Struggling to find $1 billion to plug a budget hole, a panel of Colorado lawmakers responsible for crafting the state’s next spending plan has turned to state agencies for help.

In particular, the Joint Budget Committee (JBC) asked the departments to check if they have unspent funds in the current budget year — and to not spend the money.

That would include — or could — include unspent federal dollars. 

JBC Vice-Chair Rep. Shannon Bird, D-Westminster, said agencies often have unspent funds typically toward the end of the budget year due to vacancies or other issues. Often, agencies will try to spend that money to avoid smaller appropriations in the future. 

In this budget year, the JBC wants the agencies to hold off on that spending.

The JBC wrote that agencies should refrain from end-of-year spending on non-essential items. If agencies have vacancies, projects or grants, in which the dollars have not been expended as anticipated, those funds should be reverted back to the state’s coffers, if feasible, rather than repurposed somewhere else.

Additionally, if an agency sees an opportunity for a “significant” end-of-year reduction in appropriations, the JBC wants to know about it as soon as possible.

“The FY 2025-26 budget challenges are exacerbated by unexpectedly high Medicaid expenditures in FY 2023-24 and FY 2024-25 and voters’ adoption of Proposition 130,” the JBC said in a letter to the governor, the treasury, the attorney general, the state and education departments, and the Colorado Supreme Court. 

The panel was referring to the ballot measure approved in November that requires the state to allocate $350 million on public safety, although it did not set a timeline for when those expenditures should be made.

Gov. Jared Polis said he wants to see some of that public safety spending started right away, in part to help the widow of a Golden police officer who died in the line of duty last November.

Is it essential?

The JBC also asked the agencies to consider whether their one-time funds from COVID-19 allocations might not be “essential” — and thereby could be repurposed.

The budget committee conceded that one-time funds don’t really help solve the state’s structural budget deficit — which happens when ongoing revenues fail to cover ongoing spending. But those monies can help the state “in transitioning to a lower level of ongoing spending.”

The advice is a reversal of the JBC’s position a year ago, when they encouraged the executive branch to spend down those one-time dollars, consistent with the legislature’s intent.

However, the fiscal picture has changed significantly since then, the committee said, suggesting that short-term programs could “look less valuable in the context of a structural budget deficit.”

Those funds should be reverted, the budget committee said. 

The committee explained what that might look like. In case of a short-term program with a two-year cycle of grants, where only one year has been awarded, those funds in the second or later years could be reverted, rather than awarded.

The JBC noted that the governor’s office on Jan. 15 submitted information on programs funded with American Rescue Plan Act (ARPA) dollars that could be scaled back. The letter said agencies should look for other opportunities, both from ARPA-funded programs and one-time general fund dollars.

The governor’s Office of State Planning and Budgeting identified ARPA funds in the 2023-24 and 2024-25 budgets that could be reverted to the state budget. The office’s initial estimate back in November was about $4 million.

That’s now grown to about $24.6 million.

A JBC memo on Jan. 23 said those dollars “include both funds reverted because the spending period has passed and some funds that are proposed to be ‘recaptured’ because they are not expected to be spent.”

Colorado received $3.8 billion in ARPA funds appropriated by the General Assembly during the 2021, 2022, and 2023 legislative sessions, according to the JBC memo. That led to 75 bills in six major spending categories: economic recovery and relief; workers, employers, and workforce centers; behavioral and mental health; affordable housing and home ownership; revenue loss restoration (allocated for general government services); and, transportation.

The intent was to spend those dollars no later than January 2025.

The Big Swap

In the 2024 session, the legislature passed House Bill 24-1466. Under that bill, federal ARPA funds previously allocated to specific ARPA-supported programs were used to “refinance” General Fund appropriations for personal services in the departments of Corrections, Human Services, and Judicial for FY 2023-24 and FY 2024-25.

The memo explained that spending federal funds this way “freed” the General Fund for those programs. About $1.6 billion in ARPA funds were at risk of not being paid in time.

Most of those one-time funds were used to help balance the 2024-25 budget.

What’s left to help balance the 2025-26 budget is about $24.6 million, with many of the reverted funds coming from programs with spending deadlines of June 30, 2026.

The programs those reversions will affect:

• $5.5 million for a healthcare worker recruitment program from legislation in 2022.

• Another million will come from a 2022 bill on a criminal justice intervention detection and redirection grant program.

• A 2021 bill to help people who have not completed their college education will lose just over $1 million. The “Finish What You Started” program was intended to help adults who left college before finishing their degrees return and get those diplomas.

• The student educator stipend program from 2022 will lose $4.7 million. That program was due to run dry in June 2025 and provided stipends to students in education professions to help with their finances while doing their clinical work.

• A Behavioral Health Administration grant program designed to award “community investment grants” for support services for children, youth, and families will lose just under $2 million, funds that were to be spent by Dec. 31, 2026.

Higher education consolidation?

On Jan. 22, in another cost-cutting move, the budget writers asked the Department of Higher Education to consider consolidating some of its functions under the Department of Education.

It’s not a novel concept. Several states — Delaware, New Hampshire, and the District of Columbia — have placed their higher education systems under the Department of Education.

The JBC, however, isn’t suggesting a wholesale move for the higher education agency. The letter said some of its administrative functions, such as budgeting, accounting, fiscal management, and IT system/data management could be “more robust” under the Department of Education.

The letter did not indicate how much would be saved by making that change.

A response from the higher education department is expected next week.