Gov. Jared Polis unveiled his final budget proposal Monday, suggesting the state seek to raise taxes on the gaming industry through a 2027 ballot measure and arguing again for legislators to support the private conversion of Pinnacol Assurance for some $400 million.
The $51.3 billion budget plan, which includes an $18.9 billion general-fund budget that represents a 2.6% increase from the current fiscal year, also includes more than $650 million in Medicaid growth limits to help plug an estimated $1.6 billion shortfall next year. And proposes to eliminate more than $16 million in business personal property tax exemption reimbursements that the state gives to affected county governments, though it does not affect the actual exemptions that are given to businesses.
This budget, proposed for the fiscal year that begins in July 2027, is the last of the Democratic governor’s career because he is term-limited and will leave office in mid-January. In that sense, it is in some ways a suggestion to his successor about the state’s spending priorities, though it is a suggestion that will be used to begin the fiscal planning process with the Joint Budget Committee as soon as next week.
While business leaders are likely to be more affected by the non-budget bills that will come up in the 2027 legislative session, dealing with everything from labor laws to operational regulations, Polis’ budget plans are likely to stir some concerns as well as some praise.
Increased taxes as well as increased expenditures
His gaming-tax proposal would cost the industry about $80 million annually in new payments, the document estimates, and rural hospitals continue to worry about potential service cuts that could result from Medicaid reimbursement reductions. On the other hand, the gaming-tax and Pinnacol-conversion proposals would both seek to boost funding for childcare at a time when early childhood education is both hard to find in Colorado and comes at some of the highest costs of any state.
Polis, in a news release, said his final budget plan reflected the values with which he’s tried to imbue the state financial plan since his inauguration in January 2019.
“I am proud of the progress we have made the last eight years. Our investments have improved the lives of Coloradans and helped everyone thrive,” he said, pointing to proposed spending boosts for K-12 education and workforce development, among other priorities. “My final balanced budget proposal builds on all this success, safeguards Colorado’s financial future and sets Colorado up for success for years to come.”
One more effort to convert Pinnacol Assurance
Maybe the most impactful business proposal in the plan is Polis’ suggestion to let Pinnacol Assurance, the state-chartered workers’ compensation insurer to 47,500 businesses, free itself from state control and operate as a fully independent mutual insurance company. The company has lost market share as state law bars it from covering workers in other states — a particular problem as more companies hire nationwide remote workforces — and such a conversion would secure Pinnacol’s future, Polis said.
But while Polis’ plans for what to do with the $200 million to $400 million the state could get from Pinnacol for its conversion — 50% to beef up state reserves, 25% to the State Education Fund and 25% to a new childcare assistance fund — are new, the idea isn’t. It’s been presented to legislators each of the past two budget years and met with resistance by some members from both parties, making it a particularly unsure bet this year because Polis won’t be around to try to cajole support from other elected officials.
And the suggestion comes while Pinnacol leaders and workforce-development supporters like Colorado Succeeds are already negotiating alternative plans on how to accomplish this privatization in other ways, following the withdrawal of a ballot proposal on the topic.
“We appreciate Governor Polis’ leadership and his long-standing commitment to Pinnacol’s future, which has helped highlight and shape the need to modernize Pinnacol,” said the statement that was sent to The Sum & Substance. “We’re working with a broad coalition on legislation in 2027 to give Pinnacol the flexibility to adapt to a 21st-century economy while fully preserving its member-owned structure and public mission, including its role as Colorado’s insurer of last resort.”
Gaming, tobacco tax increases in budget proposal
While that last-ditch suggestion was no surprise, Polis may have caught leaders of Colorado’s $4.2 billion gaming industry a little more off-guard with his budget proposal to raise taxes on it through a ballot initiative next year. Specifically, the governor proposed raising taxes on casinos and on tobacco and nicotine sales by a combined $128.9 million annually to boost funding for childcare and preschool programs.
For the gaming industry, that would happen by creating new taxation brackets based on the adjusted gross proceeds for each casino and raising tax rates, which now are capped at 20% to 27.5% for casinos earning $20 million to $100 million annually and to 35% for the four casinos bringing in more than $100 million per year. This would raise the effective tax rate for the industry from 16.1% to 23% and would boost tax revenues an expected $80.2 million a year, the budget proposal states.
