June 30, 2022, comes at a time of profound economic uncertainty, and one day ahead of an election that portends countless possible budgetary impacts on the state and country. Polis will know more about the state’s economy later this week but he is required by state law to present his budget request on the first Monday in November.

“This budget,” Polis said Monday, “lays the foundation to build a stronger Colorado through key investments in our economic recovery, saving people money on health care, expanding access to education, building climate resiliency and expanding renewable energy to enhance our way of life and to build a Colorado for all where everyone can thrive.”

In the spring, the state legislature finalized the current budget with dramatic, across-the-board cuts necessitated by a precipitous drop-off in revenue, both real and forecast, during the early phase of the pandemic. Months removed from that process, the governor’s budgeting advisers now believe that things are not quite as bad as lawmakers and economic analysts believed they’d be when Polis signed the 2020-21 budget into law.

In fact, the governor’s office now expects to have about $3 billion more for next year than it previously forecast, said Lauren Larson, budget director for Polis.

Anticipating extra money, Polis on Monday touted a $1.3 billion “stimulus and recovery package.” About $168 million of that money, he said, will come from a program announced last week that’s expected to deliver a $375, one-time direct payment to some 435,000 Coloradans who’ve faced unemployment this year.

The stimulus proposal also calls for $105 million in wintertime support for small businesses harmed by capacity restrictions; $220 million to create jobs “by investing in shovel-ready public works and infrastructure projects”; $160 million in broadband investments aimed at improving telehealth systems and educational equity; and $50 million in benefits for vulnerable people, including housing and rental assistance — among other line items.

Polis also is proposing to restore higher education funding to pre-pandemic levels. It wasn’t much to begin with, though; Colorado has in recent years consistently ranked toward the bottom of the country for higher education spending. Polis seeks to restore and even increase per-pupil funding at the K-12 level.

The governor also proposes to set aside $200 million for coronavirus response in Colorado. He said he hopes for but is not counting on that amount being supplemented by a new round of federal relief.

Colorado is grappling right now with historic, climate change-driven wildfires, and Polis proposes $78 million in 2021-22 to prevent and respond to wildfire. That is a tiny dent in an estimated $4.2 billion forestry project backlog in Colorado. Polis called upon the federal government to make up the deficit, since much of the affected land is federally managed.

Polis proposes to dramatically increase the state’s General Fund reserves, from 2.86% to 10%. Expanding the state’s rainy day fund, he argues, will help it meet economic challenges to come. The outlook for 2022-23 is much worse than for the next fiscal year, Larson and Polis both said Monday.

In total, Polis proposes about $422 million in budget-item savings, close to $150 million of which comes in part from a lower-than-expected capacity to grow behavioral health programs in the state next year. The state’s has reduced its prison population during the pandemic, and the governor proposes about $35 million in Department of Corrections savings for 2021-22.

The legislature’s bipartisan — but Democrat-controlled — Joint Budget Committee will, over a series of meetings that will run well into next year, evaluate the governor’s priorities against its own, and the broader legislature is scheduled to weigh in and then pass the 2021-22 budget in the spring.

This year there is extra reason not to read too much into what Polis released Monday. The state’s fiscal outlook could change considerably, in any number of directions and starting as soon as Tuesday, when four tax- and fee-related ballot measures will be decided. Depending on results, voters could deliver Polis and the legislature hundreds of millions in additional money or leave them with even less to spend.

“I am still cautious, as we await the results of ballot initiatives and two additional economic forecasts before the budget is finalized, but the goal is right on: helping people,” state Rep. Daneya Esgar, a Pueblo Democrat who chairs the legislature’s Joint Budget Committee, said in an assessment of the governor’s proposal.

More significantly, the state’s economic forecast is extremely uncertain, and has fluctuated wildly since the coronavirus pandemic began. The most recent projections from state economic analysts, released in mid-September, show the state’s economy clawing back from the pandemic-caused recession ahead of schedule, but virus cases and hospitalizations have risen precipitously in Colorado and nationally since then.

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