DENVER — Monday, Nov. 2, 2015 — Gov. John Hickenlooper today delivered the FY 2016-17 proposed budget to the Joint Budget Committee (JBC) as required by law. Prepared by the Governor’s Office of State Planning and Budgeting (OSPB), the requested budget totals $26.98 billion, a drop of 0.4 percent from the current year with $10.36 billion coming from the General Fund (mostly State income and sales taxes). The General Fund increase is 0.9 percent above the current year’s budget.  

The FY 2016-17 General Fund request includes $189 million in rebates required by the Taxpayer’s Bill of Rights (TABOR). At this level, rebates will range between $34 and $108, with an average of $51.

“This proposed budget strikes a balance between the contradictory rules in the Colorado Constitution, funding for essential State programs, and an unclear revenue picture,” said Hickenlooper. “We had to make difficult decisions to find this balance that will affect health care providers, students from kindergarten through college, and State workers. We look forward to working with the General Assembly and the Joint Budget Committee on the final plan.”   

Though economic conditions in Colorado remain among the most favorable in the United States, the budget required numerous balancing measures. In the current year General Fund outlook, the LCS forecast shows a $215.4 million shortfall (35.2 percent of the required reserve), while the OSPB forecast is $28.7 million (4.7 percent) below the required reserve. For FY 2016-17, the forecasts are closer in terms of growth rates, and the available money differs mostly by the gap in the current year.

The General Fund budget request uses the midpoint of the two available forecasts. Through the first quarter of the fiscal year, growth in the General Fund was 5.9 percent above the same period in 2014 and major sub-components of various taxes are performing consistent with the September 2015 OSPB forecast, notably wage withholding and estimated payments. However, as a measure of prudence, a lower assumption of available revenue was used for the request. With this assumption the current year General Fund budget is short by $160.3 million.

Colorado’s statutes and State constitutional provisions that govern revenue and spending are influencing features of the request. At the present time, both available forecasts show that the State will not be able to retain all of the revenue available and the excess revenue is a rebate liability in the General Fund. However, the rebates under the TABOR revenue limit are the result of cash fund revenue collected outside the General Fund, notably the Hospital Provider Fee established in House Bill 09-1293. Without these collections, State government revenue has grown slower than population and inflation since the revenue base was set in FY 2007-08.

Against available new revenue of $457 million and before balancing measures, OSPB identified $830 million in primary cost drivers in the General Fund:

  • $ 301 million for enrollment and inflation in K-12 schools
  • $ 289 million for TABOR rebates
  • $ 160 million to restore the 6.5 percent reserve level
  • $   80 million for new Medicaid clients

Thus, the budget request closes a $373 million gap.

Large growth areas in the budget include:

In K-12 education, a 2.6 percent ($162.6 million) increase from State and local funding sources. With this request, per pupil funding will grow to $7,397.52 from $7,294.40.

The State expects the Medicaid population to increase 4.7 percent to 1.35 million Coloradans. Though the overall appropriation to the Department of Health Care Policy and Financing will be flat, the General Fund to the department will increase by $135.6 million or 5.4 percent.

Several important requests in the Department of Human Services including: 1) $6.7 million to hire an additional 100 child welfare caseworkers. This in addition to the 100 new workers approved for this year;  2) $4.75 million for 125 additional workers in the Division of Youth Corrections (75 workers were approved for this year); 3) $4.1 million to address court-ordered competency evaluations and restorations, the demand for which has been increasing significantly; 4) $3.8 million to increase funding in the Early Intervention program, serving an additional 467 children.

Based on the forecast assumptions, under the provisions of Senate Bill 09-228, transportation will receive $201.9 million in FY 2015-16 and $107.4 million in FY 2016-17.

The budget required significant balancing measures to match spending and revenue. These include:

Reduction of Hospital Provider Fees. As noted earlier, the TABOR rebates in the General Fund are the result of growth in Hospital Provider Fees, which are not collected in the General Fund.  However, the rebate liability they generate is a General Fund obligation. We propose a $100 million reduction in the expected collections in FY 2016-17.

Reduce Appropriations to Higher Education. This request reflects a continuation of financial aid programs at the FY 2015-16 appropriation level, but $20 million, or 3.1 percent, is reduced in the General Fund request for public colleges and universities.

Allow the “Negative Factor” to Increase.  For K-12 education, FY 2016-17 enrollment is expected to increase by 1.2 percent and inflation will be 1.8 percent. In this request, though per pupil funding  will increase by $103.12 (1.4 percent), the negative factor in this request will grow by $50 million to $905.2 million.

Allow the State Education Fund Balance to Drop. As part of minimizing the increase in the negative factor, this request allows the ending balance in the State Education Fund to drop to $102.8 million, from a projected ending balance of $342.7 million in FY 2015-16.

Reduce Most Provider Rates by One Percent. Based on current appropriations a one-percent across the board provider rate reduction would equal $52.6 million total funds. However, we propose this reduction excluding primary care physicians under the federal "1202" designation. With these exclusions, the reduction totals $19.6 million net General Fund and $45.6 million Total Funds.

The request also used an updated forecast of local property taxes for school funding, which added $72 million over two years.  

Meanwhile, though there is no statewide raise for State employees, health insurance contributions should keep take home pay even with the current year.

Click here for the entire budget transmittal letter and summary slide presentation from OSPB. Click here for all of the components of the budget request.