Senate Advances FY 2026-2027 Budget

Lawmakers protect K-12 education, universal preschool, and core health care services while making difficult cuts to balance the budget

DENVER, CO – The Senate 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. 

“This year’s budget reflects a tough reality,” said Vice Chair of the Joint Budget Committee Jeff Bridges, D-Arapahoe County. “TABOR’s rationing limit, the rising cost of Medicaid, and Trump’s cuts are crushing Colorado’s finances and families. We’ve worked overtime this year to minimize the harm caused by these cuts. It’s not enough. That’s why Colorado voters will have the opportunity in November to solve these structural pressures and ensure all Coloradans have the opportunity to earn a good life.”

“The Joint Budget Committee has been working around the clock for months to finalize a budget that meets our constitutional requirements and make thoughtful, evidence-based decisions in a very difficult budget year,” said Member of the Joint Budget Committee Judy Amabile, D-Boulder. “Many of the cuts required this year are painful, and they will have a direct impact on people’s lives. We did not make these decisions lightly. Ultimately, we were able to deliver a bipartisan budget that protects core Medicaid services, lifesaving nutrition assistance, and funding for education.”

The state’s $46.8 billion budget includes $17.4 billion in general fund expenditures, a net increase of just $212 million from last year’s budget which does not cover increased costs in key sectors, especially Medicaid. 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.

Democrats took action to invest in Colorado kids and students in this budget. The General Fund contribution to K-12 education will increase significantly this year thanks to the Kids Matter Fund created by Colorado Democrats last year, which is forecast to invest more than $216 million in our schools next year. Democrats also increased funding by $14 million to continue free preschool access for all Colorado kids and increased funding by $38 million to implement the voter-approved Proposition MM to preserve access to free school meals for students. 

This budget protects core health care benefits and does not reduce Medicaid enrollment, preventing many Coloradans from losing health insurance. It also protects the Senior Homestead Property Tax Exemption with $200 million in funding.

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 Joint Budget Committee (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. 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 forecast by nonpartisan legislative staff. Medicaid is growing at nearly nine percent per year, while TABOR constrains budget growth to 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 earlier 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 reduction to the Cover All Coloradans program, which provides health care to pregnant people and young children, by reducing benefits. 

The budget package will now advance to third reading and final passage in the Senate.