Want you to know with a couple of Democrats senators who are not on the JBC, it'd be nice if our chair and other folks showed up. Either, but I JBC is back. Hello, everyone. We're going to kick it off with the 1330 one's and then turn to the dire predictions for the future of our state's budget later on. Mr. Braque. Thank you, Mr. Chair. Justin Braque, Joint Budget Committee staff. I'm starting off with the interim supplemental request for the Department of Corrections. We have two, so starting on Page two, as the personal services shortfall,
they're asking for an over expenditure authority of about $7,400,000 General Fund, I agree that it meets supplemental criteria. The issue was known during the session, but the scale of it wasn't. So I agree that it's based on new data. Specifically, they need $4,100,000 for the PERA unfunded liability payments. It's a long acronym, but PERA unfunded liability and then $3,300,000 for shift differential. And basically, they've been successful in hiring. So they've hired more people than our total compensation process contemplated,
which is good, especially where they were a few years ago. And then the second piece is that the total compensation process just hasn't caught up in some cases with actual expenditures. So essentially, there's a bit of a lag here that there is being reflected in the request. It's very similar to last year's over expenditure, the difference being that last year they addressed it through the Governor's transfer authority for like purposes, which has been adjusted with the JBC bill this year limiting his ability to do
that. Last year, they transferred money from various line items in order to take care of this, but this year they need over expenditure authority in order to do it. The request notes something about an expected reversion of $5,100,000 general fund in the transgender health care line item to offset this. They're not really connected. It's just that there's going to be a reversion there that's going to offset this at least in practical terms, in terms of the general fund situation. So you can't really do anything about restricting or reducing a different line item. So, it is what it is. I recommend approval.
Questions? Rip Jagger. Thank you, Mr. Chair. Question, Mr. Bracki. When it comes to the shift differential, is this the tip of the iceberg for other departments that are going to have a like situation that this has not been properly calculated? Or is it strictly the Department of Corrections? Mr. Bracki. Thank you, Mr. Chair. Representative Taggart, it's primarily the Department of Corrections. They have way more staff than any other department, and not every department has shift differential given the nature of 20 fourseven facilities. And then the way that the total compensation process works,
it should start to smooth out more than it has this year and last year just with the two year lag in the process. So it's mainly Department of Corrections and I think next year would be a different story. Senator Kirk Meyer. Thank you. Just looking at your second paragraph under department request, where it talks about the example of the request for the shift differential is based on the prior year's actual expenditures creating a two year lag in budgeting process. So given what we just heard from the audit, are we starting to get this turned around? Are we starting to make some changes here? Or is this still just a
practice that that they've been doing in the past and we're just going to keep continuing it for another for the remainder of this year? Mr. Brecke? Thank you, Mr. Chair. Senator Kirk Meyer, with Shift Differential in particular, I think it's going to smooth itself out given that the FY twenty twenty five-twenty twenty six budget is based on FY twenty twenty three-twenty twenty four actuals and that's when shift differential started to like really go through the roof. So next year's appropriation is going to reflect kind of the start of those higher expenditures. So if there is a gap next year, it will be much smaller than the last two years.
I think the question moving forward is if there's another change in shift differential premiums, for example, how would we address it then? So and not end up with a two year lag if things change in the future. But I think with this particular example, it should kind of be smoothed out now that we're caught up essentially or getting there. Any other questions? All right. She's up there. Madam Vice Chair. I move to approve staff recommendation. Are there any objections? Seeing none, that motion passes six-zero. Mr. Bracki, next. All right. Thank you, Mr. Chair. We're on page four, payments to local jails.
There's a lot here, and I think my plan is to run through the first four pages, which is connect to give you a high level overview. And from there, I'll let you take the wheel in terms of how much or what's best you want to talk about. So, I'm going to start with a few pages, and then we'll kind of take it from there. The department requested an over expenditure authority of $1,300,000 general fund for the appropriation that supports reimbursements to local jails holding DOC inmates. I think I agree that it meets supplemental criteria. Again, the scale of the jail backlog wasn't known when the appropriation was made.
There were concerns about it, but the specifics of which only manifested recently. The department's request is for over expenditure of $1,300,000 Essentially, they attribute the request to two things: one, an increase in the jail backlog, which the data do support. Per the request, it says due to the anticipated population of beds as part of the supplemental budget process, the jail backlog increased significantly at the start of 2025 and has continued to rise. And then the second piece of this was a midyear reduction to the jail local jails line item. So basically, there's not enough appropriations there to support the over expenditure they're needing now.
The line item for private prisons is a factor here, and I do need to correct some of the data that you see in this paragraph on Page four. So they're going to offset the actual over expenditure for Local Jills is $1,800,000 offset by a transfer from the private prisons line item of about $500,000 So that's why this request is for $1,300,000 They under expended the line item not by 450,000 I was calculating it differently, but by about $200,000 And then there was the midyear increase that the JBC approved of $350,000
which brings us to about the $550,000 that they're going to transfer. There's some technical issues here with the way it is, but basically the actual expenditures you see in the request do not reflect what was billed. They reflect what was billed minus liquidated damages from the private prison's operators. So the actual expenditures are not necessarily reflective of actual billing, which is something I learned yesterday. On Page five, you kind of see where we shake out when it's all said and done in the table there. And highlighted at the bottom of the table,
basically, the actual expenditure that they're saying that they're going to have at the end of the year is basically minus nine private prison beds from where the appropriation started at the beginning of the year and minus 26 jail beds from where you started at the beginning of the year. So ultimately, it's coming out a little bit lower than 07/01/2024, if that makes sense. You see there on Page five kind of where the JAK jail backlog is currently. And you see kind of some ebbs and flows in the male jail backlog and also to a lesser extent in the female jail backlog,
both of which are elevated at the May 2025. Page six. I am recommending that they that you approve this request simply because the data support the assertion that the jail backlog is elevated and that an over expenditure is necessary. But I do differ from the request as to why it occurred. With respect to the female jail backlog, I do partially agree with the request. The vacancy rate is pretty low when you exclude the residential treatment program and the new Transgender Integration Unit,
which was established at the beginning of this fiscal year. So it's around at the May, it was around 2% in the other units. So the beds that were reduced during the supplemental process, which was 50, will come back online in July and help remedy at least to a certain extent that particular issue. But also with respect to the female total inmate population in general, that population is being driven by, in my conclusion, technical parole returns to prison, which are in turn increasing the total female inmate population thereby limiting space in the
prisons themselves. There's also been a coordinated decision to depopulate residential treatment program beds. They've gone from about 45 down to 11 in a 48 bed unit, which drives up the overall vacancy rate. The mail jail backlog is the bigger issue driving the request. And I don't think we'd be necessarily talking about an over expenditure here if it weren't for the mail backlog, which is substantially higher and is about 75% of the total backlog. I don't think that the data support an assertion that
the jail backlog the male jail backlog was a necessary and inevitable consequence of fewer minimum security prison beds, which is what the JVC made reductions to. I think that there's a couple of other things there's a lot of stuff happening here, but I'm honing in on two things that I think are relevant, not just for this conversation, but for future conversations with respect to prison caseload, and that's policy decisions that the Executive Branch has made within the authority granted to it by the General Assembly. Specifically, increases in technical parole returns and apparent efforts to keep
the jail the vacancy rate over 3% in order to avoid triggering statutory prison population management measures pursuant to Section seventeen-one thousand one hundred and nineteen point seven. I will note here and I can dive into this in a bit more detail because there's some reasons why I specifically focused in on those two things. But generally, with respect to this over expenditure in particular, statute doesn't require you to approve it because it says subject to available appropriations, you reimburse for a portion of expenditures. I'm recommending approval because I think it's probably prudent to do so,
but you're not necessarily binded by statute to do it. Questions so far? Senator Kirk Bauer? Thank you. I just want to make sure I understood what you said. So one, I think we probably I don't know why we weren't anticipating that the jail backlog was going to go up, and it appears it's going to continue to rise even through the rest of 2025. But I just want to make sure I understood that some of the issues that we're having here is based on policy decisions to keep the vacancy rate over 3% so that we don't trigger statute. Is that what you said?
Mr. Brecke. Thank you, Mr. Chair, Senator Kirkmeyer. That's correct. Okay. And I guess my question is Senator Kirkmeyer. My follow-up question, thank you, Mr. Chair, would be, so if we don't approve this today, what's the fallout? Mr. Bracki. Thank you, Mr. Chair. Senator Kirkmeyer, local jails don't get reimbursed to the extent that they're billing, I think is the initial consequence. Which I have to say. Senator Kirkbire. And if we were to basically look at and try and help them redetermine what their vacancy rate is and that it's over 3%, what exactly would that trigger in the statute
for them to have to do? If it falls under 3%, Mr. Brackie? I'm trying to understand the question. Are you asking what happens if it falls under 3%? Yes. I think I have to find which page it's on. There's a lot of pages, so there's, let's see here. It's in here somewhere. I just gotta find it. There's three bullets on page 17. Thank you. So on Page 17, you see it's there's a lot in the statute, okay. So this is just an abridge summary. But if it falls under 3%, basically you have to identify unutilized community corrections beds,
which is expected to underspend its appropriation by about $2,800,000 in the current fiscal year or about 100 beds for standard residential placements. I think they have plans for that money given existing transfer authority and statute to pay for condition of probation placements, but I'm only about 99% sure about that. The Parole Board and DOC reviews prospective parolees meeting certain criteria. And then within those criteria, certain inmates are excluded for certain crimes, particularly violent crimes, I think,
displaying certain behavioral issues like co penal discipline violations and then regressions from community corrections and parole. It's laid out in greater extent in the briefing. I don't know which page, but it was in detail kind of some of that stuff. So there are basically some things that aim to relieve prism pressure. And I think there's no good question as to the degree to which it actually would, but there are steps that would have to be taken in order to do that. Any follow-up? Sarah Mable. So there are unutilized community corrections beds, but we don't have any mechanism for making them accept the people that maybe could
be coming out of DOC. So I think that's part of the problem and we did talk about that last session. And I know there's some effort underway to figure that out and to have some auto accept criteria put into place, but I don't think that's happened yet. Madam Vice Chair, did you have your hand up? Nope. Senator Gonzalez. Thank you, Mr. Chair. Thank you, Senator Amabile. I was just at my local Community Corrections Board meeting. The statewide acceptance rate, this year for Community Corrections Board meeting from the local providers is 41% currently. There is there are a number of factors being considered for a potential,
auto accept process that those would all require statutory changes. But the prison population management measures that we put into statute, a handful of years ago, 2019, 2020, 2019, that were meant to avoid precisely this problem seems to have been ignored or maybe very instead of ignored, very closely watched in order to avoid. Yes. I think that there's a lot of attention being paid to that 3% number. Any other questions? Seeing none,
oh, there we go. Rep. Taggart. Thank you, Mr. Chair. Mr. Brackie, I wonder, could you, in your on Page six, under the summary of analysis headline, in the second paragraph, you highlight a change in department policy is driving an increase in technical parole violations. Could you expand upon that? If that's one of the driving forces, are we going to continue to see this problem because of whatever that change is? But if you could review the change, I think it is in your documentation,
but I'd love to hear an explanation. Mr. Rekke. Thank you, Mr. Chair. Representative Tager, I think briefly we could have visited two things. That's page 11, where there's a couple of graphs that show you just factually what's happening with the kind of monthly change in the technical parole returns. And so you have part of the reason I highlighted this isn't because whether it's a desirable policy, it's up to you all as policymakers. I keep hearing though that the total inmate population is just the courts sending people and it's the courts doing what the courts do.
But the reality is new court commitments have declined over the last couple of years, while technical parole evaluations have offset that to a degree that's leading to an increase in the prison population. What you see here is on the top of Page 11, kind of a slight overall decline over the last two years in new court commitments. And at the bottom of Page 11, in your purple graph, an increase where in the current fiscal year, you're looking at I forget what the percentage increase is, but I want to say that relative to the last fiscal year,
the number of technical parole returns have increased 21% over last year. Now when I say it's a change in policy, I would move to Page 14. Oh, not page 14. I'm sorry. Page page nine. As recently as the 2023 state fiscal year, it was the department's explicit, wildly important goal to reduce technical parole returns to prison. At some point, that policy changed and technical parole returns increased. So there was a conscious decision at some point to be more assertive on parole,
which again, I can't say whether that's right or wrong, good or bad. It's just it's actually it's what happened because it was no longer a while the important goal and technical parole returns increased. Relative to pre COVID, technical parole returns I think are way below where they were pre COVID, But they've increased the last couple of years are, I think, a major factor driving changes in the prison population, which affects how we budget for it, if that makes sense. Can you give us some examples of technical parole violations? Yes. So I think for an extended conversation, the hearing documentation from this last year in December really laid out in explicit detail
kind of what's happening. But I'm trying to in my mind's eye, I'm picturing willful failure to appear for summons, absconding, possession of a deadly weapon, unlawful contact with the victim and some other things along those lines. And I think the increase in technical parole returns is correlated with a decrease in the absconded population. So they're finding absconders and taking them back. Okay. Senator Gregoire? Thank you, Mr. Chair. So I'm back to where I was. Sorry, were you finished? So again, looking on Page 17, dollars 2,800,000.0
general fund in the current fiscal year is what is expected to be underspent for unutilized Community Correction beds. They're requesting they were requesting $1,800,000 but because of the prison bed underutilization or reduction or whatever it was, it's $1,300,000 approximately. Is there a reason why, we can't use the, at least $1,300,000 of the 2,800,000 general fund that is in the current fiscal year that it's expected to be underspent for the Community Correction Beds. Is there a reason why that can't be transferred over?
Like why are we asking for more money in this current fiscal year? We are still in the current fiscal year. Mr. Brackie? Thank you, Mr. Chair. Senator Kirk Beyer, I think as Senator Mobley noted earlier, there are limitations on the DOC's ability to move people into community corrections, namely the local control aspect, which is they can reject any placement for any reason. So acceptance rates for transition placements, which are DOC inmates, tend to be way lower than other placement types. There's no legal authority by which the DOC could say,
we want to put this person in this halfway house so that we can reduce our population in order to not have this over expenditure. So there are limitations on the DOC's ability to use community corrections as a resource based on some of the local control aspects of how that works. Senator Kloeir? Okay. So maybe I didn't ask the question correctly. So there's $2,800,000 general fund in the current fiscal year that is underspended. We are at the end essentially of the current fiscal year. So there's $2,800,000 sitting in the Community Corrections Bed Fund,
whatever that's called. And over here in the jail backlog, they're asking for $1,300,000 And I'm wondering why we need to give them $1,300,000 when they have $2,800,000 sitting over in another fund. And it's the end of the current fiscal year, and the backlog is in this fiscal year as well. Mr. Brecky? Thank you, Mr. Chair. Senator Kirk Meyer, maybe a couple of clarifications. The Community Corrections Appropriation sits in the Department of Public Safety. So it's administered by the Department of Public Safety, not the Department of Corrections. The other piece of the underutilization of the Community Corrections piece is I believe that
based on some e mails I've received, about $1,700,000 of that general fund is going to be used for condition of probation placements, which is explicitly prohibited by statute, because you can only use the Correctional Treatment Cash Fund for that. So which is why I recommended a bill to strike their transfer authority in statute. That's a separate question. But this $2,800,000 reversion, I guess what I'm getting at is there's not a clear mechanism by which that money could be used for this, if that makes sense. And that's not something we can do with 1331. So that's something we can only do when we come back,
but we will get that money reverted back and can apply it theoretically at least to this. Mr. Bracki? That's correct. Yes. You'd have to wait until supplemental process next year to true things up. Any other questions? Madam Vice Chair? I move to approve staff recommendation. Are there any objections? Seeing none, that motion passes six-zero. Mr. Bracki? That's it for me. Thank you, Mr. Chair. All right. Mr. Dermody, please, come to the mic and introduce yourself for the record. Thank you. Excuse me. Thank you, Mr. Chair, for the record, Tom Dermody, Joint Budget Committee staff. Thank you.
You're welcome. And this morning I have a 13, excuse me, an interim supplemental for you from the Department of Health Care Policy and Financing regarding the county administration line item. The excuse me. The as I find my place in my binder. I've kept this relatively short. It's a relatively straightforward supplemental request. The department is requesting $1,700,000 in federal spending authority over expenditure or over expenditure spending authority for the current fiscal year FY twenty twenty five-twenty six. Staff does believe and agree that this meets the supplemental criteria.
Expenditure trends from data that the department provided were ambiguous at best throughout the year. So a supplemental during the normal supplemental time in January would have been difficult for them to predict what the impacts of this would be. Expenditure trends were up and down through the year. They are looking at having qualified medical expenses on the county levels qualifying for $1,700,000 in matching federal funds. The reason for this supplemental is that there's an M note on the general fund
appropriation for this line item, which essentially means that any increase above the appropriated amount in the long bill for federal funds would require a decrease in the general fund for that line item. The department is expecting an over expenditure of that general fund in that line item. Prior to this additional federal funds, those over expenditures by practice are shifted to the counties to cover those costs. That is a general practice that has been instituted for many years. There's plenty of room in the budgeted local funds for that particular shift.
Right now, the department is predicting about $3,400,000 of that shift from state funds to local funds. This additional $1,700,000 would add to that over expenditure, kicking it up to about $5,000,000 €5,100,000 given the interactions between the general fund with the M note, the additional federal matching funds and the anticipated additional cost to the counties, staff is recommending approval of this interim supplemental. Are there any questions? And to the folks online, we are getting you promoted and visible in here.
So if you have questions in the future, we won't miss them. Apologies if we did previous to this. Seeing no questions. Madam Vice Chair? I move to approve staff recommendation. Are there any objections? Seeing none, that motion passes six-zero. Mr. Dermody? That is it for me. Thank you, committee. Thank you very much. Ms. Lowe. Thank you, mister chair. Llewellyn Lowe, JBC staff. I'm here to present a thirteen 31 request from the Department of Higher Education. You'll see on page three, an outline the department is requesting approximately 1,000,000 general fund in spending authority in the current fiscal year.
This is to complete the, implementation of senate bill twenty three zero zero five, border street grant application. So this bill appropriated funds to the department for the purpose of expanding creating forestry programs, including wildfire mitigation programs to bolster the forestry workforce in Colorado. It appropriated funds approximately 1.2 in f y twenty three, twenty four, and then additional 800,000 ish in 2425. And so the department had anticipated approximately 1,900,000.0
total funds for implementation of this bill. Those funds were to be spent over the two fiscal years, twenty three, twenty four, twenty four, twenty five. The department contracted with institutions, but significantly underspent that 2324 appropriation and reverted the remainder of that appropriation to the general fund. Then it has overcommitted its 2425 appropriation without the requisite spending authority to do so without the appropriations to do so. It also has had communicated with institutions that they had through 2526 to spend the
rest of these funds. So these institutions have planned and have created programs with the expectation that they would have through 2526 to spend these funds. Not only does the department not have enough for the current fiscal year, but there is not role for an authority in 2526 for these funds. So there are two problems, obviously. They need the spending authority in the current fiscal year to honor what they've paid out. I am recommending approval of that because, again, these departments or these institutions have planned for this. There's nothing you can do right now to address the role forward authority issue for
2526. But I am recommending that you commit to drafting legislation, supplemental legislation in 2526, which would essentially make those institutions whole for what they thought they would have and therefore are spending institutional funds to do with these forestry programs. That is the best you could do at this time is to commit to running that legislation to make them whole for for, 2526. I, this treatment of rule forward continues to be an issue for the department.
As previously discussed during both the briefing and higher ed figure setting as well as comebacks and according to the single statewide statewide single audit, the financial policies and procedures in the department are alarmingly deficient. We have had conversations since then, miss Bickel and I, and you will hear a whole presentation, so I won't get into the details of that right now. I'm sure you have burning questions. I may ask that you wait to ask questions regarding those departmental policies until later, but we're not ignoring the broader issues. We'll address it in a different presentation later. So what I am asking though is your vote on approving that spending increase the
spending authority increase for the current for the thirteen point three one for twenty four point two five. I'm going to channel Senator Kirk Meyer here and say what happens if we say no? That's the later that discussion is coming. That discussion is teed up. If you say thank you, Mr. Chair. If you say no, the department would need to claw back what has committed and paid out to these institutions in the current fiscal year so that they can revert what they did not have the authority to spend is kind of the bottom line. One more time. Miss Lowe. Thank you, mister chair. So they have already paid out,
disbursed some of these grant funds. If they have not been expended even if they have been expended, if anything over what they were appropriated in 2425 would have to be clawed back to be reverted. So they would have basically 766,000 that wouldn't need to be clawed back in the current fiscal year, but everything else would so that it could revert or not revert. It'd have to be clawed back because they should not have paid it at all. Sarah Kirkmeyer? And they've gone through and looked at each of these grants applications and the money has been spent by the institutions as well?
Or is their dollar still sitting there? Because I'm of the mind to say, go claw it back. First of all, I mean, I don't know what we can do to solve this issue, but and I'm not talking about this issue. I'm talking about the overall general issue of just poorly managing a grant program that they knew about a long time ago. I don't get it. I mean, everybody understands rule forward authority or lack thereof. Everybody understands if you don't have the funds, you should not be granting them out. Apparently, not everybody. But so I'm of the mindset to tell them to go claw it back.
So I want to know if they've actually gone back and looked at and seen if the money is actually spent or if it's sitting someplace in a fund in these institutions. Ms. Love? Thank you, Mr. Chair. Thank you, Senator Kirk Meyer. It varies across institutions. Some of them have not yet received these funds, but I wanna say that institutions have done their due diligence. They had asked the department multiple times to ensure that they had roll forward spending authority before they started hiring people and were instructed that they did. So I am inclined not to penalize these institutions for a failure on the part
of the department. There's one particular person I'd like them to hire with these funds. Madam Vice Chair. Thank you, Mr. Chair. I am going to just echo and share the, sentiment of Ms. Lowe. I I think that our institutions acted in reliance upon, representations made by the department. If the department had expressed authority and an ability to execute and deliver these grant dollars, then, I I don't wanna hold the universities accountable for this. I think they believe they were acting in good faith upon past legislation,
so we should make them whole and then, commit to well, we we need to make them whole and then address roll forward the roll forward issues later. Miss Love. Thank you, mister Burgess. I should also mention that, no, not all of these funds have been spent that have been paid out to these institutions, but they were counting on them for paying for these staff. And still, even with this solution approving that spending authority this year, they will have to use their own institutional funds because if they don't spend what you approve, it will still revert anyways.
What this allows you to be able to do, though, is for those institutions that can, they can spend these without reverting. But the remainder of those institutions that can't spend by the end of two weeks from now, they will have to rely on their own institutional funds for programs that they had been assured by the department they had through 2526 to use those funds for. Senator Kirkland. What exactly is the Forestry Program Expansion and Creation Grant program? What does it do? Ms. Lowe. Thank you, Mr. Bridges. It does it is is somewhat broad,
but the point is to create different programs that will help bolster your forestry, your wildfire mitigation workforce. So it is to for like, I know Front Range Community College has a forestry program, and and the bottom line is again, this was passed in '23, very apt and appropriately timed to to give the state more resources they can use as this continues to be a state prone to forest fires and, in need of that particular workforce. Rep Taggart and then Senator Mabile. Thank you, Mr. Chair.
