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Lawmakers protect K-12 education, universal preschool and core health care services amidst a $1.2 billion deficit while making difficult cuts to balance
DENVER, CO – The House today advanced the Fiscal Year 2026-2027 state budget on a preliminary vote. This bipartisan budget protects K-12 education and core health care services, while making reductions across state departments, lowering the state’s reserve, and reducing Medicaid spending to close a $1.2 billion deficit.
“Many of the cuts in this budget are gut-wrenching, but we did our best to protect investments in core services, including health care, universal preschool and K-12 education,” said JBC Chair Rep. Emily Sirota, D-Denver. “The TABOR cap requires trade-offs; a dollar for one program or service is a dollar less for another. It’s impossible not to make cuts to programs Coloradans care about–programs that have proven to be effective. However, this bipartisan budget protects what matters most to Coloradans while making responsible reductions to meet our Constitutional requirement to deliver a balanced budget.”
“Despite a staggering deficit, this bipartisan budget protects K-12 education, core Medicaid coverage, and public health services,” said JBC Member Rep. Kyle Brown, D-Louisville. “There is a bipartisan agreement that there are no easy places to cut more than a billion dollars from our state budget, but we did our best to preserve core services Coloradans rely on. Medicaid costs have been rising far beyond what the state can afford under the TABOR cap, but I’m proud that, unlike H.R. 1, we were able to reduce some Medicaid spending in a way that doesn’t kick anyone off their health insurance.”
The state’s $46.8 billion budget includes $17.4 billion in general fund expenditures, a net increase of just $212 million amidst $470 million more in Medicaid general fund costs This year’s Long Bill, HB26-1410, is accompanied by 64 “orbital bills,” which move through the legislative process alongside the budget and make the statutory changes needed to balance the budget.
Investing in Our Students
K-12 Education: Despite declining enrollment, this budget increases education funding at pace with inflation and does not reinstate the Budget Stabilization Factor. The General Fund contribution to K-12 education will increase significantly this year thanks to the Kids Matter Account created by Colorado Democrats last year, which is forecasted to invest more than $216 million in our schools next year. This is in addition to the $4.6 billion base General Fund spending for Colorado’s K-12 schools that will continue in FY26-27, which will be outlined in more detail in the 2026 School Finance Act.
Universal Preschool: Increased funding by $14 million to continue free preschool access for all Colorado kids, save families money, and prevent children and families from losing access to early childhood education.
Healthy School Meals for All: Increased funding by $38M to implement the voter-approved Prop MM and preserve access to free school meals for students.
Higher education: Lawmakers avoided major cuts to Colorado’s higher education institutions by holding funding flat this year.
Protecting Core Health Care Coverage
This budget protects core health care benefits and does not reduce Medicaid enrollment, preventing Coloradans from losing health insurance entirely.
To boost support for parents and children and protect access to maternal health care, the budget exempts Neonatal Intensive Care Unit (NICU) and maternal health providers from provider rate reductions.
Supporting Older Coloradans and Veterans
Senior Homestead Property Tax Exemption: This budget protects $200 million to ensure older Coloradans and veterans save money on their property taxes.
Safeguarding our Water
Colorado River: This budget boosted funding by $3.8 million to strengthen the state’s Colorado River negotiations and protect Colorado’s water future.
There are three main factors that have contributed to Colorado’s budget deficit.
First, H.R.1 created enormous new tax cuts for the wealthiest corporations and slashed revenue for core state services. This required the JBC to cut $200 million more from the budget to protect the Senior and Veterans Homestead Exemption. It also created a larger hole to fill in FY 2026-2027 by dipping into the state’s reserve in FY 2025-2026. Finally, it turned off over $1 billion in tax credits for families, taking money out of the pockets of hardworking Coloradans.
Second, TABOR limits how much Colorado can invest in government services each year, and there is a constitutional requirement to pass a balanced budget. When the costs to provide state services grow faster than the amount of money the state can spend each year under TABOR, then cuts have to be made. That is what is happening this year – Medicaid costs, prison caseload, and utilization of core services continue to grow substantially more than what the state can spend and what program experts previously forecast.
Third, Medicaid costs are exploding year over year, far beyond what was forecasted by nonpartisan legislative staff. Medicaid is growing at nearly nine percent per year, while TABOR constrains how much more the state can spend each year (about 3.2 percent for next year’s budget).
Medicaid spending is increasing primarily due to inflation and higher costs for existing benefits, higher utilization of services, and higher provider rates, not new benefits or services. The largest growth has been in long-term care, prescription drug coverage, and pediatric behavioral health.
To close the $1.2 billion budget deficit and deliver a balanced, bipartisan budget, lawmakers reduced health care spending, including a $270 million reduction in Medicaid reimbursement rates and some services. This is in addition to the $90 million lawmakers already cut from Medicaid this year.
Additionally, lawmakers reallocated $570 million that was previously invested in state programs or services, lowered the state’s reserve by $340 million, and made $150 million in cuts across smaller state departments. Lawmakers found additional savings in state employee compensation and held contractor rates flat to save $120 million, reduced health disparity grants and water quality programs by $4.5 million, and made $9.3 million in caseload-based reductions to the early intervention programs at the Department of Early Childhood.
One of the more difficult cuts for the JBC was to limit reimbursements to family members who serve as caregivers of Medicaid recipients. At 56 hours per week starting in 2027, reimbursement for family members who serve as caregivers in Colorado will remain one of the most generous in the country. Many states only reimburse up to 10 hours. Lawmakers also made a 9-percent reduction in the Cover All Coloradans program, which provides health care to pregnant women and young children, by reducing benefits.