That would put Colorado’s effective tax rate closer to the national average of 26.5% while building on efforts to help families access early childhood education that can force young parents to stay out of the workforce if they can’t find help, the proposal explains. And it could help clear an increasingly lengthy waiting list for childcare assistance that parents experience in many parts of the state, he wrote.
The Colorado Gaming Association said in a statement that it’s working to understand the proposal and that it will discuss the idea with Polis’ successor — Democrat Phil Weiser, Republican Victor Marx or independent Greg Lopez — next year.
“The industry is reviewing the details of the proposal,” the statement reads. “(Industry leaders) anticipate there will be changes to the budget proposal under the new administration and look forward to working with the new governor on his budget proposal after the election.”
More money for workforce training, incentives
Polis, as he has for several years running, proposed several ideas to boost workforce development — a topic on which he’s been very engaged with business groups, including the Colorado Chamber of Commerce, over the past three years. Those included:
- Proposals to expand tax credits for CHIPS zones designed to attract semiconductor manufacturers and through the Opportunity Now program that’s awarded money for business-education partnerships to boost workforce-training pathways;
- A $4.7 million set-aside to implement suggestions from the Transition Advisory Commission that is working to combine the state’s siloed higher-education an workforce-development initiatives under one new state agency; and,
- $10 million in incentives to support Colorado’s bid to be the home of the new Space Academy — part of an anticipated package of $50 million in incentives over five years.
The governor also proposed a change to a program that offers companies with $58 million or less of equipment exemptions from paying business personal property taxes to local governments — exemptions the state reimburses with $16.3 million in payments to counties. The proposed budget change would eliminate the reimbursements to counties but would not affect companies’ abilities to claim the exemptions.
Medicaid spending slowdowns
Finally, in what is likely to be the most debated part of Polis’ budget plans, he proposed capping spending growth for the state’s Medicaid program at 4.3% rather than the 15% growth level that is anticipated based upon current spending and caseload growth. While that would still grow the general-fund portion of the Medicaid budget by about $250 million, it would reduce anticipated spending by $664.6 million and would be accomplished through a variety of cutbacks that include:
- Limitations on behavioral-health providers’ ability to bill for support standalone services like self-help and targeted-case-management services, permitting reimbursement only when these services were provided as part of a larger encounter — a change anticipated to save the state $169.1 million
- Reimplementation of prior-authorization requirements for outpatient psycho therapy services, which is expected to save the state $64.1 million;
- $28.6 million in reductions to incentives and funding for accountable care collaborative contracts given to regional accountable entities to manage the care of enrolled Medicaid patients; and,
- Delaying health service initiatives for families enrolled in the Child Health Plan Plus program for lower-income children, including provisions of new supplies like diapers and car seats, expanded home visits and food-pantry support, saving some $9.9 million.
“Medicaid is the single-largest expenditute within the state budget, and it has historically outpaced the growth of state revenue and the (Taxpayer’s Bill of Rights) cap,” Polis wrote. “The current growth rate of Medicaid spending is unsustainable, and on its current trajectory would crowd out other state government services.”
Budget stirs debate among observers
Sen. Barbara Kirkmeyer, one of two Republicans on the six-member JBC, said in a news release Monday that the proposed budget makes it clear that legislators must rein in spending, particularly on Medicaid, before it overwhelms the state.
“The governor’s own numbers tell the story of what happens when you allow spending commitments to outstrip the state’s ability to sustain them,” Kirkmeyer said. “We need spending discipline that is actually enforceable, meaningful oversight and a budget proposal that is actually balanced.”
However, Adam Fox, deputy director at the Colorado Consumer Health Initiative, said that Polis’ proposals would only hurt Coloradans at a time when the federal government also is reducing access to Medicaid services.
“Governor Polis’ suggested budget cuts put the health of vulnerable Coloradans at risk and exacerbate an already worsening affordability crisis,” Fox said in a news release. “Polis, who has passed pro-consumer healthcare policies and expanded access to Medicaid, is now proposing more cuts to lifesaving programs rather than supporting a viable solution. Cuts aren’t a solution for Coloradans struggling to afford healthcare or other basic necessities.”
Polis is scheduled to meet with JBC members on Nov. 12 to outline his proposals in more detail and answer questions from the committee. The JBC will then put together the budget with the goal of passing through the Legislature by late March.