Ms. Lowe, I you're Page six. I too am concerned about the institutions and very concerned about your write up on Page six, because in that second paragraph on the problem number two, There was a communication from the department that these schools had until 06/30/2026 to spend these funds. And then in April, there was another communication that said, no, that's not correct. Has anybody from and I realize this is a rhetorical question,
but has anybody talked to these six institutions to try to clarify? They have got to be confused beyond belief without some type of communication. Ms. Lowe? Thank you, Mr. Chair. Thank you, Representative Taggart. It's my understanding there have been lots of institutions with the department. Sarah Mobley. Thank you, Mr. Chair. So yes, I have no interest in punishing the institutions. And I think we have to take Ms. Slo's recommendation. But I do think we also next year, when we come back,
rather than guaranteeing we're going to do one thing or another, we have to guarantee that we're going to address the problem in a way that actually fixes it. And I'm not sure that just granting saying, well, we're going to grant you roll forward authority does that. I think we have to figure out what is the best approach. Rep. Serreto? Well, thank you, Mr. Chair. I actually do think that we should commit to this role. I mean, this is how the institutions can feel confident that we will make them whole if they utilize their own funds. So I do think that this committee should because I don't want to penalize the
institutions who were told when they asked that they did have roll forward authority when, in fact, they apparently did not. So I don't think we should hold the institutions hostage to this gross mismanagement by Department of Higher Ed. But so I think we actually I would hope that the committee would agree to run a bill granting roll forward authority for these funds. And then also when we get to the next presentation by Ms. Bickel and Ms. Lowe, we then,
I think, will perhaps talk about the other part that Senator Amable just said that we have to fix the greater problem here. I would say that my yes on this is conditional on a really good presentation from you all on how we address this problem because if not, I think we need to make it painful for the institutions to generate some movement to fix the problem. I'll be a yes on this with the assumption that we're going to fix this problem. Senator Kirk Marr? I'll need more specifics with regard to the total amounts that have been contracted to the colleges, the higher education institutions.
So like to know what's contracted, what's already expended, and how much they anticipate is not going to be expended of the grant contract. So just because they got the contract and I know there were other screw ups here, but if they haven't for example, Front Range Community College was contracted July if they haven't spent it all, haven't hired anyone, then I think we should claw back that money. I don't think we should tell them to continue on with the program that the funding is not there, and it has been grossly mismanaged,
I would agree. And I would agree, we don't want to necessarily penalize them. But just because money has been contracted out doesn't mean that it's all been spent. And maybe it's not that much. Maybe it doesn't matter. But, it does matter in the fact that everybody needs one, the department should be managing these grant applications. They should have come in here and told us or told you what's left, what hasn't been spent, how much has been expended, what they're anticipating. If they haven't hired people, if they haven't done certain things, they should stop. Then they don't have to worry about that it would be on their dime and
not our dime. So I think that kind of information needs to be found out before we just say yes. And if they've already contracted and they've hired the individuals, then I would agree with Rifserota. Maybe we should be putting that role forward in for these institutions that they shouldn't be penalized because of the gross mismanagement of this department. Madam Vice Chair. Thank you, Mr. Chair. I just want to follow-up on a comment you made, actually. You had said you wanted to feel wanted some sort of accountability from the institutions, and I I I don't understand that because, the way I'm hearing this,
this was mismanagement by the department, and not the institutions. So I just wanna make sure. Sure. Have you clarify. The department screwed up. Understand. We are now being asked to fix their screw up. And unless we know for sure that the cause of that screw up is going to be addressed, my inclination is to say, well, they're the ones that screwed up. This is not our problem to fix and cause some pain in the institution so that they come back and ensure that there is the pressure that we need to fix this screw up. So that is my inclination. But I'm told from Ms.
Lowe and Ms. Bickel that there is a plan that we will hear later today, or at least there is a proposal. I guess the plan is maybe too much. But there will be at least a robust discussion about how to fix the root problem. And as long as that discussion and as long as that root problem is addressed sufficiently, then I'm fine fixing the mistake this time, but I don't want future mistakes. And at some point, we have to say that we as a committee aren't going to fix mistakes that happen on the other side of the street. Madam vice chair. Yes. Just a follow-up. Thank you. Okay.
I look forward to that conversation. I do just wanna put on the record, I am against holding the institutions accountable for mismanagement happening in the department. So, looking forward to our presentation. With that said. Rep Taggart and then Senator Marchman. Thank you, mister chair. I don't have a question, but I do have a comment. I spent yesterday afternoon, as you know, with the Colorado Forestry Service. Thank you, Ms. Lowe, for setting all that up. They have a severe workforce shortage problem with a lot of their most valued
employees moving very quickly towards retirement. And this program is to help fill that gap somewhat. And our need for wildfire mitigation in this state is significant. And the area that we visited yesterday in Genesee and Evergreen, I feel for those people that live up there because if God forbid something happens, in terms of a wildfire, it could be devastating. And we need a strong workforce in that area. So
I don't like this screw up, but I don't also want to lose sight of the fact that we have a severe shortage of trained people in this area of wildfire mitigation. Senator Marksman. Here, here. That's what, generally what I was gonna say, sitting on the wildfire committee and the water committee. There's a huge workforce issue. But then also coming from our big blur work and our workforce work, I think it's a very, you know, in the executive order that just came down, I just think it's a very tenuous situation to penalize our workforce programs wholesale when
it's department mismanagement. I will say I will repeat what Representative Sirota said, gross mismanagement by the Department of Higher Ed. So I just hope that we'll we'll keep, some sort of a bright line about workforce when it makes, when it makes sense. And I I just wanna put on on record, like Rep. Taggart did, that there's a huge workforce shortage in this area that becomes a public safety and, insurance issue as we know.
So thank you. Any other comments? Madam vice chair. I move that the committee approve staff recommendation. Are there any objections? Seeing one, that motion passes five to one with Kirk Meyer objecting. I just want to make a comment. Kirk Meyer. I understand in the explanation with regard to the request meets the the joint budget committee supplemental criterion, and the answer was yes. And I'm just going to respectfully disagree with that. It is not an unforeseen contingency when you don't have adequate financial processes and policies in place. That's not an unforeseen contingency.
So I don't think it meets our supplemental criteria. And the reason I'm going to double down on it, it's not unforeseen, we've been talking about this for over a year here at the Joint Budget Committee. We've been talking about the lack of not just inadequate, but lack of financial processes and policies at that department for over a year. We tried to figure out how to address that last year. We tried to figure out how to address it this year by looking at do we combine Department of Education and Department of Higher Education, administrative processes,
not their boards and all that stuff, but just the administration because of the problems we're having in both of those departments, quite frankly. So I just the reason I'm voting against it is because and I don't I would agree, I don't think the higher education institutions should be penalized for inadequate processes and policies, but that is no way an unforeseen contingency. There's no way. I'll just follow that up by saying my comments earlier are exactly along those lines. We know this is an issue we on the budget committee have been asking for it to be fixed consistently for a long time now.
And so at some point, keeping in mind what is the best outcome for the people of Colorado, which is always how I vote, at some point stopping the work that we do to fix those mistakes may be the only way that those mistakes stop being made. This is a fairly inexpensive one compared to some of the other tens of millions of dollar mistakes that we've seen. I do not want the institutions to have to suffer that, but that fundamental problem needs to be fixed. And if we don't act to fix it,
I think we have seen that that problem will continue. So looking forward to that presentation later. Thank you, Ms. Lowe. Let's do one more of these, and then we'll hop back. Mr. Thompson? Thank you, Mr. Chair. Scott Thompson, Joint Budget Committee staff. This is a thirteen thirty one from the alternate defense counsel in the judicial branch. This may look familiar to most of the committee because it was actually approved in September of twenty twenty four, Due to some mistakes by myself and my alternate defense counsel, it didn't get made into the supplemental bill this year.
And so I'm back with the 1331 to correct that to ensure that it gets into next year's supplemental bill. But the funding is for about $900,000 general fund for the development implementation of a new billing contractor and expert tracking system for alternate defense counsel. On Page two of my analysis, I've kind of provided a summary of the work that's been completed since it was approved last September. And in the middle of the page, there's remaining work that's expected to be completed in July 2025. And that's going to be when they're completed rolling out this new system.
And I'm recommending that the committee approve the requested change. I can also assure the committee that Alternate Defense Council and I have had conversations on how we can avoid making this mistake again in the future. And so I don't think that that's going to happen again. Any questions? Madam Vice Chair? I move to approve staff recommendation. Are there any objections? Seeing none, that motion passes six-zero. One more. Come on back, Ms. Lowe. Llewellyn Lowe, JBC staff presenting an interim supplemental budget request for the Department of Treasury. This request is for additional funds related to the Bloomberg Asset Investment Manager.
So this is not something new, but they were notified they requested supplemental funds in January for this particular program. They were notified after that fact that they had a tier increase that's based on the volume of transactions that they do with this particular investment management tool. They didn't see that coming. Bloomberg did not notify them again until very late. So they're requesting an additional 16,381 due to that tier escalation. We approved the initial request of 14,000 in in January excuse me.
Yep. January from vacancy savings, and I just found out last night that there is vacancy savings for this as well. So what I am recommending is approval of the over expenditure, and we will make we will make the adjustments running a supplemental where we will reduce their personal services, increase their operating expenses in January. So basically, so net zero for us, but they they need the authority to be able to spend out of that line item for this particular purpose. Any questions? Madam Vice Chair? I move to approve staff recommendation. Are there any objections? Seeing none,
that motion passes five-zero. I think we can get through these. Next. I don't think so. Well, just the these. Oh, sorry. That motion passes six o. Yes. Indeed. What did you say? Five. I like that number more. Miss Ewell. Andrea Ewell, JVC staff. This is a capital interim request. We've seen many of these four projects that were funded right after the pandemic. This is for the Community College of Denver Boulder Creek building remodel. In addition, Coming up towards the end of their project, they have realized that they can't complete the original scope within the budget,
and that also can't complete it on time. So they are asking for $7,500,000 of their own institutional cash funds to finish the project. The project was funded in the twenty twenty two-twenty twenty three long bill and it would also run out of spending authority at the end of the current fiscal year. So they also need an extension through fiscal year twenty twenty six-twenty twenty seven. Their targeted ending date is now December, 2026. The CDC acted on this on May 1 at the very end of the session. So technically, they did know about it during the legislative session,
but practically, there wasn't really much we could do at that time. This isn't uncommon to see these capital asks for cash or spending authority come up during the session. So strictly speaking, it doesn't meet the interim criteria. But, in reality A little fludged. Making them pause their projects for eight months over a technicality is not something I would recommend. Any questions? Recommend approval. Madam Vice Chair. I move to approve staff. I think the motion was to approve staff recommendation. All those are there any objections? Seeing none, that motion passes six-zero.
Ms. Bickel, can you do yours fast? No. No. Let's wait for after, if you don't mind. The, Robert, I'll take a look at it. Other issue because you've got that additional higher ed discussion out. We do have the additional higher ed discussion. And you think Metro will take a little bit? A little bit. Okay, great. With that, we will stand in a meaningful three minute recess while we reset to hear about the optimistic financial future of our state. JBC is back, and we've got great news about Colorado's economy and,
the fiscal outlook for the state. Bad news, not acceptable today. So with that, go ahead, introduce yourselves, and tell us about our economy. Alright. Thank you, mister chair and members of the committee. I'm Emily Dorman, economist with Legislative Council staff. I'm filling in for mister Sobetsky today to do the budget overview. Before we get to that, I will turn it over to Doctor. Rimi to do the economic outlook. Go ahead. Introduce yourself and give us the economic outlook. Thank you. Thank you, Mr. Chair. Elizabeth Ramey, Legislative Council staff. Yes, so as you just heard, I'm here to present the economic outlook that we use to inform our revenue and
budget outlook, which Ms. Storman will present to you after I present the outlook. So we always start with the big picture here. Gross domestic product, which is a measure of overall economic activity. As you can see in the slide, the economy has been growing at rates consistent with a moderate economic expansion over the past three years with pretty much an orderly slowdown, cooling labor markets, cooling inflation. And the main news is that in 2025, we've seen an uptick in uncertainty mostly about federal policy shifts and that's taken center
stage in our economic outlook and is presenting challenges for economic activity now and moving forward. In the first quarter of twenty twenty five, we did see a slight dip in GDP as spending on imports, which is a subtraction from economic activity surged and anticipation of tariffs going into effect. We also saw the federal government was a net drag on GDP growth in the first quarter and both of those were offset somewhat by consumer spending, which slowed and investment.
So as we've mentioned before, consumer spending is the main driver of economic activity. So we want to keep a close eye on what's happening with consumers. And we are seeing some signs that consumers are hitting pause in the face of some uncertainty moving forward. Most economic data that we have available are backward looking, so that's important to know. They don't tell us if the economy is in the midst of changing trajectory. We only know that pretty much after it's happened. And right now, we're seeing some mixed signals with the data.
Some of the more forward looking indicators that are less reliable are showing such as consumer sentiment are showing some deterioration, while the hard data on labor markets and inflation is still holding up. So our forecast overall, we are still anticipating economic growth but at a slower pace over the next couple of years and with a narrowed path for that expansion to continue. In recent months, we have seen Colorado fall behind the nation on several indicators, including labor market indicators.
Colorado's job growth has fallen below 1%, while The U. S. Maintains a pace just over 1%. This could be a sign that reduced spending on things like travel and tourism or uncertainty about trade and other policies is starting to impact employers' decisions to hire. We do expect further softening in the labor market with a continued slower pace, but still positive employment growth. In terms of sectors to watch that we see as particularly vulnerable to federal policy
shifts so far including especially on tariffs and immigration. These sectors would include manufacturing, retail trade, leisure and hospitality, energy, construction and agriculture and food processing. We have spoken to you before about some issues with labor market data in the state since 2023. So just to reiterate, we do think that those issues are ongoing and likely to be underestimating employment growth in the state and overestimating unemployment. A question about the manufacturing piece. I've seen especially in some of our rural areas with outdoor apparel manufacturing that folks
just can't get the materials that they need to continue producing those. But at the same time, there's an effort the theoretical effort of the tariffs is to onshore more manufacturing or reshore manufacturing. So what I'm hearing you say though is that at least in Colorado's economy, maybe in the whole country, we're going to see a decrease in manufacturing from what's happening around the country as opposed to an increase. Doctor. Ramey? Thank you, Mr. Chair. What I meant was we should watch those sectors that we are seeing that they
are vulnerable to some of those shifts in the ways that you just mentioned. And so we want to watch closely what's happening with indicators of manufacturing employment. But as with price impacts of tariffs, we mostly have yet to see in the hard data those impacts materialize. Okay. Okay. So here we see the trajectory of U. S. And Colorado unemployment rates. Unemployment rates do remain relatively low if we consider previous downturns in the economy, but they do continue to tick up with Colorado's unemployment rate exceeding that of The
U. S. Over the past few months. As you can see in the chart, this may be an example of one of those unusual movements in state level employment data that we're seeing because we have not seen the sustained level of Colorado's unemployment rate above that of The U. S. In the twenty five years that's shown on the chart. So with that said, we do expect unemployment rate to continue to increase, particularly with the impact of uncertainty, perhaps hampering businesses' plans to expand or invest. And with federal job losses and job losses in related sectors and also with federal
reserve monetary policy still expecting to be tight in the coming months. So just in terms of the federal sector in The U. S, Colorado is I'm sorry. I'm going to interrupt you again. This is the first time you're saying that in the last twenty five years on the chart that we've seen the unemployment rate in Colorado higher than The U. S. Unemployment rate. Doctor. Ramey? Yes. Mr. Chair, thank you for the question. For this many months at a time, yes. This many months. So it has at times gone above The U. S. Unemployment rate, but not in a sustained way as we've seen in the past
few months. Please continue. And how many months has it been that way that we've been higher than the national employment rate? Thank you, Mr. Chair. Senator Kirk Meyer, I would have to look back and see. There were some revisions to the unemployment levels since our last unemployment rate since our last forecast. So I would have to look back and check how long that's been. Yes. And Rep. Serota mentioned there were some data problems, I think, on our unemployment information. Is that corrected? Is that why the data was delayed? Or do we think that maybe the data continues to be kind of wrong,
based on those challenges? Doctor. Ramey. Thank you, Mr. Chair. Yes. So there was a disruption to the way that the census of employment and wages is conducted in Colorado or recorded in Colorado in late twenty twenty three, we do think that, that is continuing to impact the state level employment data so that it is likely underestimating employment and overestimating unemployment. Chair. I will say that I do think the trajectories that we're seeing are what are actually happening are likely to be accurate.
So we're seeing this downtick in employment growth and uptick in unemployment growth. And that is as expected in this type of tight monetary policy environment with uncertainty moving forward. So we're just uncertain about absolute values of those numbers at the moment. So on the federal employment front, we do have in Colorado about 2% of non farm employment are federal workers. That's about 57,000 workers employed in Colorado in March. The federal workforce has declined according to the data that we have by 800 workers
or about 1.4% in the first four months of 2025. Okay. All right. On to inflation. After ticking up in late last year when the Fed began cutting interest rates, we had been seeing a decline in inflation throughout 2025. U. S. Inflation remains relatively steady at 2.4 in May across since March to May. But while in Colorado, the inflation rate has ticked up more significantly from 1.9% in March to 2.2%
in May. We do continue to expect some near term price pressures from tariffs, which have yet to materialize in the data. And that should keep inflation above the Fed's 2% target on average through 2025 and the forecast period. Senator Weisman. Thank you. Hard to analogize from the present moment either in terms of politics or policy to prior moments, but pretending that we could, what does sort of economic history teach us about how long after a substantial change
in tariff policy we could expect to see that show up in forecast data like this, like how many quarters, if it's even possible to answer that question? Thank you, Mr. Chair, Senator Weissman. We so I'm not sure if his story is particularly instructive since we haven't seen this level of increase in tariffs since the ninth pre World War II. So I would say, though, that the expectations are that we're seeing current levels of inventory for things like apparel and cars to holding through maybe up until the fall.
And so we would expect when a new car model comes out, for example, that we would see a jump in the price of those types of goods at that time, whereas the apparel supply chain should be holding up until again, until the fall. And so, we don't have well, we don't have like a historical data indicating when this should happen. We are Thank you, sir, chair. And just to add to what doctor Ramey said, one reason that this is particularly challenging is that the tariffs, in 2018, which would be the most similar to these tariffs,
were mostly on intermediate goods, like steel and aluminum. And so it takes longer for those to filter into consumer prices, which is what we're measuring here, whereas the tariffs that are going into effect now will impact both intermediate goods as well as final consumer goods. So it may happen a little faster than it did in 2018, which was fairly lagged. Helpful. Thank you. Doctor. Ramey, back to you. Oh, sorry. Rep. Taggart. You're so much closer now. I don't see your hand as easily. Thank you, Mr. Chair. You have a different view from the area.
Don't get too comfortable. Thank you, Mr. Chair. The other problem here and spending a lot of time in boardrooms for a long time is the decisions we have to make as to how much of these tariffs do we absorb as compared to, passing them along to the consumer. But that has an effect too because that has an effect then on our bottom line, which has an effect on our revenue side of things. So I would agree with Doctor. Ramey that this is a complicated subject because every company,
is going to make its own decision as to how they're going to handle this. And I quite honestly, I'm glad I'm not in those boardrooms right now because I don't know how you make a decision right now because you don't know what's next. Yes. Doctor. Ramey? Thank you, Mr. Chair. Okay. Next slide, yes. Okay. So this is just a look at some of the components of driving inflation in the Denver area recently. So I just want to point out that we do not have a measure of statewide price levels.
This is Denver or Lakewood inflation and we use that as our state proxy for inflation, but recognizing that the limitations of that measure. So housing was the main driver of inflation, the higher rates of inflation that we saw in both The U. S. And the Denver area in 2023. And until recently that component had dropped off in the Denver area. We saw it contributing nothing to inflation in January. And that component has ticked up to 1.9%
in May 2025. We know that the housing component does move more slowly than the other components because of how it's measured. So we expect this to continue to contribute to lower inflation in Colorado, offsetting some of the increased cost pressures that we see in other components. And what's in other? Thank you, Mr. Chair. I do. I ask that I do think I ask that every time, but this time it's the biggest bar here. So what's in there? Yes. Sorry to interrupt. Thank you, Mr. Chair. So it is a small component of overall inflation,
that other category. And we don't get a category. And we don't get a breakout for the Denver area. That's detailed enough for us to know. But that other inflation does include, tobacco products, personal care products and services, miscellaneous other personal goods and services, so dry cleaning, financial services, legal services and funeral expenses. And I will see if Mr. Doorman. Okay. What's driving up the cost of funeral expenses? Like what is What does we count? I it just seems that's the highest I think we've seen it in any of
these analyses. So just curious if it's like one thing or if it's both tobacco and funeral expenses or dry cleaning has gone way up? Just if we could if there's any more information, I'm just curious because it's such a big number at this Have you looked at The U. S? Miss Dorman. Thank you, mister Chen. Forgive the peanut gallery here. So as doctor Amy said, we don't actually get a breakout of those components at the Denver level and but we do get them at The US. But, unfortunately, the other category for US is had didn't see this increase.
Okay. So we can't really parse out, exactly what is causing the 14% increase. I will say that because this is a small component measuring, there's just kind of less data, so it's fairly volatile. So, it's there's a high chance that in September it won't look like that. Senator Weisman. Thank you. And Mr. Chair, you got the question on other a few other clarifying questions before we move off this slide. Relative to nationwide, could you speak to basically what the Denver or Lakewood is above, below or comparable to nationwide for the food and medical care components?
And then for the housing component, remind me, imagine we roll in rent, but are we also rolling in sort of mortgage payments, PITI, imputed rent, if you will? And if so, that has to be net of what kind of prevailing rate one is going to get, say, on the standard thirty year, which is going to track what the Fed is doing, which obviously saw a big move in the middle of twenty twenty two. So is that last part about housing correct? Ms. Dorman. Thank you, Mr. Chair and Senator Weisman. On the housing piece, this is made up mostly of rents,
as you said. The other piece for measuring the cost of homeownership is actually not based on mortgage payments, or interest or anything like that at all. It's based on, a an imputed measure called owner equivalent rent, which is essentially the opportunity cost that you have of not renting out your home. So it is it essentially tracks exactly the rental market. It is not based on, like, actual payments of what you're paying for your home. And then, that those are the two biggest portions, but housing costs also include other, auxiliary costs for maintaining your home,
like utilities, energy, as well as, like larger appliances, maintaining a yard, stuff like that. So this is a little bit bigger than, I know what OSPB shows as just shelter. Madam vice chair. Thank you, mister chair. And, can you talk about the fall in energy prices? What's driving that decrease? Ms. Dorman? Doctor. Ramey? Do you want to finish answering some of the questions? Oh, I thought you did. Okay. We're going to pull up Mr. Hansen to help answer the energy question. Mr. Hansen, welcome. Go ahead, introduce yourself and help us answer the energy question.
Yes. David Hanson, Legislative Council staff. So this energy component is made up of a couple of things. One would be like those retail gasoline prices that you fuel your car with, which are down. They have fallen from not only a year ago, but from a couple of years ago when they were driven up by a refinery outage here in the Denver area. They're also driven by things like natural gas prices and how you heat your home and that type of thing. Those are moving up. But just for a point of comparison, the retail gasoline price in May was down about 6% year over year.
So that could be part of the driver. Great. Senator Kirkmeyer? Thank you, Mr. Chair. So under housing, would your house insurance be included in that? Or is insurance like house insurance, property insurance, car insurance, that stuff, is that someplace else? Ms. Dortman? Thank you, mister chair. And Senator Kirk Meyer. So renters insurance is included in the housing component, but home insurance is not included in the CPI as at all. There is, like, a kind of owner's equivalent renters insurance that's imputed.
But, essentially, what they're trying not to capture is the portion of your home that is essentially an investment, because investments aren't included in the CPI. So that's why everything is sort of translated into what's considered a service, which is rent. It's not intuitive, but that is how they do it. Thank you. Back to medical care, I'm looking at CPI BLS press release Why are you reading that? Miss Dorman. Thank you, mister chair and senator Weissman. So we essentially had almost an opposite conversation about this in December where the Denver Aurora Lakewood was negative for medical care and positive for The US,
and now it's, at 5.6 exceeding The US. And, really, this is because this component is incredibly volatile at the local level. There's just not enough data. And, in fact, it's often not even published, or, you know, reasonably often not even published due to data quality concerns. So I would encourage you to probably look at, like, an annual average in medical care, as opposed to these bimonthly numbers because they just change a lot. And we also don't get disaggregated data on the medical care component either. Stop reading the bimonthly numbers, senator Weisman. We are also showing them to be fair.
