Colorado lawmakers approved a $48.6 billion budget for fiscal year 2026-27 and sent it to Gov. Jared Polis’ desk after a conference committee completed work April 28, closing a roughly $1.5 billion shortfall not by raising revenue but by pulling $342.6 million from the state’s statutory reserve, diverting $626.4 million in one-time fund transfers across two fiscal years, and cutting services in 13 of the state’s 20 agencies. The reserve is now below the 15% statutory floor. The structural gap that produced the shortfall remains.
The budget grew from $46.7 billion in FY 2025-26 to $48.6 billion — an increase of nearly $1.9 billion — while the state simultaneously eliminated pay raises for all state employees, reduced Medicaid reimbursements by $270 million on top of $90 million already cut this year, and reduced the Department of Education’s general fund allocation by $82 million. Adult education, literacy programs, school bullying prevention, and capital construction grants all took reductions.
The TABOR constraint runs through every line of the budget. The Taxpayer’s Bill of Rights, the 1992 constitutional amendment that caps what the state can keep and spend, requires Colorado to return revenue above the cap to taxpayers. Over the three prior fiscal years, the state returned $8.5 billion in TABOR refunds. For FY 2025-26, revenue fell $308 million below the TABOR cap — meaning no refund at all for tax year 2026, the first time refunds have disappeared since the pandemic. Gov. Polis stated directly in his October budget request that Medicaid spending growth over the past decade has exceeded both the state’s revenue growth rate and the TABOR cap, calling it “a serious and unacceptable consequence for the entire state budget.” Medicaid now accounts for roughly one-third of all General Fund spending.
The legislature’s answer was to cut Medicaid by $360 million total and restructure Cover All Coloradans, the state program covering approximately 21,000 illegal immigrant pregnant women and children Those enrollees have a family household income at or below 260% of the federal poverty line. At the program’s projected FY 2026-27 cost of $127 million — up from an original $26 million estimate — that works out to roughly $6,050 per enrollee per year, or about $504 per month. That figure represents less than three-tenths of one percent of the total budget.
HB 26-1411, sponsored by Rep. Kyle Brown (D-Louisville), Rep. Emily Sirota (D-Denver), Sen. Judy Amabile (D-Boulder), and Sen. Barbara Kirkmeyer (R-Brighton), caps enrollment at 25,000 children for FY 2026-27, reduces the age of eligibility from 19 to 18, caps dental benefits at $750 annually beginning July 1, 2026, moves behavioral health services to fee-for-service only beginning January 1, 2027, and eliminates managed care and accountable care collaborative coverage on the same date. The bill also repeals the state Children’s Basic Health Plan entirely. Children who relied on home- and community-based services, private duty nursing, hospice care, or nursing home care lose access to those services on January 1, 2027, unless they were already receiving them before December 31, 2026.
The budget did preserve some spending. K-12 per-pupil funding increased $413 to $12,272. The legislature funded Proposition MM, the voter-approved free school meals program, at $38 million. Universal Preschool received a $14 million increase. A $7.7 million addition extended automatic enrollment for children with severe disabilities aging out of pediatric care through January 1, 2027 — without it, those children faced a waitlist projected to reach 14 years. The multimodal transit fund transfer of $10.5 million annually was suspended for three years rather than permanently eliminated, as the JBC originally sought.
The Wildfire Resilient Homes Grant Program was repealed. Behavioral health resources were repealed. The Comprehensive Human Sexuality Education Grant Program lost $991,025. Early childhood mental health services and a child care and substance use treatment pilot were ended.
The federal picture compounds the structural problem. The governor’s office states that H.R. 1, the congressional budget bill passed in 2025, created a $1.2 billion shortfall for Colorado through new Medicaid and SNAP administrative costs and the elimination of over $1 billion in federal tax credits for families. The state has protected $447 million from federal cuts but $23 million remains at risk.
One potential revenue source remains unresolved. Speaker Julie McCluskie’s bill to privatize Pinnacol Assurance, the state’s workers’ compensation insurer, carried a projected $300 million to $400 million payment to the state. JBC members expressed skepticism throughout the session, with only Sen. Amabile voicing outright support. The bill has not passed. The legislative session ends May 13. If it fails, the cuts in the budget stand as adopted, the reserve stays below the statutory floor, and the one-time transfers that balanced FY 2026-27 will not be available again next year.
The FY 2027-28 budget cycle begins with no new tools. The one-time transfers that closed this year’s gap are spent. The reserve is below the statutory floor. Pinnacol is unresolved. And the TABOR cap that returned $8.5 billion to taxpayers over three years continues to limit what the state can keep — while Medicaid alone consumes a third of every general fund dollar and has grown faster than that cap for a decade. The legislature balanced the math. The problem that made the math hard remains.
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