Colorado’s looming price range shortfall simply retains getting worse.
In a letter to the Joint Funds Committee this week, state officers stated Colorado might want to spend a further $73 million on Medicaid this price range 12 months, which ends June 30, as demand for well being providers continues to surge past the administration’s expectations.
Prices are anticipated to proceed to rise subsequent price range 12 months, when the state now expects to spend $86 million greater than earlier estimates.
Add that to the newest figures supplied to the Joint Funds Committee final week, and lawmakers might have to chop as a lot as $1.2 billion to stability subsequent 12 months’s price range — a 20% bounce from the $1 billion gap that state price range writers thought they had been going through just a few months in the past.
Taken collectively, the 2 experiences mark essentially the most full accounting of the price range deficit since the quarterly income forecasts in September. Throughout the latest forecasts in December, legislative analysts pegged the shortfall at $672 million — however that determine didn’t embody not less than one main expense: the $350 million voters required the legislature to spend on legislation enforcement via Proposition 130.
Since then, the legislature additionally accredited a further $85 million in spending throughout midyear price range changes, often called supplementals. Most of that may go to Okay-12 colleges. Enrollment was greater than anticipated when lawmakers accredited the price range final spring, whereas native property tax collections had been decrease, due to tax reduction payments handed by the legislature.
However the rise in Medicaid prices, which have continued unabated since final spring, stay the only largest driver of the state’s price range woes. Medicaid is the federal medical insurance program for low-income households, and whereas the state is just on the hook for a share of the price, the worth tag has grown to round a 3rd of Colorado’s $16 billion state working price range.
Well being care prices have been rising quicker than the state income cap below the Taxpayer’s Invoice of Rights for many years. However the latest spike in prices, coupled with the top of federal stimulus {dollars} in the course of the pandemic, have culminated on this 12 months’s price range crunch.
Mark Ferrandino, the governor’s price range director, wrote in a letter to the JBC that sufferers are utilizing extra long-term care, equivalent to nursing properties, than they’ve up to now. Greater use of long-term care, coupled with rising prices, triggered the state to overspend its Medicaid price range final fiscal 12 months, which ended June 30, 2024, in a pattern that’s now anticipated to proceed via not less than 2026.
Two different elements contributed to the newest price range overruns: newly negotiated behavioral well being care charges and rising enrollment and prices related to caring for these with developmental disabilities.
To deal with the rise in prices, Gov. Jared Polis supplied quite a lot of cuts to the Well being Care Coverage and Financing Division, together with a significant restructuring of nursing house supplier charges, that will exempt them from the state income cap. Nevertheless it’s not but clear if the JBC, which writes the majority of the state price range on behalf of the legislature, shall be receptive to Polis’ strategies.
Final week, legislative price range workers warned lawmakers that the price range issues they face are more likely to proceed for years to return.
When price range writers discuss subsequent 12 months’s shortfall, they’re referring to what would occur if the state continued “enterprise as standard” within the 2025-26 spending plan. Which means masking the rising prices of well being care and Okay-12, in addition to giving typical inflationary raises to greater training, state staff and Medicaid suppliers.
Subsequent price range 12 months, which begins July 1, the rising prices of Medicaid alone would wipe out your complete $304 million the state has to spend on inflationary will increase.
If lawmakers don’t change the state’s monetary trajectory with ongoing cuts, Colorado would deplete its $2.1 billion reserve fully by 2029. And that’s if the financial system retains rising.
If the nation descends right into a reasonable recession, the state may run out of cash to pay its payments in the course of the 2026-27 price range 12 months, in line with JBC workers.
“The take-home message that I’ll offer you is that you just want a delicate touchdown that’s going to get to a path that the state can truly maintain,” Craig Harper, the JBC’s nonpartisan workers director, advised lawmakers.