So I know. It's what he does for fun. I know. It's his speech. He's a wonderful, unique human being. Back to the presentation. Doctor. Raimi. Thank you, Mr. Chair. So I guess okay. So this is showing you the differences between what's contributing to inflation at the national level versus Colorado. You can see that even with the uptick, housing still accounts for three quarters of the inflationary pressure in the nation, less than half in the Denver inflation rate. And as we've just discussed, Denver has transportation and other categories namely medical care,
more important sources of price pressure currently in than in the nation as a whole. Here on the left, we see the effective federal funds rate. The Fed started lowering interest rates last September but has paused rate cuts due to uncertainty. Rates on rate So we do expect the Fed to keep the brakes on rate cutting until they get some clear data about either accelerating inflation or decelerating labor markets. The outlook has been more clouded in recent days due to potential impacts on the
energy market of conflicts in Iran between Iran and Israel. So on the right hand side, we have a measure of consumers' expectations of inflation. That's one of the more forward looking indicators that I talked about at the beginning that can be forward looking but also less reliable. But you can see on the right that households' inflation expectations as captured by the University of Michigan survey of consumers, households have adjusted their inflation expectations in the year ahead quite considerably with expectations for
inflation in May being higher than they have been at any time over the past twenty years. And I would say I should add that the Federal Reserve uses long term inflation expectations to examine to guide its policies. These are the short term inflation expectations. Okay. Here also on the right hand side is another piece of data from that University of Michigan survey. You can see that consumer confidence has really declined in 2025 and now it's at one of its lowest points in twenty years, including during previous downturns,
the Great Recession and the Pandemic. These consumer confidence can be a leading indicator of economic activity if it indicates that consumers are pulling back because of uncertainty. And we do have some indications that discretionary spending on things such as travel and tourism is declining. And this is particularly concerning to watch for Colorado since we have an economy that's more dependent on tourist activity than in some other states. And then on the left, we have a measure of financial market volatility, the VIX index.
Higher numbers indicate greater volatility. You can see that we've had some volatility spiking in 2025. That's another indicator of uncertainty, but that has receded since April. Okay. So here's another look at what consumers are up to or thinking or might be doing. So Colorado retail trade sector sales on a twelve month moving average basis is shown here compared to The U. S. We see that Colorado retail sales went into negative territory in 2024,
but positive growth in 2025, but it's still well outpaced by U. S. Retail trade growth. Again, this might be an indicator that consumers are pulling back on spending in the state. Another indicator of the possible direction of household finances and spending is personal income. So in this chart, we have changes in personal income adjusted for inflation. The largest share of personal income is wages and salaries. Here, we see that Personal Income growth in the state mostly outperforms that of The U. S,
but it's now fallen a little bit below its historical average of 1.7%. And then finally, just to finish our look at what we know about households and what they might be experiencing. Household savings rates, we've shown you this over the past few forecasts. We do still have a personal savings rate that is low by historical standards, but it has been ticking up. So this could be another indicator that consumers are saving in the face of uncertainty and holding back on consumption. On the right hand side,
we have delinquency rates. So outstanding loan debt, that's past due by thirty days or more. The mortgage debt is both mortgage and consumer loan delinquencies have been rising. The mortgage debt remains well below pre pandemic levels, but delinquencies on consumer loans such as credit card debt are creeping up to around 3% compared to around 2.3% before the pandemic. Senator Weisman. Thank you. I was going to invite either of you to unpack a little bit more of
what types of products are or are not in consumer debt for this purpose. Credit card would be the big one, but home equity line of credit, home equity installment loans, supervised lending, there's been some press recently on buy now, pay later type of loans given a retreat from federal oversight of those products coupled with apparent increase in their utilization in the consumer world. Is that in this data? And I guess apart from that, do you have would you offer any thoughts about buy now pay later utilization and what that might be telling us specifically?
Ms. Doorman. Thank you, Mr. Chair and Senator Weisman. On buy now, pay later, I believe that those should be captured in consumer debt and are probably, I would guess, are contributing to this upward pressure of delinquent loans because they're just, it's a lot easier to access credit by just selecting a box when you check out. And so that could be some of the reason why we're seeing higher consumer debt compared to 2019. And so, yeah, consumer debt is mostly credit card loans, auto loans. I believe student debt is also in there, which, increased significantly in the first quarter.
And then, I'm not sure about the other loans that you mentioned if those would be captured in in mortgage or consumer. Doctor. Amie, back to you. Okay. Thank you. Thank you, Mr. Chair. Okay. Senator Kirkland? Too far. Back on Page 10, where you talked about the Michigan study, the consumer sentiment is still down. So that's nationwide. Do we have anything for the State of Colorado? And where in here do we start looking at I mean, I just got my insurance rates for my homeowners' insurance, and it's basically doubled in the last two years. So property taxes are up,
homeowners insurance is up. Other I mean, as we looked at even through the state, our health insurance costs are all up. I mean, everything is going through the roof in the literally here in the State of Colorado. So where I mean, that is probably what, to me, is impacting consumer spending because they don't have as much money anymore because of the lack of affordability in the state. So do we have any of those kind of comparisons? Or do we have anything with regard to the State of Colorado on consumer sentiment? Thank you. Doctor. Amy? She just keeps smiling. Mr. Chair. Thank you, Senator Kirk Meyer,
for the question. I think we could look around and see, but the Michigan survey data, I don't believe, is broken out by state level. So we would have to come up with maybe some other proxies. It's something we could have a look at and see if we could come up with a picture that's at the state level. Thank you. Great. Let's keep on rolling. All right. Thank you, Mr. Chair. So I just had a brief stop in nonresidential and residential construction and housing markets before I finish with
my part of the presentation. So we wanted to show you nonresidential construction activity because it's one impact, one way that we can capture uncertainty in business investment. So this is investment in buildings and other nonresidential construction, both public and private in The U. S. And Colorado. So across The U. S, investment in non residential construction has decelerated. It's up 2.8% over the year in April 2025.
And we see that non residential construction in Colorado contracted sharply in 2024. It's recovered a bit in recent months, but it's still down by 22%. We do expect the state's non residential construction activity to remain suppressed throughout the forecast period. Then on the residential construction front, we have building permits through the last expansion into 2025, so broken down by single family homes and condos and townhomes.
Permit activity is down over the past year. That was led by a steep decline in multifamily over the next two years before they pick up again in 2027. And then finally, just a look at home prices and home sales. The chart on the left shows home prices in Denver compared with cities in the nation, the 20 city composite. In 2025 through March, the 20 city composite has climbed by 4.1%, while in Denver, home prices are up just 1.4%. Additionally, if we look at Colorado's home sales,
they have declined since 2021, but they're up slightly through April in 2025. This is single family homes driving this increase of about 2%. Single family homes are up 3%. Condos and townhomes are down by 4%. And then finally, risk to the forecast. Hopefully, this isn't a surprise that we consider the risks to be tilted to the downside at this moment, although we do anticipate a continued expansion. Senator Kirkmayer. Yes. I have a question about the steep decline in the state's multifamily construction and single
family falling. So are ADUs considered multifamily or single family? Because I'm just thinking of all the laws that have been passed in the last few years that are supposed to increase our housing and now we're seeing in 2025 that actually the exact opposite has occurred. Doctor. Ramey? Thank you, Mr. Taras, Senator Kirkmayer. The alternate ADUs, I assume, would be captured in the single family statistics. It would be a long time. We could check. We can make sure, yes. Can is there any what I hear from developers is that interest rates are a
huge part of the reason why construction isn't occurring right now. Do we have any sense of what new starts look like compared to other times with interest rates this high? Like how are we doing compared given interest rates, what's this look like? Or corrected for interest rates, what's it look like? Thank you, Mr. Rainey. Thank you, Mr. Rainey. That is a question we need a longer history in the chart, but I'm looking at my colleague if he has any thoughts. So I could look into that. For the last time that we had interest rates,
we haven't shown it in this chart. So I'd have to go back a little further. Great. I'm just curious because I we have done a lot legislatively to encourage development, but interest rates are entirely out of our control almost entirely out of our control. And so I'm curious what the impact of that is. Senator Weisman? Thank you. We have done a lot of policy, but the large sophisticated companies who build single family housing for sale are looking at all the same stuff that we're talking about here. Building a new subdivision presumes people are going to have the financial means to buy
it. And if household finances are at best uncertain and at worst about to go off the cliff due to federal policy, builders know that, and they might be operating in a more conservative fashion than if all the other macroeconomic factors were the same and we had a more stable federal policy environment. Fair, speculative? Senator Mabile, did you want to answer? Doctor. Ami? Yes. Thank you, Mr. Chair. Senator Weisman, I would say that uncertainty has would be expected to impact this type of business investment
moving and we might perhaps see some falling back. But we've also seen for several years elevated cost pressures in the state, particularly with inputs like land being expensive and labor workforce issues as well impacting building permits and construction. And just also to say that we have seen a recent increase in housing inventory, which is placing downward pressure on building of new units as well,
which might be getting to your demand your point about demand. Senator Mavalley? Thank you, Mr. Chair. I'm most alarmed by this chart on nonresidential construction activity. And I assume that's well, I don't know what's in is that roads and bridges and commercial buildings and all those things? Because that seems like a pretty big economic driver that's way down. And I wonder what you think about that. I know we have a lot of vacancies in the commercial sector and interest rates
would also be impacting that. But that just seems like a very big dip. What is the impact on the economy of that? Doctor. Raimi? Thank you, Mr. Chair. Senator Mabile. So nonresidential construction does include commercial office, industrial and warehousing and infrastructure spending. I would say also and as you can see in the chart, it's a pretty volatile, investment category. And we have seen quite a bit of building over the past, several years shown in the chart. And so we could be seeing a correction from that combined with
commercial vacancy rates, impact also contributing to a decline. I don't know if Mr. Hansen wants to add. You should get a chair in the end. Mr. Hansen? Yes. Thank you for the question. David Hansen, Legislative Counsel staff. Yes, I think we've seen, especially in 2024, a very large decline in many of the sectors. As you mentioned, Commercial Office is definitely struggling. We had a lot of warehousing that was and industrial was a very hot market up until maybe a couple of
years ago, and that market is also struggling. So I think it does seem like a broad based decline in non residential is how I would characterize it. All right. Thank you. Anything else? It's a long walk back. Doctor. Raimi? Thank you, Mr. Chair. Yes. So we were just wrapping up with the risks to the forecast. So we see them as tilted towards the downside. Although, like I said at the beginning, we do anticipate continued economic growth but slower. Some of the downside risks include federal policy changes that we've discussed,
issues possibly with national debt creating concerns in financial markets and elsewhere, International trade policy, so responses of our trading partners to potential tariff policy changes already happening or potentially happening. In the last few days, we've seen an explosion in the issue with geopolitical tensions once again and possibly impacting energy markets or other things, deteriorating labor market conditions. Like I said, if we think that we're seeing employers kind of holding back on new hiring plans
and not necessarily laying off workers. But if they do start laying off workers instead, we might see an increase in unemployment rate beyond what we've already considered here. And finally, as I've highlighted, this uncertainty is really the key aspect in impacting the economy now and moving forward. All right. We do have upside risks to the forecast. I should mention that the federal among the federal policy changes is the tax bill that's moving through. Congress right now is very uncertain what it will look like in the end.
But to the extent that it includes tax cuts, it could be stimulative to consumer business activity. And then we might see faster monetary policy easing or an improvement in labor market conditions. So that's it. Are there any more questions? I will pause there before I turn it back to Ms. Dorman. Senator Kirk Marritt. Thank you, Mr. Chair. Well, speaking of federal policy changes in the tax bill, what implications to the state whether it be if the no tax on tips or no tax on overtime? That'd be great for people. Doctor. Ami? Thank you, Senator Bridges,
Senator Kirkmeyer for the question. So we would expect that to have an impact on state revenue collections if we are tying since we are tied to federal tax policy in that way. So my colleague, Mr. Pino, will have some additional information. Go ahead. Introduce yourself. Help us answer the question. Thank you, mister chair. For the record, Louis Piedl, legislative council staff. Senator Kirk Miles, so, the house bill 20 twelve ninety six that was just passed, it actually it actually excluded,
it actually required that there would be an addition if there was an exclusion at the federal level of taxes and overtime pay, that there would be an addition to Colorado taxable income to include those. So the impact on that would it wouldn't really impact Colorado State Railroad because we just add that back on. It would be excluded at the federal level, but in addition at the state level. In '26, though, not for the next not for the Yes, in '26, yes. So we would see an impact in the current fiscal year that starts July 1
for the state. For tax year '25. Yes. Senator Kirk, Mark? Yes. So I could follow-up. So that was $25.1296 and basically what it did was it I'm just going to use the word decoupled. So we decoupled tax on tips and over time from so we would still tax that in the state, but it wouldn't get taxed at the federal level? Go ahead. Mr. Chair, Senator Kirk Meiner, sorry. It doesn't decouple at all. It just basically created an addition to so right now, it basically would say that if you excluded that overtime pay at the federal level,
then you would have to add that back to your Colorado taxable income before you go through the rest of your tax process. So it's we're still I don't wanna say decoupled by saying that we're not still tied to federal AGI and stuff. It just creates a new state tax addition that has to be added to Colorado taxable income. Okay. And sorry, my colleague here, yes. And I guess it's only just overtime. I guess, TIPS would still be not included in the Colorado taxable income. Any other questions? So do we know what that impact would be now?
That's SIPs? Do we know what that impact would be? I think we may have an answer for that in the next presentation. So let's move on with this one. Ms. Dorman, back to you. Thank you, Mr. Chair. Is your mic on? Now it is. Thank you. So I'm going to go over the revenue and budget forecast. To start things off, I'll just give sort of an overview of what our new forecast is. So we revised down economic expectations in fiscal year 2025 and 2025, 2026 and fiscal year 2026, 2027 and revised down revenue accordingly.
So tax credits that depend on revenue conditions are expected to be triggered down for tax year 2026. We'll go into that in more detail. Cash fund revenue also experienced a significant downgrade, partially due to legislation enacted in the 2025 session as well as collections coming in lower and lower expectations for our economy. For the TABOR outlook, we're expecting small surpluses expect especially in fiscal year twenty five and fiscal year twenty six. So the TABOR outlook is very sensitive to changes in revenue and changes in those tax credit triggers.
The budget bottom line is that the general fund reserve is expected to be below the reserve requirement in all three years. So to start things off, I'm gonna do a little recap of legislation that was passed in 2025 and the impacts on our general fund revenue collections. So the impacts on fiscal year 'twenty six were fairly minimal with roughly $30,000,000 increase to the general fund on net. That's mostly coming from SB three seventeen and two sixty two, which changed how cash fund interest is deposited. So instead of, that interest being deposited in cash funds,
it's now deposited in the general fund. So that's an increase to general fund collections. For fiscal year 'twenty seven, we have those same two bills, but then the other main impact is, HB251320, the School Finance Act, which created a new diversion away from the general fund into the Kids Matter account and the State Education Fund. So that's counted here as a reduction in general fund revenue of $228,000,000 but then you will also see that on the next slide as a positive impact to cash fund revenue because that's deposited into the State Education Fund. So on net, that's about a $215,000,000
decrease for fiscal year twenty twenty seven. So this is the legislative impacts on cash fund revenue. You'll notice that the first three lines are the same as the last slide, just in the opposite direction, moving money from cash fund's general fund and vice versa. Beyond that, there were a handful of bills that reduced cash fund revenue subject to TABOR. Some of those reduced fees, some changed finance structures, to move revenue, such that there's less counted as cash fund revenue subject to TABOR and then some reclassified current cash fund revenue. So on net,
that's about $185,000,000 decline for fiscal year twenty twenty six and a slight increase for fiscal year 'twenty seven as a result of that Kids Matter account diversion. Senator Kirk Marr. I do have a question and maybe if you're not the appropriate person to ask the question, then I'll get with Pierce later. But on that tax exemption adjustment for 12/1996 or on just on 12/1996, I'd like to know how we add back in a tax addition without going to a vote. Essentially, we put in statute that if the federal government, right? Hopefully, I'm saying this right, but if the feds say,
look, no tax on overtime, but we say no, but in 2026, 2027, we put it in statutorily that we are now going to tax you still tax you on overtime, that would be a tax addition. I'd like to know how we do that without going to a vote of the people. And maybe if I I think this is a phone of rent for Mr. Lively here. This discussion with Mr. Lively off line, I will, but I'd like to know. Do you want to know? You probably don't. I would like to know. If you can answer it quickly, I'd like to know. Quickly, Mr. Lively. Thank you, Mr. Chair. Pierce Lively, Office of Legislative Legal Services.
So in that particular portion of the build are two relevant TABOR portions or relevant portions of TABOR, I would say. The first is TABOR four, which I think is what you're just thinking about where if we have a tax policy change causing that revenue gain, we need to get voter approval. However, at the time twelve ninety six went through the legislature and was signed into law, the federal law the federal bill that we're discussing hadn't become law, in fact, it still has not. So the fiscal note did not show and we did not project any revenue gain
as a result of the change in that bill. And so we would one could argue that there was not a change in revenue as a result of that change. There might be down the road, but at the time the change was made, there was not. The TABOR eight component has to do with changes to the definition of taxable income. There is a limitation on when those changes occur that it should occur in the next year. We, of course, did not make the change, as Mr. Pino said, until 2026. So there are arguments for why we did not go to the voters and why we made those changes with the timing that we did.
Thank you, Mr. Lively. All right. Back to you, Ms. Gorman. Thank you, Mr. Chair. Okay. So in addition to, legislation that was passed in, the 2025 session, you might also recall that there are four bills that were passed in 2023 2024, where the that had tax credits, where the availability and amounts are dependent on our revenue forecast for revenue conditions. So I'm going to go through those four. So the first was HB 20 three-twelve 72, tax credits that advanced decarbonization. So this included four tax credits, that had a revenue trigger in them.
So that's, EV, yes, electric vehicles, electric trucks, e bikes and heat pump tax credits that are tied to our revenue forecast. The second is HP 20 four-thirteen 65, opportunity now grants and tax credit, which had a workforce shortage tax credit, which provides, tax credits for investment in facilities and equipment that address workforce shortages. The last two, I am guessing, you are the most familiar with, the family affordability tax credit and the expanded earned income tax credit. So in all prior forecasts, revenue expectations were expected to be sufficient that all of these tax credits could be
available in full. However, since the March forecast based on lower collections and a reduction in expectations for the economy, we revised down that forecast. So this table shows our initial forecast. This is not our final June forecast, but this is our initial forecast that we did that assumes that all of these credits are available in full as we have assumed for all past forecasts. And so what this shows is that revenue subject to TABOR was expected to increase by only 2% in fiscal year twenty twenty six. And so that activated some of these tax triggers.
And we are expecting revenue to fall below the TABOR cap by $164,900,000 in fiscal year twenty twenty six. So that represents about a 3% decline in revenue compared to March. In fiscal year twenty twenty seven, we have some acceleration in growth to 5.4% with revenue just barely exceeding that reference of CCAP by $284,700,000 And that is, before we have taken into account Senior Property Homes to tax exemption, correct? Correct. Great. Please continue. Senator Kirkmeyer. So when we take that into account, what will happen to our bottom line?
Miss Doorman. Thank you, mister chair and senator Kirkmeyer. That will be the focus of the rest of the presentation. But so I'll walk through them on the next slide, and then we'll get to the bottom line. So based on the forecast I showed you on the last slide, tax credits from each of these four bills are expected to be reduced in tax year twenty twenty six six only. So I'll go into each of those. But before I do, I'm just going to make a note that the order in which these tax credit triggers are evaluated does matter, and it's ambiguous in statute. So because the amount of the tax credit impacts total revenue,
the value of the other tax credits will matter when you're evaluating each individual tax credit. And it that priority order is not, dictated in statute. So we have consulted with, Office of Legal Services and they, gave us a recommendation for the order in which we should evaluate each of them. So we evaluated them in the order, in which they are actually determined by our forecast throughout the year. I think that will make sense as I walk through it. So the first one is HB 20 three-twelve 72, which is the electric vehicles,
e bikes and heat pumps. The actual credit reduction for each of these tax credits are determined by the preceding June forecast. So that means that this June 2025 forecast determines the actual credit amounts for tax year 2026. And so this bill requires that revenue be exceed 4% in fiscal year twenty twenty six for those tax credits to be fully available or to be fully available in tax year 2026. So as a result of our forecast, these credits will be reduced by 50 in tax year 2026 only,
according to current statute. The next is HB 20 four-thirteen 65, the workforce shortage tax credit. This has the same trigger as December requiring 4% growth, but the actual credit amounts for tax year 2026 will be determined by our September 2025 forecast. So that hasn't officially been triggered down yet. But based on our forecast, that workforce shortage tax credit has an aggregate revenue cap of $15,000,000 and we expect that, that will be reduced to $7,500,000 in tax year 2026 only. Lastly,
we have the Family Affordability Tax Credit and the expanded earned income tax credit. And the actual credit amounts for tax year 2026 will be determined by OSPB's December 2025 forecast for the compound annual growth rate for fiscal year twenty twenty seven. So based on our forecast, that compounded annual growth rate between the March 2024 forecast OSPB's forecast for fiscal year twenty twenty five and our forecast for fiscal year twenty twenty seven is 3.5%. So pursuant to that trigger mechanism,
if that CAGR is expected to exceed 3.75%, then these tax credits will be available in full. If it falls below 3%, then both of these tax credits will be unavailable. So as a result of our forecast, these credits are expected to be reduced in tax year twenty twenty six six but still available and then return to their full amounts in 2027. So what I've shown so far on the last slide is just what the forecast looks like, assuming that all of these were available in full. For the rest of the presentation, I'll be focusing on what it looks like with these tax credits reduced.
So this is our general fund revenue forecast with those tax credit reductions. So we're expecting a 1.2% decline in the current year and 3.1% growth next year and 4% in fiscal year twenty twenty seven for General Fund. Relative to March, this is a $47,000,000 increase for fiscal year twenty twenty five. This increase is entirely attributable to an accounting change made by the Department of Revenue. So they shifted essentially where certain income tax collections were being recorded between cash book returns and estimated payments. It doesn't impact the total amount of revenue collected for the state,
but it does impact the timing. So it essentially makes it so that there's more revenue being accounted for in fiscal year twenty twenty five. And so that pushed up our general fund revenue collection expectations for fiscal year twenty twenty five despite lower collections overall where nearly every revenue stream was actually revised down on a cash basis. I'm going to need you to repeat that in terms that hopefully I can understand. And how do they do that? Because I mean, are we just kind of moving things around just like a shell game kind of stuff and it's just going to catch us in 'twenty six
or what? Doctor. Reich? Thank you, Mr. Chair. Senator Kirk Meyer, so the Department of Revenue identified tax returns that had been for quite some time, payments that were submitted in April that they accounted as estimated payments, but were instead prepayments of extension returns. So they should that amount should have been counted as cash worth returns instead of estimated payments. So cash worth returns attributable to tax year 2024 and not estimated payments associated with
economic activity in 2025. So for that reason, that amount is in the future, will be accrued back. It will change the way the timing happens in the future. But what it means now is because we already closed the books on twenty twenty three, twenty twenty four, we've got sort of a traffic jam in the current fiscal year because it won't be accrued back. Cash worth returns will not be accrued back to twenty twenty three, twenty twenty four because we're done. We closed the books on that year. So it's inflating current revenue that's attributable to attributed to this current fiscal year.
But it should not have the same impact moving forward. Okay. Super clear. Ms. Dorman? How much is it? Thank you, Senator Kirk Meyer. Senator Kirk Meyer. So for individual income tax, it was $724,000,000 That was it does not change the cash revenue cash amount, but it does change and it's moving between estimated payments, dollars 700,000,000, into cash worth returns. Go ahead and dialogue, Sandra Clark. Is there an issue brief on this? So we can actually see what's going on, the amount of monies and where it's moving and how it does impact us because
we went through this whole pay date shift stuff and things move here and they move there And it just it's an accounting game. And it kind of masks the problem that we're in with our budget. Thank you, Senator, for the question. That is something we can work on for you if you'd like us to do a research request, an issue brief of some sort. I imagine that my colleagues in the Governor's office will also be able to answer questions about that adjustment. Yes, I think we'd love to hear more about that.
Moving on for now. Ms. Dormant. Thank you, Mr. Chair. Yes. So this was a big accounting adjustment. We will follow-up with more information on that. Besides that, most cash basis forecasts were actually revised down for fiscal year twenty twenty five. So that also led to, more downward revisions for fiscal year twenty twenty six and fiscal year twenty twenty seven, which are not offset by that accounting adjustment since it was just made in the current year. So a lot of that came from corporate income taxes, especially for fiscal year twenty twenty six, which were revised down by $351,000,000 in fiscal year twenty twenty six.
And then because those tax credit triggers were reduced, individual income was boosted slightly, so it offset that a bit. And then fiscal year twenty twenty seven, the downward revisions were pretty wide based between sales, individual and corporate income taxes. This is your quarterly reminder of how cash funds impact the budget. It seems like we're a little short on time. Lower cash funds means more general fund revenue. Yes. Okay. So this is our cash fund forecast, incorporating all of those revisions, particularly legislation. So this was still a downward revision in all three years of 19,000,000
in the current year, 235,000,000 next year, and a 180,000,000 in 2027. Does this take into account, CDPHE's phased increases in various different fees? Was that a 2025 bill? Mhmm. But yes. Yeah. Great. Wasn't a bill, but it was their plan. Okay. Great. Thank you, miss Orman. So this, is mostly a major downgrade to our miscellaneous cash funds, file, due to legislation in 2025 changing different cash funds. There was also a modest downgrade to transportation based on legislation as well as based
on lower collections for fuel tax revenue. And then in fiscal year twenty twenty seven, we've added in the new diversion to the Kids Matter account. This is what all of those changes look like, when you add up all revenue subject to TABOR. So these gold bars show the TABOR surpluses. And you can see that they get very, very small in fiscal year twenty twenty five and fiscal year twenty twenty six. So those TABOR surpluses are $142,000,000 in the current year, dollars 83,000,000 next year and $536,000,000 in fiscal year twenty twenty seven. And this is what that looks like as a percentage of total revenue,
although I will note that, that doesn't directly correspond to forecast error at this point because there's still room for those triggers to be turned off further. So there's a little bit more room than 0.4 for downward revisions to fall below the reference fee cap. This is what those look like. It's a little bit better. Thank you, Mr. Chair. I wonder if we could get the numbers, if we don't have them here, if we could get another chart because the chart showing the percentage change on the revenue side was very helpful from March.
It would be equally helpful to see the impact of all of this on tabor surplus from the March forecast to the June forecast. Just to see that delta would be very helpful. If it's in here that's Yes, I just That's fine. Ms. Dormen? Thank you, Mr. Chair. I just want to clarify exactly what you're looking for. Are you looking for the impact of the tax credit triggers or just the revisions, between March and June, assuming that all tax credits are fully available? Rob Jack. Thank you, Mr. Chair. I'm trying to think about your answer.
Given the fact that it does trigger a reduction in the tax credits, I think I could take that into account when I'm looking at it. But I would just like to see the delta and the surplus from March to June. Ms. Dorman. Thank you, Mr. Chair. I believe that is presented on page 26 of the forecast to offer in the text. But we can make a chart. In the text. Great. We'll take a look. Thank you. Miss Dorman. Okay. So this is how each of those TABOR surpluses look, by their refund mechanism. So in fiscal year twenty seven,
the surplus is supposed to be enough to cut the income tax rate to 4.36% with $212,000,000 left for the six tier sales tax refund. For fiscal year twenty twenty five and fiscal year twenty twenty six, those surpluses are not expected to be sufficient to fully fund the required property tax reimbursements to local governments as a result of the Homestead exemption and the AV reductions in Tenneville twenty four-two eleven. So for fiscal year twenty twenty six, that obligation is expected to be $214,100,000 covered $142,200,000
from the fiscal year twenty twenty five TABOR surplus, driving a general fund obligation of $71,900,000 for fiscal year twenty twenty six and a similar mechanism driving a general fund obligation for $153,900,000 for fiscal year twenty twenty seven. So these numbers are incorporated, for the rest of the presentation Gonzalez? Maybe thank you, Mr. Chair. Maybe I'm just not understanding the mechanism correctly. As I listen to you speaking about this slide and this information,
if there were to be a refund obligation that would not be sufficiently sufficient enough to cover the property tax exemption mechanism, that then requires a general fund obligation. Got it. Thank you. It's because of the tax credits. This is Dormant. Thank you, Mr. Chair. We use the surplus for the tax credits. Okay. So moving on to the budget outlook for your fiscal year 2025. This is what our forecast looks like in March. We had expected that you would end the year with a 14.3%
reserve, which is $127,900,000 below the requirement. This was revised up for June, such that your general fund reserve is expected to at least round to 15%, but will be below the requirement by approximately $8,600,000 under our forecast. So that's an upward revision of $118,500,000 compared to the prior forecast. The biggest change here is those twenty twenty five legislation that increased transfers into the general fund. So that's a variety of bills there, but that totaled $343,000,000 in addition,
reduced cash fund revenue increases budget space by million. And then on the other hand, increased general fund appropriations and the corresponding increase in the reserve requirement reduced budget space by $238,000,000 For fiscal year twenty twenty six, we're showing the comparison between March's scenario A forecast, which assumed constant appropriations, from the prior year, but also incorporating the swap and ARPA funds. So that required or expected that you would have 16.7% reserve and $320,000,000
in excess reserve for fiscal year twenty twenty six. Based on this forecast, we're expecting you will end with a 14.2% reserve or $83,600,000 below the general fund reserve requirement. And then there's also just a reminder that $500,000,000 of this general fund reserve is now held in PERA. So that's a net $403,700,000 change in general fund reserve relative to the requirement. This is offsetting quite a few different factors, mostly driven by legislation. So there's that downward revision to cash fund forecast of $235,000,000
for fiscal year twenty twenty six, which creates corresponding budget space. Additionally, that carry forward, from the prior slide and increased beginning balance of 150,000,000 Also, Senate Bill 20 five-two 57 reduced transfers to transportation from the general fund for fiscal year twenty twenty six, which creates $75,000,000 more in budget space. On the other hand, increased rebates and expenditures reduce your bottom line. This is mostly due to shifting the PERA direct distribution from appropriations into rebates and expenditures by removing it from the reserve requirement.
Other than that, there's also that is also where the Homestead payment is captured. Where is that? I'm sorry. In rebates and expenditures. And then Senate Bill 20 five-two sixty two increased capital construction transfers relative to what we had assumed in scenario A in March, which reduces budget space by $151,000,000 And then increases in general fund appropriations and the reserve requirement reduces general fund space by $617,000,000 Okay. Now turning the page to fiscal year twenty twenty seven for the first time. So this is scenario A,
which is assuming constant general fund appropriations between fiscal year twenty twenty six and fiscal year twenty twenty seven. This scenario A also does already include that expenditure for the homestead exemption and, local reimbursements. So under those assumptions, you're expected to have an excess reserve of a 148,200,000.0 or 15.7% reserve. Scenario b is meant to be illustrative, not prescriptive. These are meant to show just kind of general decision making that the JBC could make based on their past decisions.
These were supplied to us from JBC staff. So the first change here is annualizations of 2025 legislation and fiscal year twenty twenty six decision items. So on net, appropriations are expected to decline actually by $2,200,000 which provides $10,200,000 in additional budget space. That's mostly due to the Healthy School Meals for All bill, which reduces appropriation for fiscal year twenty twenty seven relative to fiscal year twenty twenty six contingent on the November 2025 ballot measure. Next, we'll add in, appropriations.
So this the first one is HCPCS, the largest, based on decision items, annualizations. This is a $349,000,000 expected increase for fiscal year twenty twenty seven. Higher education expected to increase by 44,800,000 That's assuming an increase with inflation, so that's a 2.8% increase relative to the prior year. Provider rates are expected to take up an additional $52,600,000 representing, I think, the same increase as fiscal year twenty twenty six. And then the salary survey expected to cost an additional $95,100,000
assuming a 4% increase from the prior year. Secretary Wagner. Thank you, Mr. Chair. So the community provider, you said the rate was the same as it was budgeted for 25%, 26%. So is that the Medicaid provider rate? Or is that the all other rates? Like what is the number there? What's the what's that actually increase? Because we didn't increase we only increased Medicaid provider rates, not all rates. And we only increased them by 1.6. Yes. That's $60,000,000 Ms. Bickel? Exactly. I believe the assumption that was used was the same as whatever the increased total
increase you did last in the last So an assumption of replicating that investment. Exactly. I mean all So the same way we looked at this last year. Right. So we just did. If we could anticipate what we did last year and do it again next year, we're down $700,000,000 Correct. Cool. Senator Kirk Meyer? Okay. Well, I'm still trying to figure out when you talked about the community providers, that's representing $53,000,000 approximately. What's that assumption based on? What percentage increase and what's it based on? And is the Medicaid provider rate increase, is that included in the HICPUF $349,000,000
This is better. Okay. Senator Kirk, sorry, JBC staff did provide this to LCS staff. So my understanding and I did ensure there was not a double count of any kind, The community provider amount was, I believe, based on the same dollar amount that you did this last year and did include the HICPUF amount. So really, that current what's listed as community providers right now is incorporating a HCPCS adjustment. The HCPCS adjustment is does not include that and is based solely on forecast growth
figures. So not an additional community provider adjustment. I think it's really important to note these are really rough estimates. We don't know what you're going to do next year. And we all we but in order to have something to look at that is somewhat more helpful than just let's assume you made the exact same expenditures last year in 2627 as 2526, we give some sort of rough estimates of the kinds of expenses you might have. And so the community provider,
again, reflects the decision in I believe in total dollar amount that you did for twenty twenty five, twenty twenty six. So that's the 1.6% increase is reflected if we do that again just for the community providers. 52.6%. I think that's lower than what we did dollar amount last year, but Mr. Bigel? I'm afraid I'm not certain I can have Mr. Breakey come in and talk to you if necessary. It's fine. Well well, it doesn't change the overall negative down there. So, continuing on. Okay. Hey. This is rep leader. I have a question.
Oh, representative leader, go ahead. Hey. I wanna go back to the, the homestead act, the seniors homestead act. Just pointing out, one for the portability portion was only for two years, which is which will be expiring. I don't know how much of that you have put in there. And then and maybe because I can't I don't have all the handouts and everything. Maybe you explained it in there. So I'm curious as to what were what is all the factors that you're, using in regards to the senior homestead exemption portion?
Because I know when I filed my bill last time, I got this exorbitant, fiscal note on it, and I which I was in disagreement with because you're already giving the exemption, and you just don't get it back for the portability portion is when they have the portability portion. I'm just curious as to what what is everything that goes into calculating the amount for the senior homestead exemption? Ms. Dorman? Thank you, Mr. Chair. I have a question. Mr. Hansen, just go ahead and take that chair. Thank you. All right. Thank you, Mr. Chair,
and thank you for the question. So David Hanson, Legislative Council staff. So we have two parts of this. We have the existing constitutional exemption for seniors and for certain veterans, Gold Star spouses, that type of thing. And that is we build our forecast based on the population that exists. We have good data. We have good historical data because they have to file an application. This gets compiled by the DPT. This has long been something that the state has reimbursed for us.
We do have good data on that. For the other piece, the qualified senior primary residence assessed value reduction or homestead portability, That piece, we will have more data. Right now, applications are being accepted by county assessors that will get compiled by the DPT and we will have data for that first year of implementation in September. That is based on the fiscal note has methodology has led into what we predict for this forecast.
So meaning basing it on average property tax exempted for the senior population. And so assuming that that qualified senior primary residence population is similar to that senior population. And then also an estimate on who may have moved, I think it was since 2020, that may qualify for this assessed value reduction. And so that definitely, I think, does have some very risk associated with where those actual numbers come in, how many folks will utilize that assessed value reduction and apply for it.
So by September, we will have a hard number for that. All right. Thank you very much. And for the final page of this presentation, Forecast takeaways. Oh, we have not done capital. Oh, okay. Back to the penultimate page. So capital construction is expected to add, $25,800,000 and $6,700,000 for IT capital just in annualizations of projects approved for fiscal year 2026. Additionally, the state architect's recommendation for controlled maintenance is 202,600,000 So when you add all of those things together, the excess reserve under scenario b is expected to be negative $698,000,000,
so below the reserve requirement by nearly 700,000,000, which corresponds to a 10.7% reserve. Okay. Now forecast takeaways. So the economic outlook has weakened and remains highly uncertain, so we have downgraded our revenue forecast accordingly. These revenue downgrades are especially consequential when we're this close to the Tabor cap as a result of those, surpluses not being enough to fully fund Homestead for fiscal year 'twenty six and fiscal year 'twenty seven. Also, the tax credit triggers are highly sensitive to changes in the revenue forecast. So even small declines in the revenue forecast for fiscal year 'twenty seven can change those FADC and EITC
triggers pretty significantly, which have an impact on your budget as a result of those homestead exemptions. The biggest changes to the budget for fiscal year 'twenty six are due to legislation, both transfers in, transfers out and changes to the revenue forecast. Lastly, the general fund is expected to end fiscal year 'twenty seven below the reserve requirement under scenario B assumptions. So these forecast takeaways in the forecast, none of this includes anything that may or may not happen at the federal level. So if we see some things that would radically potentially change this forecast,
is that right? Ms. Doorman? Thank you, Mr. Chair and Senator Amabile. And it includes the expiration of TCJA. TCJA. It does not include, any adjustments for the bill that is currently working through the bill at, Congress. Alright. Well, thank you, for this presentation. Any any other questions? Oh, we'll go to rep Tager. Thank you, Mr. Chair. I'd like to go back to Slide 26 for a second, but I'd more like to ask this question of us as the JBC. I am very concerned about the statement that the tax credits
to date along with the Senior Olmstead Act, are we going to do something about this ambiguity as a JBC? Because that's really disconcerting that we don't have a priority in place at present and I think we should have a priority in place. I think that is definitely a conversation that we should have, and we may actually have an opportunity to address that at some point soon here. So, we have Senator Weisman, and then we'll go to Senator Kirkmeyer. Oh, you have a Senator Kirkmeyer. All right. Senator Kirkmeyer. Well, if we don't act fast,
we can't address it. I mean, we won't be able to address the June forecast issue, the September forecast issue. So those two tax credits would go first. We would have to act pretty quickly on those and we don't know until we won't know. So and we already tried to figure out what to do about the December forecast. So if we don't act on it before December, it'll be too late. I'm fairly sure we will be in a position to act on things before December, unless the federal government completely and totally doesn't move forward in anything, which who knows?
I mean, these days, who knows? Senator Majle, I saw your hand up. Senator Weisman. Thank you. I always comment on scenario B. I can't remember what conversation I had, but somebody was roughly scoring the impact of HR1 to be revenue negative to us due to our dynamic conformity and tax anywhere between 300,000,000 and $700,000,000 And then we look at Medicaid and SNAP and whatever else they do. On the bright side, somebody left a dollar on the table, so that's not how No, that's a JVC thing. That's been spoken for.
Okay. All right. I'm not in on the joke, never having been a budget committee member. I mean, all right. So it's been sorry to count, we can't double count. Look, I mean, obviously, scenario B is pretty sobering. I mean, it always is. I think it really is this time. And I think that we should all be really worried about what H. R. One is going to do to the state fisc, I guess, is my observation. I think you take the scores on the revenue side, never mind the expenditure gap fill, if you will, side of the ledger. And now we're looking at the 0% reserve exactly when we'd like at least 15%
and arguably more. Mr. Chair, I'm certainly here for any conversation about tax policy that might ensue should we find ourselves here prior to January. Looking forward to those conversations. Senator Mabile? Just on a more just to respond to this slide, I will just say this looks like a good priority that we would cut things in this order. So just want to put that out there. Like that looks like somebody was thoughtful about the way they did that. And I would add that as long as we make these decisions before, the 2026 tax year,
I think we can say in looking backwards that regardless of what the June forecast says, we can make changes to how these different policies are implemented. So as long as we have a shot at this before the end of this year, I think we can make those changes. Ms. Dorman, your hand shot up at that. Thank you, Mr. Chair. I just wanted to respond to the order that this was it is ambiguous, so this is not necessarily the order. Like, if you don't do anything, this isn't necessarily the order that will happen. I think OSPB actually has a different interpretation as well. OSPB assumes something different. Well, I think that we should probably include this in,
the conversations that we will have should there be some gathering of, folks that can make those decisions. So, trying very hard not to say the magic words. Anything else before we move over to OSBB? Alright. Thank you all very much. We're gonna stand in a two minute recess to reset. And just so everyone knows, we are not stopping at noon. We are gonna keep on rolling until this agenda is done. Standing in recess for three. JBC is back. And, I heard that the, OSPB presentation is, is optimistic and sunny. So is that,
director speaker Ferrendino, what do we got? Thank you, mister chair. And I think it's always in the eyes of the beholder. If you wanna say it's sunny and optimistic, I'll take that, but I think other people would not maybe agree with that assessment. Mister chair, for the record, Mark Berandino I think we're just gonna adjourn. Mark Barandino, Director of the Office of State Planning and Budget. I will let my colleagues introduce themselves when it's their turn to speak. But overall sorry. Overall, the forecast is, as has been the case, pretty similar to where you heard from legislative counsel.
We do expect a, Tabor surpluses in the this current year and next year and then growing in the out year. Actually, if you look at it, I think we're $1,000,000 different in the budget year, which is the 2627, which I think is the closest I've ever seen, to forecasts from the OS, OSBBL and ledge council be. However, I would point out and we will get through get into this conversation later, the impacts of House Bill one in the federal would bring us below the Taber
surplus in twenty twenty five-twenty twenty six and twenty twenty six-twenty twenty seven. And we'll go through why and what the impacts. And that's just on the tax side, not on the expenditure side, which we'll also talk about increased expenditures due to the versions of House Bill one. So with that, I will turn it over to Deputy Director Cook to talk about the economics. Mr. Cook? Thank you, Mr. Chair. For the record, Bryce Cook, Deputy Director at OSPB. And just as a reminder, HR1, there's no federal impacts on our baseline forecast here at all. I'll go through some of the other assumptions as we get further into the presentation.
Overall, our Colorado's wage growth is expected to be stable, but we do expect slower consumption and business investment given even rising uncertainty past what we had in our March presentation. So moving into the next slide. We are revising down our forecast by 0.4 percentage point in the current year and growth revised down 0.5 percentage point down to 1% growth in 2026. Before going into our forecasted portion, I want to talk about the fact that in the first quarter of the year,
there was slightly negative GDP growth. This was as a result of basically of record imports that were coming into The U. S. As businesses were trying to build up massive inventories before some of these tariff policies took place. Then in the second half of the year, you can see that our GDP forecast turns negative and flat, then flat again as we're expecting slower consumption and a drag from investments from businesses. So moving to the next slide, part of the reason why we think that expenditures are going to be lower from individuals, it's because there are slightly higher inflation expectations that we're expecting relative to the March
forecast and also household debt is higher. Just as an example, when we look at the ninety day delinquencies on credit cards, it's the highest that it's been since 2011 right now. And so for many households, we're seeing that they are going to have to pull back to more essential purchases. That being said, about half of all spending is based on the top 10% of wealthy households. And so that's the only reason that buoy from the wealthiest households is the only reason why we don't expect there to be a drag in real consumption.
What percent of consumption is just the top households? The top 10% according to JPMorgan's research branch is about 50% of all spending. Wow. Yes. Wow. Senator Kirkmeyer? And what's considered a top 10% household? I don't know what the exact number is, but they break it down by income brackets. And so whatever the 10% or higher income bracket, would be that number. I can go back and figure out exactly what that number is, but I don't have it off the top of my head. I'd be curious to know what that number is.
Thank you. Senator Quickwire? So can you give us your best guess at it then? I mean, surely, there's something you can do with the number. Somewhere probably around $200,000 but maybe less than $200,000 Also for on the inventories and investment side, we do expect the capital investments are going to be a drag on GDP growth. The main reason why is in the most recent surveys only 18% of firms are expecting to take on new capital investments.
That's the lowest since we've seen since April of twenty twenty. And so then moving on to the next slide. One thing I want to highlight too is that Colorado's economic recovery since the pandemic recession has outpaced the nation, which also had a great economic recovery overall. That was particularly true between 2021 and 2023 when jobs growth, wage growth and consumption was much more elevated here in the state than it was for the nation. As you can see though in this graph, that index for Colorado kind of shifts a little bit back towards The U.
S. In 2024. 2024 was not a good year for Colorado relative to the nation, and so that does slim the gap. But we do expect by the time we get to the out years that, that trend will reverse and Colorado will continue to improve in advance of the nation. So moving on to the next slide. This analyzes one reason why that's the case. The labor market, as you can see, the Colorado jobs growth was really outpacing the country during those three years and then coming into last year starting to flatten off. We do expect that the unemployment rate will be higher than The U.
S. This year and next year, but it will peak earlier. And then by the time we get to 2027, we will have a better labor market than The U. S. Overall in our forecast. One downside risk is that the Challenger report identifies announced job losses, whereas the BLS survey that we talk about with jobs growth and the unemployment data is based on net survey data on jobs gained. But that BLS data does not include announced job losses that haven't been finalized. So if you think about some of the federal voluntary separations that will take place
in the fall, those aren't included yet in the BLS data. Any federal cuts that have taken place but are tied up in court aren't yet in the BLS data. That might show up later in the year and if it does, it will reduce the amount of jobs growth that we expect to happen between now and the end of the year. Also just to highlight, there's only 124,000 jobs added every month this year thus far versus 168,000 last year. So we are weakening as far as our job growth goes as a nation. Wage growth is also expected to weaken over the course of the forecast until we
get to twenty twenty seven. It has been weaker in 2024 in Colorado compared to the nation, similar to what the jobs market looked like. However, we do expect that trend to reverse course. And by the time we reach next year, we expect Colorado going into the end of twenty twenty four was basically flat year over year growth. It has grown now to 3.1% in the first quarter. We only have data through March. And so quarter. We only have data through March. And so comparing apples to apples with The U. S, they're about the same as far as overall amounts of retail spending growth.
You can notice that some of the spending areas where there's really growth are revolving around cars, furniture, electronics, things where we expect there to be some pull forward spending before the tariff impacts hit. One of the reasons we believe that to be true is The U. S. May numbers actually dropped in retail spending by almost a full percentage point. Moving on to consumer confidence and we highlighted this last time, it has been going up. It went up even further in April and May as tariff rates went up. Right now, inflation expectations are slightly above where they were when we presented in March.
That being said, business inflation expectations are lower, maybe giving a little bit of reason for optimism. And we have had a disinflationary path for the inflation markets. And if you look at just CPI for The U. S. And for Colorado, It's 2.42.2%, respectively. Additionally, the PCE price index, which is what the Federal Reserve uses for their 2% metric, is it 2.1%? So in a vacuum, you would think, oh, well, the Federal Reserve is close to hitting their targets, maybe they should start lowering interest rates.
They're not doing that because they're very concerned about tariff policy, right? So turning to that tariff policy, when we presented in March, we had an expected 9.5% effective tariff rate when you're aggregating all of the different tariffs across all the different countries and how they impact imports. It was very volatile during April and May. It is now lowered, but still more elevated than it was in March at 15.6%. That's a major reason why we think that the GDP estimate should be lower than they were in March. Additionally, one of the major reasons why we don't think that,
that inflation pressure has hit yet is because all of those inventories that were built up in the first quarter, businesses still have those inventories, we're still spending them down there at lower unit costs and so they're not passing along increased inflation that they didn't personally face themselves. However, those inventories in our minds are likely to diminish over the next couple of months. And by the time we reach around Labor Day, we're expecting to see more broad based inflation as a result of those new shipments facing higher tariff rates. Turning to some good news that we've seen thus far this year on inflation categories.
With shelter inflation in Colorado, we have seen declining rent prices over the last year. One of the major reasons why is that there are growth in active listings. Even though there aren't increases in new multifamily housing starts, there are a lot of people out there who are ready to sell their homes, but the demand is not there yet. And so with that supplydemand gap, it's putting downward pressure on prices in a way that we're not even seeing for The U. S. U. S. Prices are still growing, whereas in the state, rent prices are declining right now.
On oil through May, which is the inflation data we have, there was downward pressure on oil prices. In the most recent publication that we included here, which is presented, the Energy Information Administration expected $62 a barrel for WTI this year and $55 for next year. This forecast was locked down as far as its policy and economic assumptions are concerned by June 9. So we just need that time to basically feed everything through our revenue models. Because of that,
what has happened with the conflict in The Middle East? It is not incorporated into our baseline, but obviously that could have significant upward pressure on oil prices. Two other things that are included within federal policy, I'll leave the tax policy and fiscal policy sections largely for Director Ferrendino's discussion on what's happening But they are not captured in our baseline. Immigration policy and trade policy is incorporated into our baseline. As I mentioned on trade policy, that 15.915.6% effective tariff rate as of June 9 is what we're incorporating.
And then to the final slide of my portion, the chance of recession in our minds has raised from 40% to 50% in our forecast. It actually would have been higher if we were in April or May when effective tariff rates were as high as 28%. But now where they are, we think it's 50% with some of the downside risks being additional trade policy impacts that could impact supply chains. Additionally, as I mentioned before, geopolitical conflicts with The Middle East could be a downside risk and some of the
reconciliation tax policy could be a tailwind to businesses being an upside risk there. And that is the end of my section. Before I turn it over to Mr. Mixon, are there any questions? Mr. Mixon? Thank you, Mr. Chair and Committee. Will Mixon, OSPB. So I'll turn now to the general fund revenue and TABOR outlook section of the presentation. Over the next couple of fiscal years, we do expect small TABOR surpluses despite some lower revenue expectations. An important piece of our forecast is that the family affordability and expanded earned income tax credit are assumed off in tax year 2026.
I'll get into a little bit more of that. And similar to March, we continue to see elevated potential for the state to fall below the TABOR cap throughout the forecast period. So turning to general fund revenue top line numbers, it is revised down over the forecast period. In fiscal year twenty twenty five, we expect revenue decline of 0.8%. It's about $113,000,000 revision down from March. That's largely from individual income tax revenue refunds going out more than expected and so reducing that revenue down some.
In fiscal year twenty twenty six expect revenue growth to turn positive again by 4%. However, that is a revision down on weaker economic expectations. And then in FY twenty twenty six-twenty twenty seven expect revenue growth of 3%. That is a $488,000,000 revision down. But as it was discussed in the Legislative Council presentation, a good chunk of that is from just a general fund revenue diversion to a cash fund from for the Kids Matter account as passed in the School Finance Act. Rep Tacker? Thank you, Mr. Chair. I'm just concerned about the statement before you started into this because it is significantly
different than the forecast we just reviewed. You're making the assumption that the family affordability and expanded earned income tax credits will be completely off. And we did not see that unless I miss something. We did not see that in the other forecast and that's a dramatic difference. So I'm trying to figure out what you're seeing that's turning that off as compared to, Legislative Council. Mr. Mixon. Thank you, Mr. Chair and Representative Haggart. I will get into it a little bit more.
What we are forecasting in this forecast is that the revenue growth required is not met. The 3% revenue growth is not quite met. It's very close. And so it gets pretty tight where the that trigger is 3% it gets hit for the lowest level and then up to 3.75% it's turned on fully. And so we're just a little bit below 3%. And so it's pretty close except it just gets tight where if you just fall a little bit below it, it does turn it off. And I'll get into a little bit more of that. All right. Keep on going. Okay.
So thank thank you Mr. Chair. Turning to cash fund revenue top line, and so cash fund revenue we do expect a decline in fiscal year twenty twenty five of 1.9%. That's largely from severance tax revenue coming in lower, so seeing that decline there. In fiscal year twenty twenty six, we do we are revising down $185,000,000 That's largely from policy impacts from this past legislative session that my colleague Mr. Schuck will get more into detail there. And in fiscal year twenty twenty seven that very large growth number of 14% again that's largely from the diversion from the general fund going to the cash fund now
related to the Kids Matter account into the State Ed Fund. And so that's just kind of showing up there. So turning to the overall Taber's surplus outlook, we're seeing those net downward revenue revisions. So we do expect narrow Taber surpluses over the forecast period under current law of February in the current fiscal year, dollars $289,000,000 in fiscal year twenty twenty six and $536,000,000 in fiscal year twenty twenty seven. Those are revisions down over the forecast period given those lower revenue expectations and so those that does narrow the TABOR surpluses there.
So that's under current law. However, the tax provisions in the federal reconciliation bill are projected to place the state below the TABOR cap. When we apply the estimates that our office has worked on of what the revenue impact of the state would be, We estimate that the state would be $288,000,000 below the Taber cap in fiscal year twenty twenty six and $45,000,000 below in fiscal year twenty twenty seven. That's due to there on the right you see the revenue changes. It would have about a five eighty million dollars negative revenue impact to the state.
I'll leave it at that for now. Director Ferrendino is going to walk through into more of the details of what leads to those estimates. And then as I mentioned earlier, so the earned income and family affordability tax credits, they are assumed often tax year twenty six in this forecast. And so our compound annual TABOR revenue growth expectations for fiscal year twenty twenty seven are 2.8%. So it's just below that 3% requirement. However, this we have that assumption for this forecast, but the final determination for that is not until the December 2025 forecast that we'll
present to you. At that point, that is what would actually provide the information necessary to trigger them on off or at what level. And so between now and then, our revenue expectations will certainly change one way or the other. And so we'll see how that shakes out. But for this forecast they are assumed off in that one year and then back on in tax year twenty twenty seven when we see revenue growth meeting the requirement. And then the table on the right kind of shows you the impacts of that tax credit revenue trigger. So again, the baseline Tabor Surplus expectation is $289,000,000
in fiscal year twenty twenty six. Without the trigger in statute, it would have been $261,000,000 below the Tabor cap. And then similarly in fiscal year twenty twenty seven, we would only be CAD 49,000,000 above the TABOR cap, so very slim compared to the CAD $536,000,000 expectation. I will also just note here as well that similar to what alleged counsel staff presented you, the CAD $12.72 tax credits are also do not meet the revenue requirement in this forecast for fiscal year twenty twenty six and so those would be reduced by half as well.
So turning to some of the major revenue major general fund revenue streams. Individual income tax is projected to decline in the current year by 0.2%. That is a downward revision of about $435,000,000 on those higher than expected taxpayer refunds related to tax credit utilization and the potential dependents or children claims related to the Family Affordability Tax Credit. In fiscal year twenty twenty six, we do expect growth to jump back to 9.6%. Part of that is from those FATCEITC credits triggered off and so you see more
revenue growth there. And then in fiscal year twenty twenty seven expected growth of 4.7. Just real quickly. So on Page 24, our individual income tax projected, that's just us. That doesn't have anything to do right now with anything happening at the federal level. Is that correct? Mr. Mixon? Thank you, Mr. Chair. Senator Kirkman, that's correct. Thank you. Sarah Mabile. I hate to even ask because it means I really don't get it. But when you're projecting the growth in revenue in order to turn the tax credits on or off,
is that before or after the tax credits? Mr. Mixon. Thank you, Mr. Chair. That is a good question. Which came first? Yes, That is a good question, Cetera. Yes. So the way that the calculation works is that we assume the revenue growth prior to applying the tax credits. And then if it meets the requirements, then the credits are turned on or if they don't meet the requirements, they remain off. So we kind of do the forecast prior to applying them. All right. Please continue. Okay. Thank you, Mr. Chair. So turning to corporate income tax,
that revenue is projected to decline in the current fiscal year by 5.5%. That's first decline since fiscal year twenty twenty. However, there is an upward revision in the current year of $234,000,000 due to a shift in how the Colorado Department of Revenue accounts for the cash returns and estimated payments. So that results in some higher cash returns than previously expected. And so basically the tax year twenty twenty five revenue a little bit more gets accrued back into fiscal year twenty twenty five. That will all shake out in the wash over multiple years. Fiscal year twenty twenty six, expect another decline of 14% on weaker business activity expectations,
lower corporate profit growth. So expecting another decline there before growth turns positive again in fiscal year twenty twenty seven by 5%. And then finally in the general fund revenue on sales and use tax, it continues to record weakness. So after 0.4% growth this last fiscal year expecting slow 1.2% growth in the current year. That is a revision up. However, we have seen the past few months of collections be higher than expected as Mr. Cook talked about some of those purchases being pulled forward by consumers as large purchases like vehicles. So we're seeing some of that flow through on the sales tax side.
So I've seen some strong couple a stronger couple of months there. In fiscal year twenty sixteen, expecting slow growth again of 1.3% and those are visioned down unexpected consumer weakness in the latter part of 2025 into early twenty twenty six. And in fiscal year twenty twenty seven, expecting growth to return to more average levels of 4.4%. And so with that, that concludes the general fund portion. I will hand it over to Mr. Shuck unless anybody has any questions. Hi there. For the record, Skyler Shuck, OSVP. Getting into the cash fund portion of the forecast. So in the current year,
we have revised up our revenue forecast slightly, but in the out years, we have revised down our revenue and that is largely driven by policy adjustments from the most recent legislative session. Getting into our revisions before incorporating any policy adjustments that is detailed in the table on the left, but once we have fully incorporated policy adjustments from the most recent session in the table on the right, we can see that there is 32 we revised up in the current year $32,000,000 but the main impacts go in fiscal year twenty twenty five-twenty twenty six where we
have revised down revenue $185,000,000 and most of those impacts are concentrated within other miscellaneous cash funds. Additionally, in fiscal year twenty twenty seven, we have revised up cash on revenue of $140,000,000 but as Mr. Mixon was discussing earlier, that's primarily driven from the Kids Matter account, which is a diversion from the general fund to this cash fund. If it weren't for the Kids Matter account in fiscal twenty twenty seven, cash on revenue would be revised down otherwise. Getting into the individual revenue streams with the transportation forecast. The transportation forecast has continued to experience sustained weakness in revenue from motor and special
fuel taxes. The story in the transportation forecast shown in the graph on the left is that vehicle miles traveled have continued to increase while gas taxes has plateaued. Our thinking with that is that cars continue to become more fuel efficient over time and use less fuel overall. As well, while EV registration fees put in place to offset losses in fuel tax revenue are ramping up, currently gas taxes are being outstripped and we haven't really seen a substantial increase in the overall registration revenue to offset lost fuel revenue. Moving on to the next slide for specific policy callouts within the transportation forecast.
The main item is the reduction in the road safety surcharge, which lowered it by $3.7 for twenty four months and that will impact revenue collections in fiscal year 2026, 2027 and 2028. The other policy adjustment to transportation is the diversion of cash on interest revenue to the general fund from Senate Bill three seventeen. Getting to miscellaneous cash funds, like I said before, this is the most impacted cash on revenue stream from policy adjustments and those are detailed in the table on the right. And we have revised down revenue within miscellaneous cash funds by $150,000,000 in fiscal year twenty twenty six.
However, we do want to note that a lot of this is just more of a reclassification of revenue rather than an overall reduction in revenue. And you can see that detailed in the table by the types of bills impacting this stream with a number of enterprises as well as the cash on interest diversions in Centerville 317 and 262. For specific impacts within miscellaneous cash lines, like I said before, one of the biggest ones is the RR revisions for cash on interest revenue driven by Centerville 317 and 262. You can see in fiscal year twenty twenty five-twenty twenty six in the graph on
the right that we have revised down overall cash on interest revenue by 42,300,000 with two thirds of that impact landing within miscellaneous cash funds. The other item to highlight within miscellaneous cash funds is that with all the modifications to revenue streams is that the adult dental fund has emerged as the number one largest individual cash fund within the miscellaneous category. And this one is particularly interesting because the expenditures within this fund are entirely driven by expenditures for the implementation of the adult dental Medicaid benefit. And the way this fund gets its revenue is a transfer from the unclaimed property
fund into this fund to implement that. As you can see as well, this rev this the adult dental fund has undergone a substantial number of revisions over time as we have seen the impacts of the adult dental Medicaid benefit cap of $1,500 being removed play out in full time. There's a big jump in March and June in our most recent forecast up to $75,000,000 and that incorporates, HCPA's February Medicaid forecast. Moving on to severance, after cumulative revenue declined a negative $48,000,000 in February from historic refunds in that same month,
there have been three consecutive months of positive collections which have put year to date severance tax revenue positive as of May. Overall, severance tax revenue is expected to end the year in a weak but positive position. And you can see that on the next slide with our top line forecast for severance tax. For our June forecast for the current year, we have revised up revenue to just under $59,000,000 However, for the out years in the severance tax forecast, we do expect a weaker picture overall from lower oil price expectations. As well, part of the cash on interest sweeps do hit the severance tax forecast.
So we have revised down revenue in fiscal year twenty twenty six by $36,800,000 and we have revised down revenue in fiscal year twenty twenty seven by $6,500,000 These revisions are buoyed by higher natural gas price expectations. We finally had a colder winter across The U. S. As a whole, so supply was drawn down a bit. But unlike oil, overall, we do anticipate global appetite for liquid natural gas to remain strong. And as Mr. Mixon and Cook pointed out previously, our final point to call out is that we are monitoring oil prices that are being impacted by the conflict in The Middle East, which could potentially shift our out year forecast expectations.
Moving on to table refunds. In this forecast, we have estimated sufficient revenues and refunds to potentially cover Homestead over the next two years. The other main takeaway from our June forecast is that the income tax rate reduction is not expected to be triggered in fiscal year twenty twenty four-twenty twenty five or twenty twenty five-twenty twenty six, but a 0.04 reduction is anticipated in fiscal year twenty sixtwenty seven. Another call out is that property tax refunds shown in that bottom blue bar on the graph will decline in fiscal year twenty seventwenty eight because that's when Homestead Portability will be rolling off. On the next slide for the State Education Fund,
it is in a better fiscal position in the short term, but your budget share pressures do still remain. Fiscal year twenty twenty five and 2026 revenues are relatively similar to our March forecast. But in fiscal year twenty seventeen, SCF is in a much better position based on the diversion for the Kids Matter subaccount. And for fiscal year twenty seventeen, it is estimated to have an ending balance of $428,000,000 Additionally, this fund is forecasted to be better off with the cap on the best program. Finally or sorry. Looking to the healthy school meals on the next slide, we do wanna call out that our baseline forecast is revised up from March as
tax year twenty four's main month of April was stronger than expected. Also in our baseline forecast, we do assume that the retention measure coming this November election does pass, and that is because if the retention measure is to fail, it is at that point that DOR will determine the appropriate tax policy to reduce revenue proportionally. So our baseline forecast for HSMA has 114,800,000 in fiscal year twenty six. We do also wanna call out that there is a lot of revenue uncertainty within Healthy School Meals. Our forecast does not include house resolution one or a TCJA extension,
which could potentially increase revenue. That does come with the side note that proposed federal action could also increase SNAP and school meal costs, so it's sort of a double edged sword of potentially increasing revenue but also increasing costs. The final note on healthy school meals is that, we have not included the expansion measure detailed on that bottom row in the table, within our baseline forecast. And if that measure were to pass, it would bring in an additional $57,000,000 in fiscal year twenty six. On marijuana, on the next slide, total revenue is revised down slightly as average market rate fell to its lowest amount
since q two of twenty twenty three. The main thing we want to highlight is the distribution change from Senate Bill two sixty eight. So now an additional $7,100,000 is going to the MTCF, an additional $2,800,000 is going towards the marijuana enforcement division funds, which are both shown in the rightmost columns of those two tables. Finally, to close out the revenue section, we did want to highlight the upside and downside risks within our forecast. The main item and a downside risk that will impact the state revenue the strongest is Federal House Resolution I, which Director Ferndino will get into in the next section. Additional downside risks do include corporate profits and tax liability volatility,
marijuana demand and prices, EB impacts on transportation revenue. To the upside, trade policy volatility getting resolved would be an upside risk, Faster consumer reengagement and growth in the retail goods sector, better than expected salary and wage growth as well as increased business profits are all upside risks. So with that, that concludes the revenue portion of the forecast. I'll pause here for any questions before turning it over to Director Ferrendino for the budget section. Speaker Ferrendino. Thank you, Mr. Chair. Again for the record, Mark Ferrendino, Director of OSBP. In our baseline forecast, we anticipate that for the current year that we will be $24,500,000
below the required reserve, for the that will close out in about two weeks. That being said that is we still have June revenues to come in, cash funds that will adjust that. We also have reversions and potentially over expenditures as we all know from last year that we had. And so we will see where we end the year, but 24.5% is pretty close. That's all due to where we are from forecast changes. As we look into next year, we are anticipating we are short the reserve by $40,300,000
of which between the $24,500,000 from the previous year that carries forward and then a little bit actually helping the reserve I mean the forecast of about $10,700,000 The forecast actually hurt us by about $13,000,000 And then there are other things that we're still working on and working with your staff to make sure that we're accounting for things accurately with rebates or appropriations to make sure we are balanced and accounting for correctly. But overall, we think in this year and next year, we are pretty close to being balanced based on this forecast.
And as of course, as you saw from Legislative Council where we are in terms of their estimate on scenario A and B, we will on November 1 pleasantly provide you a balanced budget to consider when you look forward to next year's budget. But before we get to that Pleasantly provided. Yes. Pleasantly provided and answer your questions at a time on that. But before we get that, we do have a potential of a recession and potential of reconciliation that could have
significant impacts, R squared, that could really wreak havoc with where we are, from a budget perspective. So what we know about reconciliation, which is there is a lot of moving parts in that, but there are some really key areas. Tax provisions, will and I'll go into those, will reduce revenue to the state, and will have a negative impact as we said and bring us below the TABOR cap, and thus mean General Fund will have to,
take over the obligation for the senior homestead as well as we're below the TABOR cap, so that means more pressure on the General Fund budget. Reductions in Medicaid funding will result in impacts, to cuts to Medicaid and upwards of 100,000 people in Colorado could be impacted by the changes at the federal level. We also are seeing changes in SNAP and requirements for the state to take in more of the SNAP expenses, which will have impacts on availability and cost to the state.
And then rollbacks of energy tax credits that we are seeing that we expect likely to increase long term costs for energy in our state and in other states across the country. So talking about each of the we'll talk about each of these components within the HR1. We I have what these first two slides are, are the House passed version. The Senate version, especially the biggest pieces of it came out on Monday from the finance committee.
We went to print about twenty hours later. So I will say both with with all of this, this is quick, especially the Senate more than anything. These are quick estimates of where we see the impacts and they are moving as both we continue to refine the estimates and as we continue to refine the policy decisions at the federal level as well. So we expect a $500,000,000 to $600,000,000 less general fund revenue. Rob Zacker? Director Ferrendino,
I lost you there. I apologize, but I lost you there. Does it take into account the Senate version or does it not? Speaker Ferndito. Thank you, Mr. Chair. So these first two slides are based on so slide forty five and forty six are the House passed version. Slide 47 is our initial take on the senate version. We do not have an initial take, and I'll I'll make some comments on it, on the senate version on the tax policy changes because we don't have the detailed level on some of that, and we're waiting for the joint,
tax committee to come out with their scoring of the Senate tax policy to be able to then build that into our models to see how that will impact Colorado's revenue. Senator Weisman. Thank you. On Slide 45, Line one, Figure 38, FY '27, extension of TCJA and higher standard deduction. My recollection of back in 2017, TCJA due to base expansion was actually revenue positive to us, so that Expiry would be revenue negative. We do the forecast to current law
Booming expiry. So if we extend it, then relative to current law due to continued base expansion net of everything else, we would expect revenue positivity and this is going the other way. So I'm not following you on something. Please catch me up to where you are. Speaker of Randy now. Thank you, Mr. Chair. And Senator Weisman, so the expansion of the standard deduction is having that impact. So if you remember when we looked at it before they basically lowered back in the original TCJA, they lowered the rates but then expanded the base and that helped us positive.
They have continued to have the rates lowered and continue to expand the base but then they upped the standard deduction which has we flows through to us and that has the negative impact on that portion. There are other smaller things they added in as well or enhancements in what we define as the TCJA area and they define as that. But that's the biggest thing is the increase in the standard deduction. Sarah Wiseman? Thank you. Let me restate for clarity. So I should not be thinking understanding this is the House version, you'll get to the Center version,
and we don't ultimately know what they're going to do. But I shouldn't be thinking about simple apples to apples of a linear continuation because so far the policy choice is being made at the federal level. Don't nap one to one on what would be rolling off back from what was passed in 'seventeen. Speak here for Indiana. Thank you, Mr. Chair. Senator Weissman, so correct, there are some changes in there that are not exactly and that is making the change. But if we were to just put away, like say TCJA went away and we went back to the old, there would be different implications,
which would mean rates would go up and some of those deductions would then change. And that would probably have a negative revenue impact as well on us, but different within all these other things as well in here that are expansions in other areas. Thank you. So with that, I will go. So as we just talked about the expansion of the TCJ and higher standard deduction, expanding exemptions to individuals that is your overtime, tips, car loans, seniors, where that exemption is.
I will note that for estimated revenue impact for tax year 2025 on overtime is $220,000,000 That is we did decouple moving '26 forward, but not for 2025. That's why you see it jumping from $351,000,000 down to $165,000,000 because of that decoupling on overtime. I will also note that the Senate version puts a cap on overtime at $12,500 per individual, double that for joint filers and phases it out on income levels.
We have not been able to score that yet. It will have, we think, a less of a negative impact on the state, but probably not significant. So maybe in the 10% to 20% is a rough guess. So maybe $20,000,000 to $40,000,000 less of a negative impact, but we won't know that till we get the Joint Committee on Taxations report on their scoring of it. The next one is business depreciation and investment credits. This is a lot of different whether it's investments, credits for creation of new factories,
creative new manufacturings or continuation of pass through deductions that have been put into place during the February, during the start of COVID. I will note that currently the state of Colorado is decoupled from the pass through impact that expires under current statute in the end of tax year 2025. If that was to be extended, that would reduce this impact by $109,000,000 in 2025, 2026 and $195,000,000
in 2026 and 2027 ongoing if that extension of the decoupling continued in that process. So those numbers would change what that bottom line is if those decouplings would happen there. So that's on the revenue side. We think the we will get when we get the Senate score, we can share that updated numbers with the committee. But as you have said, there is a lot of conversations and lots of moving parts in the Senate, it seems like. So that's what we expect. In the House version of the expenses,
two main expenses, one Medicaid and one is SNAP. We expect Medicaid policy changes to cost the state $350,000,000 the new mandatory work requirements and the six month eligibility determination for the expansion populations, we expect the administrative cost to be roughly $50,000,000 for that cost. Of that, that will be both state and local costs to be able to implement that for county administration. We do and have not yet estimated what the savings will be for people who
will drop off of Medicaid, but likely it will be less than the cost or about the cost. We current thinking is, so we will be and a lot of those individuals will be dropping off because they're not filling the paperwork on, not because necessarily they aren't eligible for that. The other piece is the cut to the expansion matching or expansion funding from 90% to 80%, for states who have programs that are supporting undocumented immigrants.
Absent state changes that would reduce or increase state costs by $300,000,000 to fund the expansion population. So that's how you get to first, Medicaid $350,000,000 cost. On the SNAP program, SNAP requires under the House bill us to pick up 75% of the administrative costs, which we estimated is well around $50,000,000 So right now it's a fifty-fifty That will move to 75%. We will have to pick up that $50,000,000
That will be in our budget year right now of 2627. We will have to start picking up that cost. The match for the SNAP program itself and payments right now that's a federally funded program, this would require the states to pick up anywhere from 5% to 25% based on your error rate. We are at somewhere in the 8% to 10% error rate. The national average is above 10%. They did set that if you're above 10%, you're at 25% max. So half the states are going to be at the maximum rate,
when you think about this. So it's interesting the way they did that to ensure that at least half the states are over that instead of trying they did a 5%, 10%, 15%, 20%, 25% and almost everyone is on the upper end of that 20%, 25%. 20% would mean $250,000,000 of costs that the state would have to pick up in the SNAP program. Senator Kirkland? Thank you, Mr. Chair. Back up under Medicaid where it says unless states no longer fund programs that are
used by undocumented immigrants, is that any program anywhere or just programs within health care policy and finance essentially? Speaker for India. Thank you, Mr. Chair. Senator Kirk Meyer, we are reviewing that. We know for sure it's definitely programs within the health care space, but that is what we are continuing. The bills themselves a lot will come out with regulation after and once a final draft final bill is enacted into law. But we know for sure it will impact, for example, Coverall Colorado. We don't know if it would impact other programs within the state yet.
Yes, Senator Kirk Meyer. Thank you. And by programs, does that mean enterprise, programs that are enterprise? It's pretty great data. Thank you. Senator Kirk Meyer, the federal government, from Meyer's saying, does not we use enterprises because of the constraints we have here. The federal government does not look at that in the same way. And thus, those would have the same impact if they would be applied to that. So programs that are related that those are things we are currently looking at whether it's those type of programs reinsurance and other things and how that could impact.
And this is not and just to be clear, we're not even talking about in here the elimination of the tax credits for premium tax credits, because that's not a direct impact on the budget, but that will have a huge impact on cost of health care for individuals to buy health care and we will see significant increases in premiums with those tax credits expiring under both the House and current Senate bill. Moving on to the Senate. Thank you, Mr. Chair. Could you the term error rate is a new term to me. Is there a simple explanation as to what that is?
I believe not. Yeah. Speaker of Farrandini. Mister chair, rep Taggart, there is and there's a definition and it's calculated. I will have because I don't wanna misstate it. Okay. I have a I have as soon as I heard this, I called CDHS and I'm like, what is this and how do we calculate it? And they told me and I know and I have forgotten, like, enough detail to be helpful, but I we will get that to you what that error rate and how that's defined. It is one of those things that I think we will, as a policy decision, have to understand what will be the cost to bring that error rate down.
And I know if I'm talking to CDHS, there are significant differences in counties, of what those error rates are that will impact I think we can talk about policy conversations of what we would do based on counties and what they're doing. The other thing that I will also note is we know historically the error rate goes up during recessions as more and more people are qualifying for that the benefits. There are going to be higher error rates, and so that's going to have an impact if we do see a significant recession, which we'll talk about in a little bit,
on that error rates and then driving more costs to the state, for that. So moving on to the Senate, where I think we hoped that the Senate version would be better than the House version when it came to, these costs. And were we very mistaken by that hope, at least at least I was mistaken by that hope. On I'll do the second piece first, which is SNAP. SNAP did improve. They lowered the match program. We still have the same in terms of administrative costs,
but they lowered it to a 10% match for the 8% to 10% range. And so that will reduce the state share to €125,000,000 versus that €250,000,000 So that is the positive news on there. The not so positive news is that they included a lowering of the cap on the hospital or basically provider fees or provider they talk about provider taxes, we use a fee, provider fees from 6%, which is where we're basically at with the hospital provider fee down to 3.5%.
That starts in 2007 and is phased in over five years by 0.5% a year. So the numbers I'm showing here is once fully implemented that will reduce the allowable revenue into the HAS fee by about $558,000,000 So that means we can charge only $558,000,000 less than we are charging today in fees. What do we charge today? We charge so I'd have to do the math, but it's about $1,200,000,000 to $1,400,000,000
So we would basically get close to cutting that in half from 6% to 3.5%. But that goes to pay for two main things. One is the expansion population, which remembers a ninetyten match and payments back to hospitals, which as you blend the rates and stuff ends up in the somewhere in the 60%, 60%, 65% match because of different populations and what goes out to the hospitals in payments. So we expect depending on policy decisions and how we move forward, we will lose anywhere from basically $900,000,000
of federal funds to $2,500,000,000 of federal funds. Per year. Per year. The $2,500,000,000 is if you just to be clear, if you eliminate the expansion population, which we're charging, we're at 10%, that 90% is at $2,500,000,000 This is just to show you the range of what that would do. This would be implemented over time, but this is significantly problematic and impactful to both individuals and their access to health care and hospitals, especially safety net and rural hospitals across the state as we hear from,
I think luckily several U. S. Senators on both part both side of the aisles who are raising red flags about this. And my hope is that as this moves forward, this does not move forward because this would be devastating, to hospitals in Colorado and states across the country. Senator Kirk Meyer? But on the Medicaid, the comment was it starts in 2027 and it's phased in reduction from the 6% down to 3.5, phased in over how many years? I'm sorry. Thank you, Mr. Chair. Senator Kirk Myers, it's five years, so it's 0.5% a year from where you started 6% to 3.5%.
So we would have time to adjust, but we're going to adjust by making cuts. We're not like this is not something where we these are significant dollar amounts and significant impacts that we're not going to be able to backfill in those costs, especially with you're talking if $5.88 is 2.5, you're talking $200,000,000 no, $100,000,000 I'm doing the math in my head. That's okay. Yes, it's $2,500,000 is a You didn't work at Bain, it's clear. Yes, no,
I can't Lental math. It's about 60,000,000 a year. Yeah. About right. Step is a 100 About 60,000,000 a year. Yes. About 60,000,000 a year loss, but then you're by five. Right? Yeah. Well, no. Because you're losing 500. You're losing if for let's say, even a year, 500 it's a $100,000,000 roughly a year over five years, a little over $100,000,000 over those five years plus then you're losing the federal match. So it's $200,000,000 to $200,000,000 $200,000,000 to $300,000,000 total loss of revenue of which about 40% of that is the hospital provider fee
itself and the rest is the match to pay on decisions we make. And that's compounding each year, like it doesn't it just keeps growing. If we made certain decisions to not lose the match, it would be about $100,000,000 a year to maintain coverage for the expansion population additionally for the next five years. Mr. Chair, the cost of the expansion population is roughly $300,000,000 to $300,000,000 like so our 10% share is about $300,000,000 So if we wanted to do that, we would have to come up with once it was fully implemented $300,000,000
to be able to continue the expansion population. And that's a growing number, just to be clear, and there's lots of conversations on there's just That number keeps going up. Yes. Senator Weitzman. Director, the expansion population is right now best number you have in your head. How many human beings, how many lives in Colorado? Thank you, Mr. Chair. And I want to say it's about 400,000, but I was looking Hiccup was in the room earlier, but I don't see them right now. But I think it's about 400,000
bodies in there. And just remember, as you think about Medicaid, that those expansion populations are your cheapest in terms of utilization and costs compared to your long term and disabilities, which are much higher utilization, much higher average cost. Senator Mabile? I'm recalling that it was $600,000 in the expansion population and $400,000 for kids that would make up that. I know that I don't know what this does to the coverage for kids, but those are the two numbers that's Impact on ship? Speaker Ferndino?
Mr. Chairs, currently, there is not an impact on the CHIP program. There are some tweaks in the CHIP program that will have impacts, but not as significant as this. And we're only just to be clear, there's a lot of things that are in the bill whether it's nursing home staffing levels that are in the bill that actually something we've actually talked about with our federal delegation, the former administration and the current administration. And so there's a lot of small things that will adjust and have big impacts, but not to the same extent. So we're focused on really the big drivers of dollars here,
not all the other things that we're going to have to deal with as well, some saving us money, some costing us money, but these are the big ones we're talking about. Next. So if I haven't depressed you enough, we are going to move to the potential of a more significant recession. So as we, you know, our forecast assumes a fiftyfifty shot of a recession, that recession we assume in our baseline forecast is a mild, not even a mild, is basically a technical recession. Just avoids a technical. It just avoids a technical, right on the borderline of a recession,
because of slowing economic growth, but not necessarily seeing negative growth, quarter over quarter, in the economy. I think there is becoming more and more fear that we could get into a place of stagflation, which means higher inflation because of tariff policy and other factors like wage pressures given the job market and immigration policy. At the same time, we're seeing slow to negative growth in the economy and that will have a big
impact. We think the chances of that are about 25% of that we would see as significant of a recession there. You can see on this slide on Slide 48 kind of our assumptions of what that downturn would be. So, we would see job losses, we would see GDP slow growth and we would see unemployment peak at about 6.1% before coming back down. In terms of 49% where the revenue, stagflation will help it will mitigate some of it because you'll have higher inflation,
which will mitigate some of that downturn. But it's still we will see lower expenditures, lower income revenue, individual and corporate income revenue because of the slowing economy. We expect, from that, on Slide 50, that basically a 1,600,000,000 shortfall in or loss in revenue, because of a recession that would be that large. You can see where we would then assume if you just solve that through the reserve, and didn't make policy changes to make reductions,
we would go down to a 5.1% reserve in 'twenty six and then down to a 2% reserve in the following year. This is not where we would go. We would have to make other decisions on policy changes, on tax cut I mean, on spending cuts, for this area. But this is the size of what we would see if we saw this type of scenario move forward. And so when you think about that, if you take in the house version of reconciliation, dollars 1,000,000,000 roughly, that we're seeing in cost and loss of revenue and a recession that we think
is probably about 1.25% chance of €1,600,000,000 That two together is $2,500,000,000 $2,600,000,000 more than our actual reserve in one year. Now both of those will happen over time and other things, and hopefully that's not in our baseline forecast. I will also note, and I think it's important, those two and as we've spent time talking about recession and reconciliation, those two policies had different impacts on how we as a state should handle those. A recession is something that is more temporary.
We know based on history that we will recover, revenue will recover. That's why we have a reserve. That is that helps us, not that we would want to use a reserve all at once. We want to have a plan of how do we bring it down responsibly and bring it back up responsibly, as we're coming out of that recession. But that opens up avenues to use the reserve in a way that is sustainable and makes sense. Reconciliation is not a one time thing. Reconciliation is an adjustment to the cost or revenue to the state that is permanent
and ongoing until a new Congress does something different. But we have to assume those are ongoing and permanent. And so the reserve at that time is not to bridge maybe over time bridge a year or two as we're dealing with it in a small amount, something we can consider. But it is not a long term sustainable way to deal with those. And we need to either find revenue changes or reductions in expenditures to be able to handle those. So it is not the as you said,
Mr. Chair, the rosy, great forecast. I mean, our baseline is not too bad, but we have a lot of downsized risk shown based on potentials of the R squared of a recession and reconciliation. The last thing before we end, I just want to highlight, and this went out yesterday to the in a press release. Our office our federal team has been working really hard, to make sure that we are fighting for every dollar that is available. We've had a lot this is unprecedented in terms of,
the amount of grants that are on again, off again, what's going on. We have successfully protected about $280,000,000 of grants. We have seen at risk currently about $56,000,000 of grants that are we are working actively on to make sure that we can bring those dollars in. And then we have right now, we estimate that we have lost roughly $72,000,000 of grants. Some of those are in active litigation, but we've seen the loss of those right now.
There's a link on this to the website. All of the information for each of the grants and what are in those numbers is available there as well as a map that shows for each of the departments and those grants kind of our assumptions of where and it's not perfect, but it's at least trying to show which counties are impacted and where they're impacted by the loss of this revenue. We will continue to update this on a regular basis as we continue to hear more information from our federal partners on where we are
seeing changes in grants that are causing us concern. But this goes back to we will continue to have and we have been just to be clear with everyone and I've been clear with departments, given loss of federal grants, we're not in position for as a state to be able to backfill those federal grants. And departments if they think there are central services that are part of those things then they will need to be able to find offsets to be able to maintain those services. And so we will have those tough conversations based on what happens from this,
but we will continue to fight to maintain as much, if not all, the grants and funding we are getting from federal government. Speaking for Endino, what is the driver of your 25% risk of a recession? Is it primarily driven by things like tariffs and other federal policy decisions? Or is it sort of something that was already baked into the numbers? In other words, what's driving this and what could potentially fix it? It sounds like Washington, but speak your friend, do you know? Thank you, Mr. Chair. And policy, so as you go back to our slide that looks about the downside risk,
it's those items and the biggest one being the tariffs and what that will do to investments and inflation. And so if we see significantly higher inflation due to tariffs and tariffs go back up to where they were, let's say, with 145% tariffs on Chinese goods, we think that that is where the amount is as you look at the tariff, I think is a really good slide on kind of the effective tariff rate and how much it moved within a series of just a few months.
And there's no certainty of what's going to happen because the president has made different statements, different times, and done different things. And that uncertainty creates uncertainty in the marketplace, which means people are going to pull back in investments. And so even if we can get more certainty in tariff policy, regardless of if it's where it is now or lower, lower would be better from an economic growth perspective and a cost perspective. But that certainty will help limit the downside or the higher potential of a recession.
But the more uncertainty we have and the more chaos there is in the system, the more likely that we will see, that worst case scenario. Senator Kirkland? Yes. Quick question back to your dashboard. I actually was starting to look through that. It was yesterday and then I ran out of time. But, is that okay. So you know, like, when you're talking about the Medicaid stuff in your former example, it doesn't start until 2027. So we have some time to plan. Those are things that are immediate in this current fiscal year, in 'twenty five, 'twenty six fiscal year, or they start at some other time and this is what we're guessing they're going to
be? I mean, could you just elaborate, please? Speaker for India. Thank you, mister chair. These are based on current grants we have in either either that we have in '24, '25 that we have gotten pulled back and told we're not allowed to draw money anymore from those or ones that are going to get renewed or should get renewed next like this starting July 1 or October 1 on the federal fiscal year, that we now are concerned is at risk whether it's because
we've been told by, you know, federal partners that this funding won't be available or which has happened in some cases, there's no staff at the federal agency to actually answer the phone and so we don't know if the money is ever gonna be there because who's gonna process it because they've laid everyone off. And so we're assuming that money's at risk because we have no one to talk to right now. Senator Mabile. Thank you. And first, let me say yes is $400,000 I looked. Some of the Medicaid stuff goes into effect, though, I thought, at least in the House bill in January of twenty twenty six or even I
think it was January of twenty twenty six. So those impacts are going to hit a lot sooner than 2027. Or is it different now in the Senate bill? Speaker Friend, Indiana. Thank you, Mr. Chair. I believe the Senate did I mean, the House pushed it back to 2027. There was talk to bring it to 2026. It's technically actually, I think, 01/2026, which is really 01/01/2027. I think they did that for messaging. But, so we are one of the things that we are doing and departments are actively
working on and monitoring is what are in these versions of the bill? What is the requirements that we need to do to implement those and the policy choices that need to happen around those? And then going from what's the implementation date to when would we need to actually make decisions so that we could hit those dates. For example, work requirements is a pretty easy one to understand because they're going to be about training, CBMS changes, policies, procedures that HICPUF and DHS are going to have to implement.
And they know how to they know how changes in CBMS, how long those take and what's the backlog on that and how we can factor that in and the cost. And so they're modeling that out, not fully right now because everything is still up in flux, but they are starting to do that. And as soon as it is like locked and we're done, they will build that very hard out and then we can have those conversations. We're looking at does that necessitate, can we wait till January when this legislature is back or do we need to do something sooner Or do we need to do things that are,
you know, whether that's a special session? Or do we need to sorry, I said the term. Or are there emergency thirteen thirty one supplementals because all we really need is spending authority. We don't need and so so we will continue to work with you as we work through those, on the expenditure side as well as on the tax policy side. Please mind your language moving forward. Sorry, Senator. And just another quick question. When I was looking at the dashboard, so I actually was going through and looking at it, I didn't see anything with regard to like housing grants. And I thought there was some discussion,
but I had read an article or something about federal housing grants. Wondering if that's going to get on the dashboard at some point. Speaker Ferradino. Thank you, Mr. Chair. Senator Kirk Meyer, so my understanding on the housing grants is that is in there is some cuts in the President's budget. But the current grants that we have are not we understand are continuing and we haven't gotten word that those are being pulled back. So if that happens and then they put it in legislation let's say in the actual appropriations bills and then we lose that we will factor that into But if
it is but until we know from the federal agency or if Congress acts, we don't have those in there because right now we're assuming those are continuing based on what we've heard from our federal partners. Any other questions on this joyous presentation? All right. I think you're done. Thank you. Appreciate it. We have nothing more from you, speaker Ferndino. Correct? What? We're just back to JVC work at this point. Well, we could talk about, Department of Higher Education if we'd like to really quickly. I would love that. Alright. Let's go ahead and move right into that then.
Miss Pickle? Miss Low? Thank you very much for that presentation. We're not gonna pause, but I think the room is about to empty out. So thank you all for coming. Alright. We are done with that senatorial five. So who wants to kick this off? I'm I will this Bickel. I will do it very quickly. Yours. I wanna point out to you that you have a document in your that was sent to you and that you've got in your folders explaining the new information that miss Lowe and I received on Friday, which was that there had been an ongoing contract with KPMG to look at a
wide range of issues with the Department of Higher Education. Because, Mr. Berndino actually has to head for the airport, I'm going to turn it over to him for now. And then perhaps Ms. Lowe and I will wrap up afterwards. Speaker Ferrendino. Thank you, Mr. Chair. For the record, Mark Ferrendino, Director of OSPB, and appreciate the opportunity to talk to you and appreciate the opportunity to start so I can make it to the airport. Alright. Well, since you referenced it, we have to know where you're going. I'm going to see my parents in Florida and then going on a ship with
my family for a week. Oh, that's nice. Thank you. Guess we're gonna have a special session in the next week. Again, watch your language. Thank you. So as discussed earlier, I think as your staff has rightly pointed out and has been an issue, as you pointed out, for now a while, we in the governor's office and the department have acknowledged that where we are in terms of the financial controls and processes within CDPHE are not where we should or want to be, and we are actively working to improve You mean Department of Higher Ed,
CDHE, not CDPHE. Did I add a p there? Sorry. You did. Yeah. Did I? Sorry. CDHE. Look. Certain members up here have very strong opinions about CDHE, but that's not the topic. Yeah. Sorry. Thank you. CDHE. We could we could be here all day if we're talking about other departments too. But let's just focus on CDHE. You know, we had a contract with KPMG, through DPA to help support, SLF RIF, the state local recovery funds and the administration of that. They were helping all departments in monitoring process procedure given the influx of significant amount
of federal funds. That is not something that most departments, especially a lot that weren't used to all these federal funds, had the processes and controls to be able to put in place. And so they were already engaged with Department of Higher Education in that capacity, working on the ARPA dollars and doing that. As this became more of light of the problems that we were seeing, the staff as you know and the department's been in front of you with needs for additional staffing, pay increases to make sure they could retain staff.
We've seen significant turnover within the department. But we have the main tasks now of KPMG are to continue the documentation monitoring for the SLRF funding within CDHE and higher ed institutions, develop templates and manuals for standard procedures and review standard review staff assignments and how we can align staff to make sure that that is working well and efficiently and has the right positions and structures within the department to support what they need.
So we did amend that contract to expand the use. We're using some of the ARPA funds to be able to pay for the contract, to be able to be much deeper into what is happening in CDHE that started in January, that deeper work. We I think part of that process is continuing. Initial recommendations and processes have come to the department that or at least senior levels of the department. We have not I've gotten quick briefing on it, but I have not even seen much of it. This is common of when there are issues at departments,
we'll bring people in to come in, review, provide recommendations, and that's usually done within the management of an organization that's doing that. I think this has gained more light because of what has happened and rightfully so. We are we've also their job is to finalize those reports, work with the department on implementation plans. It's not an audit, it's a consultation of, doing that. Both the department and the governor's office is committed to continuing to update both your staff as well as the committee on the implementation,
where we see that. There may be decision items within our November 1 budget that may implement that. But also if there are things we need to do sooner than we would, we would come and have conversations on that. We are now brought in the additional help within KBMG contract to help with year end closeout activities, which are actively happening right now, reporting activities, budget process activities and additional training for CDHE staff. CDHE did hire a CFO. They are in the process of hiring a Controller and a Budget Director,
so a lot of staff turnover. I will say we are also at the Governor's office and having conversations with departments of are there ways to do this differently across some of the smaller agencies to make sure we can do this better and have more redundancies in systems and more process and procedures. Those conversations are just starting to see and with others as well, should we come to you with a decision to think about this differently? I don't know the answer to that and we're starting to have those conversations. But we will keep you up we're committed to keeping you updated. I want you to know that this is not something we are saying everything is
great and why are you guys raising questions. We know there are problems. We are actively having people help with that. The governor's office as well as leadership in CDHE are actively meeting on a regular basis to ensure that things are moving forward, that processes are improving, and that we're hiring the right staff to get into the right place. It will not change overnight. But trust me, for when you see the request and your staff see the request and they get frustrated, just add or take back three weeks in history.
And that was what I was doing when and my staff, when we got that, and I understand the department knows that they need to improve. And so we are committed to both the improvement and the transparency on how we improve, and we are actively engaged in trying to do that. Okay. Rip Taggart. Thank you, Mr. Chair. I'm just concerned in the write up. The bullets all make a great deal of sense and they're very objective, quantitative in some cases. But there's another whole factor that I'm not seeing in this and that is culture. People leave not only because of quantitative issues,
people leave and turn over because of cultural issues. And I'm not saying that that's a problem, but I'm worried that the scope does not include an analysis of the culture. Speaker Ferrendino. Thank you, Mr. Chair, Representative Taggart, as someone who's also run some organizations, I learned early in my career when I started to run organizations that cultures are everything and it matters more than anything else And it will sink a ship so quickly. So I think you're spot on. That is an important factor and I will say that is constant.
We look at turnover rates. We look at concerns. That is as KPJ is looking at some things, they're looking at I wouldn't say like a full like three sixty of where are the cultures, but understanding where turnovers are, what things are to make sure we're not missing things. And I will say we have people within our own office within not OSB but with our operations team who have worked in that area, who have been consultants who are looking at that as well to make sure we're looking holistically about one, what's the structure, what's the culture, what are we trying to do.
We do think the turnover of basically all the financial staff and now rehiring is challenging, but it also provides a good opportunity to embed a stronger culture within the organization, at least the financial organization and how does that manifest within the broader organization. But also looking at how do we engage DPA and others to support the work, because one of the things that's really hard in some of these smaller agencies is they only have a few financial staff. And that is hard when you're looking at,
okay, what's my movement up, What are my support systems? I'm coming in and everyone's doing all this other program work, but they're not doing the financial work because there's maybe five of you in this whole thing and two people have left. That creates issues, and a lack of connectivity and that's why like organizational structure and those things we're looking at. So yes, it is part of both what the Governor's Office is looking, what KBMG at some capacity is looking at and we know from our culture is key and we will continue to lean in there.
Senator Mabile. Thank you, Mr. Chairman. Thanks for sharing this with us. I'm reading this paragraph on Page three about potentially moving higher ed into the Department of Labor and Employment. And I just want to say on the mic that I think that's a terrible bad idea. And I don't imagine that I would be able to get around to supporting that, because higher ed, to me, it isn't about getting people ready to do labor. It is about expanding people's minds and intellectual pursuit and a whole bunch more things
than just getting people ready to go to work. And not that there's anything wrong with getting ready people ready to go to work, but higher ed, that is not their sole purpose. And I don't even think it should be their first purpose personally. So I just wanted to put that out there because I think that sends a wrong message. Just in the speaker's defense, that was a suggestion that came from this committee because as we were looking at no, it was about yes, and we looked at both because
CDE is outside of the Governor's purview even though it's Executive Branch, it's under the State Board of Education and the State Board of Education and the Department of Higher Education is not. And so combining, services with a group that is not part of the services that are like this is not part of the Governor's Office doesn't make sense. So in my opinion. So that suggestion that they look at both places came from this committee. Not all of the people on this committee, but it did come from this committee. Speaker Ferrendino. Thank you, Mr. Chair.
I do think that Just real quick. So it was back end services, too. It wasn't a wholesale combining of the departments. Thank you, Mr. Chair. Senator Amable, I completely agree. I mean, I think but I think what is the role of higher ed like we're having that conversation nationally. We've been having that conversation for decades on what's the role of higher education. Is it in employment? Is it like getting people ready for work? Is it about enlightenment? And that is going to continue to be a debate for probably ever. And I do think we are we know there are issues that need to get
addressed. We're trying to address them in the current structure. We are open to conversations of are there different structures that help address those as well. And we I think where it sits and how, we know there needs to be fix to the current what's currently happening. I need to I think you're good. Okay. Senator Kirk Meyer. I'm sorry. So close. Yes. Yes. Speaker Ferndino hopes to go far away very soon. He's going to. I'm just looking though on Page three as well. And it's not just in the Department of Higher Education that the audit came back
with and talked about that they where they were extremely critical of the Office of the State Comptroller, finding material weaknesses there, and they have some other issues here. So I'm wondering if, as you were looking at it with your consultant or, well, not you specifically, but the administration's looking at this, and you hired that consultant. If it also took into consideration what occurred from the audit, I mean, this was a ways back, but we've had some other issues on with state controller and other departments. I'm wondering if that's also being taken under consideration as well.
Speaker, for Indiana. Thank you, Mr. Chair. So the state auditor of any of the organizations takes the single audit like to heart and has implemented and continues to work on implementation of all the findings from the single audit. Not to say anyone else doesn't do that, but they kind of run the point on that. And really, as auditors themselves and accountants, they really look really tight at that and are improving. And so they are addressing those with the audit committee of the single audits and
that. I will say, and this is one you've heard if you've been with it when they did the single audit to the state auditor's office, I happened to be there that day. Our State Controller, Mr. Jaros, has said, and I think it's very true across the country, accountants are in high demand, and we do not pay in a competitive rate for accountants. We struggle to get accountants. And the staffing levels, especially during COVID, that they've I believe have improved some, but that during COVID and some of these findings were during that, we had significantly a significant number of vacancies in accounting.
And one of the things that we've actually talked about in terms of other things we need to do is how are we going out to higher ed institutions and recruiting people into it? Are they is there a pathway we can get accounts in that are within DPA that are going to be able to then farm out to departments so that we can build the infrastructure for of accountings within systems. And so those are conversations we're actively having because it really we need the staff and a lot of this is, one, we can do internal controls,
we can do process improvements and DPA and the controller's office is actively and has done a lot of that in these areas. But we need the staff to implement that and that means we need to actually be able to hire accountants into those roles And that is a key thing that we have had lots of conversations of how do we make sure we're getting those people into those roles. So centralizing services may make sense and heard on the staffing challenges with large across government, not just state government,
but we're not seeing these kinds of challenges in other departments. And they face those same headwinds as Department of Higher Education. So as we look at the challenges we have here, is there some accountability that goes beyond just that department? In other words, are you going to be keeping a closer eye on this? Will DPA be keeping a closer eye? Gov's office, right? I mean, at the end of the day, the head of a department answers to the gov. What is the plan to make sure that the fiscal challenges we see in this department are going to be addressed moving
forward so that we don't have another $30,000,000 or $1,000,000 or mistakes of this sort being made? Yes. Mr. Chair, I mean, I'm here to present to you because of what the challenges are. We've engaged a consultant to be able to do that. We are holding leadership within the department accountable, meeting regularly. I'm not part of those, but the operations and other teams are meeting regularly to to make sure we have implementation plans that we're working through and engaging in those. And so that doesn't I can't tell a situation and tell you there's not going
to be other problems or other errors, but we are actively working to minimize and put in the right process, procedures and people to ensure that when errors happen, it is a mistake that happens and that happens in every department and every organization, but that is not a routine and normal process, that it is a one off, not the commonplace. And that's where we are today and we need to get to a better place and we are actively working to get there. So next time it's chief Oppenheim that we're gonna keep from catching a flight. That's right.
No comment, Mr. Chair. I'm this wasn't a question, I guess, that we stated. Next time, it'll be Chief Oppenheim. I mean, this is we need eyes on this. Yes. We're actively engaged. And as I said earlier today, it's not our responsibility to solve problems that are occurring across the street. So, thank you for this and look forward to hearing from Ms. Lowe and Ms. Bickle. Thank you. Thanks. Enjoy the flight. Enjoy the trip. Sick travels. Thank you. Spend some good time with family after the joyous presentation we just had. Where does the State Controller live? In DPA as part of Department of Personnel Administration.
So Rope a dooper. Do we wanna you ready to roll? Give us one second. You bet. Can we do a two minute break, please? Request is made for a meaningful two minute recess. We shall grant two minutes and no more. We're back. Who wants to roll? I'm gonna start us off. Miss Lowe. Lou Ellen Lowe, JBC staff. It's a big day for you. It it is man, three times. Well, just so everyone knows where we are, we are continuing a conversation about, the Department of Higher Education Fiscal Management. After that, we'll go to the presentation by the department either the presentation of early childhood or should we just
finish off Metro? Let's do MSU after that, and then we'll do early childhood. And, the goal is to be out of here by two, if possible. So Ms. Lowe? We're going to go fast then. Well, I'm going to, again, Lyle and Lowe, JBC staff. I'm going to, again, just kind of recap what we've already discussed. This is something that has been on our radar for a while. We brought up the potential of consolidating. We brought up the potential of just explore something to make this better. The last week and a half, though, has been truly actually really just a week less than has been truly illuminating.
I wrote in my previous document that we were made aware that they had engaged in this contracting services and has have been doing so since January. That was something that we were not told about. How is it paid for if we weren't aware of it? Ms. Bickel? My understanding is that most of it is being pulled out of the ARPA $370,000,000 that the governor has as flexible funds and that were then refinanced. So that was why Mr. Ferrendino was talking about the add on to the KPMG contract because we already had
a KPMG contract for dealing with the state and local fiscal recovery funds, and they've now done this as an add on to that contract. So sorry. Ms. Lowe. Thank you, Mr. Chair. Since that time, we have had a conversation with the me, office of the state controller to get their input on what to do and how to help. Our concern being, are there systemic changes? Are there statutory changes? What needs to happen particularly because of this role for the authority that continues to plague the department? Institutions do have a significant leeway in other parts of their budget for roll forward.
But when you have special one off bills like these, they don't have the same just writ large open ended rule of authority. And and this was something, though, that that apparently the department even misread or misunderstood or we don't know. So we had that conversation. We learned that, quite frankly, the last probably two years have been extraordinarily bad in terms of the accounting and financial policies for this department in ways that even we were surprised to find out.
And I'll let Ms. Bickel illuminate on that elaborate on that. Yes. So why don't just the two of you dialogue? Yes. Amanda Bickel, JBC staff. We reached out to Bob Jaros because we were really worried about what here was yet another supplemental indicating errors from the Department of Higher Ed, what do we need to do about this? And we had a conversation with them on Friday and learned a whole lot more, including that really the reason the state's books were not closed in 2023,
2024 until extraordinarily late was because the Department of Higher Ed did not get its entries in. We learned that the controller staff needed to actually step in and do some of those entries because there was nobody there to do them. It's and that is the reason the controller's office also received a huge significant deficiency finding from the Office of the State Auditor because which was as near as I can tell, it was really a follow on from the fact that Department of Higher Ed was
not able to do its accounts, could did not get its data entry in, could not reconcile anything, and they're pieces of money that one could not keep track of. It was it's I've never heard of anything this bad. And I wanted you to understand like the level of gravity that led us to ask the executive branch to come and talk to you today on virtually no notice because this is an extraordinary situation. I do think the executive branch is taking it seriously.
It's clear we've got a lot of consultants in there, including they're bringing in the former budget director and controller for the Department of Health Care Policy and Financing to try and close the higher ed books for 2024, 2025. So there we've just because you have responsibilities for oversight, you're not administering the department, but you are responsible for oversight and we wanted to make you understand how serious this is. They're bringing in hiccup to solve their budget problems? People who currently have familiarity with budgets and with the I have the same exact
thing. It's my understanding, however, that the controller for the departments, they actually sign off on things on behalf of the state controller. So they actually answer to the state controller. So that is why the state controller got pulled into this because what were they doing? What I mean, they're responsible to the state controller. So it is just as much an issue there. That's why I asked about what's going on over in that area as well. And this is not the first time that we've had issues with the state controller. So just saying. Yes. Yes. Ms. Bickel?
Senator Cook, by this is not in any way to excuse that clearly the finding was because these Office of the State Controller hadn't provided enough oversight and didn't have kind of contingencies in place when things went wrong, which clearly they need to do. So there's absolutely the Office of the State Controller has a huge issue to address themselves. But it was kind of highlighted a follow on because we were having failures at the Department of Higher Education. And I think it's important to note that historically,
the Department of Higher Education basically, the department has just any money it gets, it just expenses out to the higher education institutions. And so it has really not had, I think, true reconciliation processes with the institutions. I think that is really problematic and has been very much highlighted by all of these special pieces of legislation where apparently Department of Higher Ed couldn't even read statute that said funding was only available through twenty twenty four-twenty twenty five and not twenty
twenty five-twenty twenty six. I mean, pretty fundamental stuff. I think this to me is reminiscent of the challenges that existed under the previous Adjutant General, the Department of Military and Veterans Affairs that we dealt with last year, where the controller, the department handed out tons of money contrary to legislation and just didn't I guess there, there was actually more of a case I think to be made that it was a misread of the legislation, whereas this just seems like they didn't read it. So I guess a question here is,
I know the controller signs tons means they don't actually sign anymore, but signs metaphorically tons of checks, and there's a lot going on in there. Is there do you know from DPA if there's some special additional attention being paid by them to the Department of Higher Education? How long has that been going on? And how did we miss $30,000,000 and then another $1,000,000 Ms. Bickel? It's certainly my understanding that at this point, there's a lot of special attention being given. And so we have the state and local the contract with KPMG that's actually running
through DPA. And I believe the controller's office has even been involved in sort of the hiring process for higher ed getting a new controller. So what the I think there's good questions about sort of what are going to be the further policies, procedures and anything else that needs to happen and what is going to be the role of the state controller and what is going to be the role of the department. And as I think Mr. Ferradino Speaker Ferradino alluded to, kind of, is there a structural thing that we might need to address fundamentally?
It we've got some structural issues to look at for small departments. I certainly agree with that. But we also have very specific immediate problems with this department that must be addressed. We'll go with Brett Taggart first and then Senator Kirk Martin. Thank you, Mr. Chair. I don't want to repeat myself, but it concerns me when I hear that our not our focus, but the focus is replacing the people. That, we can get third parties, which they have been doing, to do that. And I would almost put that on pause
and continue with third parties to do it until we figure out, is this a compensation issue? Is this a structural issue? Is this a cultural issue? Because just throwing more people at that letter is not going to solve it. And in fact, it's going to make the problem worse. And it just worries me that the focus I'm hearing is, let's just get the people in there. I don't know that that's necessarily the solution over the longer term.
It's just my opinion. Ms. Lowe? Thank you, Mr. Chair. Thank you, Representative Taggart. I was going to mention a follow-up to your comment. One of the things I've noticed in reading some of the documentation that has come out and in having some of these conversations is that there have been in the state auditors report, if you read it, says that they have had communications and conversations with leadership in that department with no satisfactory result. That is truly concerning to me. And that's something that when they do, which we hope that we will get to see some of the recommendations that KPMG
puts forward. But when they do come forward with some sort of long term solution, it is our hope that it's something that not only looks at that structural and the cultural component, but also if they do need additional resources, this may very well be something that will require additional funding or whatever. If we're going to partner with another department to help them with this particular back office piece, making sure it is a department that has exemplified excellence in this particular area and how they do their functioning so that we know we're partnering them with someone who does it well or something to that effect.
But I did I think I wanted to highlight something that I don't believe really had the impact that I think maybe the offer the state auditor had hoped it would in writing up about those conversations and hoping that maybe they would get a little bit more from the leadership in that department. Sarah Kirkmore? I'm just going to go back to one of your comments about getting Chief Oppenheimer here because David Oppenheimer. Is it Oppenheimer? Chief, Chief, Chief Oppenheimer. Chief, the Chief, yes. Because seriously Him and Chief Sobecky are the two Chiefs we have. Yes. But back to my comment before.
This is not just an issue at the Department of Higher Education. This is an issue with the office of the State Comptroller's Office. The controller for the department answers to the State Comptroller, signs contracts on behalf of the state controller. They I mean, at least when I was at the state, they had maybe weekly or monthly meetings. So the fact that, these things are being missed incorrectly recording federal revenues, that's going through the controller's office. I don't understand why they didn't recognize it. I mean, I appreciate you said it in a very nice way about culture.
I don't know what's going on there either. Maybe there's problems between the state controller's office and the controller that was in the department. I don't know. But at the same time, they bear a lot of responsibility here as here as well, like, a lot. The contracts, the filings, all of that, that is done through the controller's the department controller's office. So, I think there's going to be more here. And if they've got a slush fund over there in the governor's office, maybe they should have picked up that $1,000,000 instead of us. Just saying. Maybe there's some other funds over there they could release, too. Because I'm going to ask about the bridge here as soon as we get to
more CBC stuff, just so you know. I mean, this whole thing about what I mean, I'll talk about that later. So I think the question is sort of what can you do, right? I entirely agree that culture is a huge issue. Of course, it's really an administration issue that's quite hard for you as a legislature to directly address. And so, I think that I have asked the executive branch sort of we know KPMG is doing this work. Apparently, it's not done yet. When are they going to be able to come in and report to you sort
of about recommendations, proposals, that sort of thing. But I assume that would be either in September at your September meeting or in November. But we certainly are hoping you will keep your eye on this. We don't know what the right solution is at this point, but it seems urgent to do something about it. Senator Kirkmeyer, you need a follow-up? No, I already said one. Want me to just say it again? Yes. No, but I do think we should get Chief Oppenheim here and the State Controller, Mr. Geras here because honestly, I think they're more at the root of this issue than the department is.
They have a controller for a reason. If the controller isn't trained properly, that's because they weren't going through getting the appropriate training through the state controller's office. If they weren't going and meeting with the state controller, you know, on those monthly where all the controllers come together and talk about stuff, that's on the State Controller's Office. The fact that these things weren't put in place like even the closeout, they want to blame it on higher education, seriously, it is on the Controller's Office. I've never seen that happen before until now. And so I think they all should get in here. And I wasn't joking. We talked earlier I'm not I'm sorry with you,
too, obviously. But we talked earlier about not punishing higher education institutions. I agreed. But the bottom line here is if the governor has got money in his office, I don't know why we're putting the money out when they should be putting it out when they've known about this problem for a couple of years. They had it in an audit situation. They have known about it and have not taken care of it. Right. Well, I think the full audit from KPMG will be done very soon and then perhaps conversation with the state auditor and Chief Oppenheim will be right at that point.
So that sounds like the right next steps for me. Is there anything else on this? Thank you very much to you both. Excellent work. And Ms. Lower, are you coming back? Excellent. All right. Well, next up, I believe we have we will be hearing directly from the department. We do the Minnesota Metro. Oh, let's do yes, you're right, the Metro, MSU. Ms. Pickle. Okay. Shifting gears entirely, this is one of those revenue bond intercept requests from a higher ed institution. So as a reminder, the state in effect backs bonds that are issued by some bonds that are issued
by state higher ed institutions. The institutions are, allowed to issue under the state's credit rating rather than the institution's underlying credit rating. If there's agreement on doing that, that comes from the CDC and in this case, the joint budget committee needs to sign off on it as well because if you're doing an expansion of the program. So you have a request from Metropolitan State University of Denver, to increase its authority under the intercept program by $115,000,000
And I am recommending this, but I did want to highlight some things for you because I felt like there were actually some real policy issue here issues here to talk about. So one is, most of this new bond is for to build dorms on the Auraria Higher Education campus for MSU students. They've never had residential on their campus before. UC Denver previously has built some residences. MSU has not. So they've always been a commuter campus and a big commuter campus.
They've got, like, over 11,000 students. And now this is a change. I don't know that it's a bad change, but it felt like a real policy decision. And just like Colorado Mesa University made a similar shift some years ago, this is a major change for them. There is there are some student fees that are going to be required to help support this housing project. In general, you would expect a housing project to support itself through the rents that students are paying in the for the housing project.
In this case, for a little bit of initial period, there is going to be some use of student fees and that's largely MSU indicates because MSU has not previously had any kind of dorms on campus and there's a set of sort of services, residential services and administration that need to be built out to do that. And that, is a real cost that they have to absorb and so they're anticipating using some
student fees for that, existing student fees. There's not an increase in student fees, but student fees are under their current rules allowed to increase by 5% a year for to pay for bonds without any kind of additional student involvement. And the Board has already voted to do a 5% increase, which will and they have some other projects falling off. So the combination of those things make some student fees available to help cover costs. A smaller part of the project, about $13,000,000 of the total,
is involves conversion of previous pool space that is on the that is shared space on the Auraria Higher Ed campus or has previously been. The pool has been defunct for a bunch of years and MSU sorry, and UCD went ahead and built a gym just for the use of its students. So its students have not been using this kind of shared gym space for some time. I have to say it feels that is quite an unfortunate situation.
That feels sad to me. I feel like that should have been a shared service, but it didn't happen. And this pool space is no longer being used by anyone, so MSU Denver is going to renovate it. And with the agreement of the AHEC campus and the other institutions on the campus, it's going to become event space for MSU Denver. So again, there appears to be agreement among the various parties, but it is gets again at this sort of question of what do you want the AHEC campus to be, what space should be shared, what space should not be shared and do are there good policies and structures in
place for handling that. That. And obviously, you've got a bill that's looking at at least a part of that, but I do think there's sort of long term questions about this campus that has three institutions that are somewhat competing with each other. One really positive thing about the dorm project is there's actually, University of Colorado Denver has said that it will it is willing to enter into an agreement with MSU that it will provide the dining services for the MSU students. So I see that as a really positive element of this,
that we're getting a kind of collaboration in a way that we would like on this campus. It's just, you know, interesting to see the different options and shifts. And I actually have a letter I can hand out to you from UCD saying, yes, we're in negotiation with them and we are planning to provide dining services for this project. And I would note from a kind of fiscal risk perspective, this is pretty important to you because this entire project, you're building traditional dorms. If there are there's no like kitchen in these rooms. These are double rooms with shared bathrooms.
So there's if you don't have some place for the students to eat and kind of a meal plan, then you've got a real problem and the entire project has to be redone. So to me, it was important to get some kind of assurance that this was going to move forward because otherwise, this entire project looked sort of uncertain about the finances for it. Overall, I'd say relatively, this is still a pretty small dollar amount from a you know, given the size of this institution. You've got overall over $300,000,000 in revenue in this institution. It's annually, this is going to require about $7,300,000
per year in payments, most of which are anticipated to be covered by people residing in these dorms. So based on that, I am recommending this, but I did want you to really think about it because it reflects some significant policy shifts. So CCD doesn't really doesn't have dorms. Not really a need for them. UC Denver has a dorm, and this was just and and it's not an AHEC dorm, and this would just be MSU also having a dorm. So you'd have two residential campuses and you'd have one community college non residential,
obviously. Correct. Okay. And the policy decision for us is do we think that we should be supporting the building of a dorm owned by an additional independent entity as opposed to AHEC. Ms. Bickel? Yes, correct. And whether you are willing to take the financial risk, right, in the event this were to fully go south. Again, I don't see this as a big risk, but you are some of the structure for revenue bond intercept says is based on 75% of how much you give them every year in fee for service.
This is a would be a small addition to that. We're looking at like $12,000,000 a year that they have under the intercept program. That's pretty small within the context of how much money you give them a year. But it in the event things go really south, presumably, you're having to cut some of their operating support or you're making in effect, making their students pay higher fees to help keep this going, right? Like because there's not a whole lot of other choice for how you support something on this campus. It's either going to be the general fund or it's going to be the students that are going to have to handle this.
Again, I think not a huge risk, but there's some. Any other questions? Madam Vice Chair? We move to approve staff recommendation. Are there any objections? Seeing none, the motion passes six-zero. And we are to portion the last portion of this, the presentation by the Department of Early Childhood. Sorry. Right. Department of Early Childhood regarding an update on early intervention. Ms. Lowe, I saw you walking across there. Can you just come down for one more sec? It's my understanding that this is the last time we will have you presenting in front of this committee. Is that right? It is. It is a huge blow to the JVC.
You've been excellent analysts. We will miss you dearly. Yes. Actually, can we pass a law about that? Can we expand the special session that we're going to have to include a law preventing miss Loeffner from leaving or just a line item somewhere? Keep her here. Thank you. It is truly, truly, truly been an honor to work here. The staff that you have with the JVC is incredible. Some of the smartest, hardest working people I've met, and I can't thank you enough for letting me be here. I'm sorry. It's much shorter than I had hoped it would be, but life happens. You've done incredible work.
Thank you. Thank you. As this next presentation will attest. So thank you, Ms. Lowe. And with that, it's part of early childhood, early interventions. If you need another chair, we can pull it up. You good? Alright. Who wants to start us off? I'll go ahead and start us off. Thank you, Mr. Chair and members of the committee. My name is Mary Alice Cohen, and I'm the Chief Program Officer for the Department of Early Childhood. I'm joined here by Doctor. Lisa Roy, CDEC's Executive Director Jeanne Stefanik, our Chief Financial Officer and Kendra Dunn,
the Deputy Director of the Office of Program Delivery. I want to start by thanking the committee for their support of early intervention and their unwavering commitment to ensuring Colorado provides high quality, sustainable programming for our children and families. Early Intervention offers critical services to children with developmental delays and disabilities and their families. Children are eligible for these services from birth until their third birthday. The program offers a range of developmental interventions tailored to the family's concerns and priorities.
EI assists families in helping their children reach their full potential, which may reduce the need for further assistance later in life. Almost half of the children who receive early intervention services do not go on to receive Part B special education services, resulting in potential cost savings to the state. Today, we will briefly review the cost containment strategies the department recommends implementing in FY twenty twenty five-twenty six and the program's caseload and expenditure data.
We've tried to keep our presentation very brief and there are further details and information in the appendix in the slide deck. Before we begin, I want to recognize that this has been a challenging process for the providers and families who depend on early intervention. We understand that you've received input directly from committed families and providers during this process. We hope our presentation today demonstrates how their feedback and that of hundreds of others was essential in shaping these final recommendations.
The department has conducted broad community engagement with families and providers and other partners to explore cost containment strategies. Since February, we have held 18 input sessions and on average about 200 participants joined each session. We are deeply grateful for these participants' time and valuable contributions, which are reflected in the response to the R5. Furthermore, the department has implemented several program adjustments to enhance efficiency and promote sustainability. This includes moving approximately $27,000,000
of contracted direct services from pool direct services set aside into the EI broker contracts. This change improves the ability to track how funds are being utilized. The department has begun reviewing contracts bimonthly to allow us to more quickly identify trends of underspending or higher spending and adjust accordingly. The department is also undertaking continuous improvement of contract transparency, fairness and accountability. The data sharing agreement with HCPCF has been renewed to ensure access to Medicaid data,
which will allow the department to make faster and more accurate enrollment projections. We are also taking additional measures to ensure timely invoicing so that we have more accurate point in time data on services and expenditures. Finally, as requested by this committee, the department will follow the new quarterly schedule for reporting and presenting QESO data. With these new measures, we will be in close communication with the JBC every step of the way. On Monday, you received the department's cost containment recommendations for FY twenty fivetwenty six.
The department and its partners evaluated 12 cost containment strategies based on criteria regarding their impact to children, families and providers, their cost and the feasibility of implementation. After analyzing community feedback, CDEC is proposing four cost saving measures expected to save a total of $953,000 for this fiscal year and $1,600,000 in FY twenty twenty six-twenty seven. We had to make very difficult recommendations to be responsive to the JBC's request to
saving $1,000,000 We rolled out the majority of the strategies because we heard clearly that they would devastate the workforce or threaten direct services. We worked hard to make recommendations that will have the least impact, but we know that cuts are never easy and that these strategies, if implemented, may still negatively affect providers' income, which will result in the recruitment and retention of the workforce being challenged. We are recommending these solutions because they provide significant cost savings while minimizing the impact
of direct services on families. The first strategy is to make administrative reductions to the EI program at the department, including keeping vacancies keeping positions vacant for this fiscal year, reducing the budget for data system enhancements and freezing travel for EI staff. While these reductions are not sustainable in the long term, they will provide $300,000 in cost savings for the upcoming fiscal year. I'd like to emphasize that these this strategy is specifically for the Department of Early Childhood.
Second, we recommend discontinuing the payment that providers currently receive when a family cancels their appointment within twenty four hours or does not show up to a scheduled appointment. Compensating for no shows is a policy that has been in effect for two years. This change will result in lost income for providers, which again could impact recruitment and retention in the early intervention workforce. CDEC will explore strategies to minimize these effects on rural and mountain communities,
while also raising awareness among families about the importance of keeping their appointments. Third is to discontinue mileage and travel reimbursement for subcontracted providers. Only 15% of providers bill for mileage and travel and this is a result of the reimbursement policies that are different between the EI brokers. This will also result in a loss of income for some providers or a reduction in in person services. Similar to the no show policy, CDEC will explore implementation strategies to minimize the effects on rural mountain communities.
And then finally, the department recommends discontinuing the $250 stipend that providers receive when completing their training and the subsequent $250 stipend they receive for staying in the field for six months. There is no identified impact on direct services and provider feedback indicated that while providers appreciate the stipend, this strategy would have the least impact on provider retention and recruitment. Apart from the administrative reductions at the department,
which will be put into place July 1, the other three strategies would begin implementation in January of twenty twenty six as it will take time to communicate these changes to community partners, providers and families as well as time to mitigate the impact on rural amount communities. As noted in this report, we are continuing to explore three additional strategies for future for potential future implementation. These three strategies are accessing Medicaid through the EI Services Trust,
requiring providers to be in network with insurance and analyzing the structure of the intake and referral system. The department is preparing to start another round of input sessions to analyze strategies for fiscal year twenty twenty six, twenty twenty seven. In December, the department will submit another report detailing our additional cost containment recommendations. Now I will hand it over with your permission to Kendra Dunn, the Deputy Director of the Office of Program Delivery, to discuss caseload. Mr. Chair, members of the committee,
for the record, Kendra Dunn, Deputy Director of the Office of Program Delivery. For the next portion of this presentation, I will cover the caseload data detailed in the committee's request for information. All the data discussed in this presentation is for July 1 through March 31 or the first three quarters of this fiscal year. This is the period for which we have up to date billings as invoices for the last quarter of the fiscal year are still being submitted. The first piece of the request is for the total number of EI services performed compared to the projected number of services.
On Slide four, you can see that the average monthly children enrolled projections versus actuals. When averaged across the first nine months of this fiscal year, the difference between our projections and our actuals is about 80 children in our current model. This is less than a 1% variance. It is important to notice that there is seasonality to the EI enrollment with numbers being higher in the summer as a result of participation in extended Part C and because agencies catch up on billing prior to the end of the fiscal year.
This is one of the reasons that you will see us have higher differences in those initial months and why we use a twelve month rolling average in our projections to ensure we are accounting for that variability. The total unduplicated count of children served during 2024, 2025 is estimated to be 19,459 children this year. When that enrollment is broken out by funding source for child, about 40% of those children have Medicaid and about 9% are covered by insurers that pay into the Early Intervention Services Trust.
It is important to note that neither one of these funding sources completely covers the full cost of service coordination or administration of the program. So in other words, a child who is also receiving Medicaid might be receiving certain services from state general fund or federal funds. Medicaid does not cover the full range of services provided through EI and specifically does not pay for developmental intervention services, which are our second most frequently provided services. On the next slide Sarah, my boy. So some of the services are covered by Medicaid.
So do you get reimbursement from Medicaid for those? Even if somebody comes in an all in one visit, does some Medicaid covered stuff and some not Medicaid covered stuff? Ms. Dodd. Thank you, Mr. Chair. Yes, Senator Amable. So a child might be receiving certain services that are covered by Medicaid and other services that are being provided with state general fund or federal funds. On the next slide, Slide five, because the request specifically asks us to also look at the total number of services, we have included the projected service utilization by units for twenty twenty four-twenty five compared
to actuals at the end of first three quarters. I'm going to explain just really quickly a little bit about EI services are provided to children and billed in fifteen minute increments. That is a unit. Therefore, four units would be an hour long service. On average, 80% of children receive between one and sixteen units a month. So there's quite a range. The number of service units projected is based on previous utilization data using a linear projection applied, while the year to date number is based on our actual utilization data invoiced through
the EI sales force data system. So we're looking at the data in two different ways. As of the March, 788,249 units have been utilized and billed, which equates to more than one hundred and ninety seven thousand hours of services that have been delivered to 12,772 children so far. Typically, you might expect about 75% of projected services to be utilized by the end of the third quarter. So you will see we are just under that expectation. That being said,
we typically see an upward trend in the last two months due to providers doing catch up billing and extended Part C. So we do anticipate that by the end of the year, those projections will be closer to 100%. We have also provided projected service utilization for twenty twenty five, twenty twenty six. And as you can see, we anticipate using nearly 1,400,000 service units or about three hundred and fifty thousand hours of services. This represents an increase of 16%. Though we expect enrollment to increase by 9%,
eligible children often receive more than one service, which accounts for the larger expected increase of services. And with your permission, I will now hand it over to Jeanne Stefanik to walk through the financials. Ms. Stefanik? Thank you, Mr. Chair, members of the committee. For the record, Jeanne Stefanik, Chief Financial Officer for the Department of Early Childhood. The second part of the request includes the actual expenditures versus the projected spending. And so on Slide six, you'll see the department's total appropriation in twenty twenty four, twenty twenty five for this program. It was $79,200,000 As you can see on slide six,
it's further broken down into subcategories for a more in-depth look at the budgets and costs associated. We have $2,000,000 for State Administration, about $5,000,000 for Evaluations, $42,200,000 for EI service brokers, $29,800,000 for Direct Services. The projected cost for nine months were estimated to be $58,900,000 The actual expenditures in the first three quarters or nine months for the fiscal year are about 95.5% of that projection equating to 56,300,000 Additionally,
it's important to briefly explain some of the methodology used by the program for projecting enrollment and expenditures. The program uses two separate methods in projecting enrollment and expenditures, one to project monthly, one to project annually. For monthly projections, the program uses a rolling twelve month window of previous enrollment and or cost to develop a linear forecast model. The linear model is used to project one single month, assuming the trends of the previous twelve months continue. For the annual projections,
the program utilizes the most recently completed state fiscal year enrollment and cost totals, along with their annual growth rates, then applies the same growth rate and estimates to get a cost per child. The most recently calculated cost per child for the program is an average of $4,568 While the program is confident in the tools utilized for projections on cost, of course, there's always challenges when it comes to projections versus actuals and analyzing the data. To give further context, I would like to touch on some of the challenges and ways the program is
working through the projections, the data and the actuals. All of the data used by the program for developing projections on cost and caseload comes from various sources. The EI data system has caseload data, the EI broker contracts, our invoicing, our billings and the HCPCS Medicaid Interchange System. While the systems are not integrated, the program reviews data from these systems routinely and adjust projections accordingly. Also, there have been major changes to data trends that have occurred within the last five years. Specifically, in 2020 with COVID, the narrowing of eligibility criteria caused a decrease in the number of children served.
Then in 2023, there was another eligibility change, but this time, broaden the criteria and led to an increase in the number of children served. While these changes have taken place, the program has incorporated a review of the pre pandemic data and the new eligibility data to adjust projections as well. In addition, lag times in invoicing make it difficult to have accurate up to date data and cost. To assist with this process going forward, the program is working with its partners in receiving more timely information in the invoicing process.
This will reduce the lag time to better inform projections and actuals. While all of these factors create difficulty, the program utilizes reliable data sources available and is confident in the methodology used. As you can see on the previous slide, it has an accuracy of about 95.5% in the first nine months of the overall projection. The program will also continue to fine tune and explore other data elements to lead to an even more robust projection model. For example, if we were to add an additional data point such as the Medicaid utilization, this would ensure some accuracy and adjustments of the total expenditures for all children and
then adjust the estimated average expenditure per child. It will allow the program to Senator Mavalley. Sorry. I had a question about Medicaid. So I'm not clear from this graph. Like on the next page, you have your $62,000,000 general fund appropriation. What percent of the services are covered by Medicaid? What percent of the kids are on Medicaid? And what's the story with the other kids that aren't on Medicaid? Are they do they have private insurance?
Do you bill private insurance? And what percent is that? And then are there some that are just uninsured completely or some are on chip or Who wants to take that? Ms. Dunn. Thank you, Mr. Chair. Senator Mable, forty percent of the children are currently on Medicaid, nine percent are currently getting private insurance that is billed because they billed to the Early Intervention services trust. So roughly, the remaining 50% are receiving the service through state general fund or federal funds. We are not able to we are not able to bill private insurance that doesn't
pay into the trust. What that means is they are not a plan that is regulated by Department of Insurance in Colorado. So they might be a national plan. Individuals are able to if their private insurance would cover some of these services, they could do so outside of early intervention and obviously, we wouldn't know about that. We have no way to track how private insurance is paying for additional services outside of the program. And we do receive CHP plus I do not have the specific percentage of that in front of me, but I can get you the answer to that one. Okay. So for those 50% of kids that are just being paid for with federal or
state dollars, You say they have out of state insurance. So what do you mean by that? Is that They could possibly excuse me, Mr. Harris. Sure. Go ahead. Who's that? Yes. So when a child comes in to do intake, they are asked what kind of insurance they have. If they have Medicaid, we bill Medicaid. If they have an insurer that is in the early intervention services trust, that they get reimbursed out of that. If they have neither of those, we are not charging families for services. So those services would be paid for by the state using state general fund or
federal funds. Senator Clay. Thank you. I'm just going to keep going down this track. So looking on Page eight and you have page six and page eight is where I'm going to be, but page eight right now. Early intervention general fund appropriation is the 62.5. And IDEA Part C, that's education, so that's not federal funding. That's $16,700,000 That makes up the whole total $24,000,000 $25,000,000 So of the $62,500,000 what portion of that is billed to Medicaid? Ms. Dunn? Senator Bridges,
I do not have that number. That number would actually be above and beyond. So that $62,000,000 it would only include the $2,000,000 that you guys transferred back from HCPCS. It would not necessarily cover what HCPCS put out the door through Medicaid. We can get you a number. So we can work with our partners to get you that number. Thank you. So well, I thought we were going to probably get that number. So I would like to know what that number is. I want to know. So are we using part of the $62,500,000 though to match to get to pull down the Medicaid,
to pull down the federal funds? And what would that be? Mr. Feier? Thank you, Chair. Thank you, Senator Feier. So in relation to how the Medicaid works from the HICRAF side, that is all managed in their budget directly drawn down. So we do not have optics into what that actually looks like. From our side, the percentage I'd have to get back to you on, I could tell you what we have in these numbers for today as far as what we have spent against that budget in accordance with period nine. So in addition to the $79,000,000
that you have here for this program, for the early intervention program, there's actually even more money over in HCPCA that goes towards early intervention program. And you don't know what that is? It's another 50%. No. Ms. Stephane, go ahead. Thank you, Mr. Sherritt. Thank you, Senator Kirkmeyer. So we are reappropriated funds from HICPUF. Although we are reappropriated those funds, those funds are directly drawn down from HICPUF. So it would be in our long bell line item, a reappropriated amount that I don't have at my fingertips unfortunately today. I'm sorry. And then how it's actually spent or where it's drawn down in HAPA's budget?
Okay. So what I'm trying to figure out is how much we're actually putting forward as far as general fund money towards the early intervention program. And the reason I'm trying to figure that out is because it's kind of a little disappointing when you say and maybe I'm wrong here, but you say that your cost containment strategies is $1,000,000 in 'twenty five, 'twenty six approximately and $1,600,000 in 'twenty six, 'twenty seven. And am I comparing that number of cost savings to $79,100,000 appropriation? Or is it $79,100,000 plus whatever we're doing over in Hetpauf?
It's fine. Thank you, Mr. Chair. Thank you, Senator Bergmeier. It would be in relation to the Direct Appropriation and General Fund to CDEC for this program is where we would find those cost savings. So it would be in that $62,400,000 bucket that we would potentially be applying that $1,000,000 to. And after all those meetings, that's what we came up with, was $1,000,000 out of $62,000,000 that we could save. That's interesting, to say the least. Okay. So I need to know early intervention service broker contracts versus early intervention contracted direct
services. This seems like it's backwards to me. I mean, my understanding of service broker contracts is that it's almost like case management light. It's almost like they're a middleman. You have 19,500 kids approximately unduplicated by your chart. And we're spending $30,000,000 on service brokering and only $20,000,000 on actual contracted direct services. So explain to me what service broker contracts is and what portion of that approximately $32,000,000 is actual services that go to these children,
19,500 kids approximately. Ms. Dunn? Senator, Chair, Senator Kerkmeyer. The difference between the EI broker contracts and the EI contracted direct services is not about whether or not children are receiving services. It's about whether or not there are employed staff providers for the EI brokers or if there are subcontracted independent providers that are paid through the contracted direct services. So both lines are providing direct services.
Some are just providing direct services by providers who are employed by an early intervention broker organization and some are subcontracting with that broker organization and they're getting paid for out of a different line. So the combination of those two lines is the amount of direct services minus the indirect of the EIB brokers. And what would that amount be? I do not have that number here, but I can get you that number. What I would tell you is it's different by broker. Some have Negotiated indirects, but we can give you a total across all 20 contracts.
Okay. And an approximate percentage of what we're paying brokers? Like is it 5%? Is it 10%? Is it 15%? That would be helpful Because Last year, the de minimis rate was 10%. Most people took that. That actually is increasing for 2025%, 2026% to 15%. But like I said, there are some variation because we do have some that did direct negotiation of their indirect. And that direct negotiation results in more than 15? Ms. Stefanik. Thank you, Mr. Chair. It depends. As Ms. Dunn alluded to, it's wide variability amongst each of these brokers.
And I believe that we did about five to seven negotiations. Some did come in higher because their costs were facilitated that way and others did come in lower. And to Ms. Dunn's point, I want to just make sure I'm adding clarity. This will be for the federal fiscal year point, I want to just make sure I'm adding clarity. This will be for the federal fiscal year 'twenty five, 'twenty six, not the state fiscal year. So we would see this change transpiring, in October. And so then Secretary, Kumar. Thank you. So the administrative reductions, are those actual administrative reductions? Or did I hear you say that they're related to data systems, pausing data systems or doing something with data systems?
Ms. Cohen? Thank you, Mr. Chair and Senator Kirkmeyer. There are three different areas that we're looking at for department reductions. One of them is a data enhancement. The other is around holding positions vacant for this year. And then the third is to make sure that we are freezing all travel and any other type of optional expenses within the department. Great. So could you send us the breakout of what that $300,000 is for? I'd like to know how many positions you're holding that you're freezing essentially and how
much travel you're cutting for yourselves since we cut a bunch of travel for subcontracted providers. And the subcontracted providers were okay with having their travel reimbursement and their provider no show payment basically being eliminated or decreased? I don't think I'd say they're okay with it. Ms. Cohen? Thank you, Mr. Chair and Senator Kirkmeyer. This will impact their income and will have an impact on the recruitment and retention of the workforce. So this will have a negative impact. These are very challenging recommendations
to put together. We wanted to prioritize that we would not have a direct impact on children receiving services. I would also like to note that we are doing another round of input sessions and we're exploring many other strategies that we believe will have cost savings. For example, one of the cost savings one of the strategies that will not have an impact on providers and will not have an impact on families is the redetermination of eligibility at twelve months.
So there are other strategies that we are working on between July and December that will not have this negative impact on our subcontractor workforce. Okay. And then Go ahead. Yes. You said I get to dialogue to see. That was a while ago. Keep going. I'm still dialoguing. So when you're having your discussions with HCPCF, it would be very helpful to have an understanding of what kind of funds that we are putting towards early intervention through Medicaid, through HCPCF and how many of those dollars are underutilized at the end of our fiscal year,
just like we were finding out before. So thanks. Related to the answer about the redetermination of eligibility, When it's determined that a child no longer needs services, what does that discontinuation look like and how is it related to the family service plan? And do you discontinue services even if the family service plan says keep going if the kid isn't needed? Or do you continue to provide those services? What's that look like? Ms. Cohen? Thank you, Mr. Chair. We will follow-up with you on the details of that information. Great. And then oh,
Rep. Taggart, go ahead. No, no, go ahead. Thank you, Mr. Chair. I have a question and then I have, I guess, a couple of overall comments. The question centers around when you budget, are you budgeting around the number of clients that you're serving children or are you basing it on the projected amount of services for each of those or is it a combination of both? It's done. Or something else? Thank you, Mr.
Chair, Rep. Taggart. It is both. We are looking both at growth rate on enrollment and growth rate on service utilization. We know that since we won't realize the full expansion of the eligibility that we put into place January 2023 until January of twenty twenty six, that increase is kind of expected. We would hope after that to start to see a leveling off of the growth rate on service utilization and enrollment. But since we haven't gotten to January 2026 yet,
we are not surprised to be seeing this continual increase. And so we are looking at both enrollment and service utilization. Commissioner? On the increase in enrollment, are we looking primarily at kids who need smaller or fewer interventions? Or are we still looking at potentially kids who need just as much as folks that were already eligible? In other words, is that expansion of the universe going to cause a dramatic increase in the whatever the provider,
the units, will it result will the increase in kids this increase result in a lot more units being utilized? Or will this be fewer units per kid? What's that relationship with the expanded eligibility? Mr. Chair, we are seeing those connected. So because we changed the eligibility in January of twenty twenty three as we were coming out of the pandemic, at the exact same time that we saw that children were needing more services or more intensive services, those two have been on an increase together. So we have not yet seen a decrease in children that need more services,
if that makes sense. So we will be watching closely in 2026 and beyond to see if those two trends start to diverge or not. Rob Jagger? Thank you, Mr. Chair. If we could continue. So if I go back to Page five, in your statement that both the number of children that you serve and the number of services go into the calculation, it concerns me with a 66% actual utilization. Now you said it's going to come up. 66% to 100% is a big jump.
So I know I would like to see what that's looked like for the last couple of years because 66 to 100 makes me very suspect that you don't get to 100 that and you can tell that from the standpoint of the next page is that, you're not excuse me, not the next page, but the Page eight, there's still a range for '20 4, 25, which seems which I understand there's going to be a range because we haven't closed out '24,
25. But that's a broad range from $400,000 to $2,100,000 If this ends up at $2,100,000 I have some serious concerns about basically the savings we're taking from the providers, albeit 300,000 in one year, that is not, in my humble estimation, the way to get savings, is to put it on the backs of our providers. That, to me, is extremely problematic. And you've already said you're going to lose providers over that.
If you lose providers, then we can't support these kids that need our support. So that, to me, I hate to be harsh, but I throw out those recommendations that you put on, on page two. I don't know if it is page two of your, the numbers not there on that particular one that I can find. But the cost containment, that's not the approach I would take under any circumstances. And then my last comment is when I do the numbers, I'm sorry, I come from a financial background,
when I go the numbers of you've had 18 input sessions and you said about 200 people per, that's 3,600 people. Your reply rate to then a survey, and I'm assuming it went to those people, was 4.5%. That tells you something's wrong because if people that you are, in fact, talking with about cost containment are not replying or replying at 4.5%, something's wrong. I would expect to see 15%,
20%, 25%. This isn't a cold survey kind of situation. And so I'm sorry. I just I really have problems with this whole presentation. Ms. Cohen. Thank you, Mr. Chair and Representative Taggart. I'd like to clarify the numbers that you cited regarding the 200 participants. That is unduplicated. So we had many participants that joined for each session. I'd also like to share that we utilized That will make the number worse. It will not make it better. Thank you, Representative Taggart. I'd like to point to the RFI under each of the different strategies.
There's a document linked that has all of the responses that is more than 167. What we did in each of the input sessions is we created breakout groups for small groups of providers and parents and partners to work together on responding to the strategy. All of those comments were documented and put together and are linked in the RFI. The survey was a separate process from the input session, which was from those many of those that weren't able to join the listening sessions.
So there's two separate ways that we captured feedback. So in order to have effective listening sessions, we implemented four different strategies. The first was a planning group that met every Monday that was comprised of parents, providers and partners that helped prepare us for the session. The second was the breakout groups within the listening session. And then we had the survey as well and then we also had multiple people that met individually with each of us. I also would like to point out in the RFI,
we presented four strategies that were cost containment, three of which would have an impact on providers as you've noted, Representative Taggart. There are three strategies that are very complicated and need additional consideration. And in the RFI, you will see those beginning on Page eight. And so one of them is Medicaid access through the EI Services Trust or looking at an early intervention code. And you'll see the comments on the top of the middle of Page nine of
the RFI. You'll see additional provider input on Medicaid paying into the EIST or using an EI code. There's hundreds of comments in those sections really providing feedback on what that would look like. Under the second strategy that we're going to continue exploring as part of these initial input sessions is that all providers be in network with private insurance. This one had very strong pushback from providers. It was one that was almost unanimously
voted that it was not one to move forward, but we think there may be some options there we can explore further as a department. The third is the analysis of the bifurcation of the referral and intake system. There is potential cost savings there as well depending if we want to there's three options there that you can explore. So those are three strategies that we need further exploration on. And then in the next round of sessions, we have an additional eight listening sessions. We're going to go deeper into more complicated strategies like the redetermination of eligibility,
looking at eligibility tools and other strategies noted here. So we have a lot of work left to do. This was our first round and our first set of recommendations. If I can follow-up on that. I think it's been clear that I've fought very hard for this program. It is also very expensive and was surprisingly more than $10,000,000 I think more than $15,000,000 more expensive than we thought it was going to be. I understand that it is a burden on providers to get certified with private insurance. I understand it's a burden to have this EI code,
and I hear that, understand it, and we also need to figure out a way to get these costs under control. And when I look at Page when I look at the chart in your presentation here of the folks that are on the trust, I just I don't understand why we're not doing more to have these services paid for by private insurance, recognizing that in some cases they won't be and we still need to provide them. But if that's an option, if that's available, I know for parents maybe the co pays get confusing, maybe there's something we can do to cover co pays perhaps,
but this seems like a way that we can continue to provide the same level of service with the lower cost. And I guess the question would be, is there something beyond just an administrative burden or a the time line on getting certified by insurance companies that makes this something that providers are hesitant to move forward with? Like, what are the challenges for providers in that case? Just to me, it seems like the obvious way forward. Like, what would they say? Thank you, Mr. Chair. I first of all, I would love for you to be able to hear it firsthand from the providers.
And if you go to the link in the RFI, you will see all of their comments. And in fact, at the end, you'll see a slide deck by one group of providers that detailed why this is such a challenge for them. The other piece that I want to note here is that only a certain percentage of the services are allowable under insurance. They pay for the medical services, but they wouldn't pay for many of the services that offered within the home. The other piece that I think will help clarify this is the funding hierarchy.
And you'll see the funding hierarchy in the last slide of your slide deck. By federal requirements, we have to follow a funding hierarchy, which starts with private insurance, which the service coordinators, when they bring in a child, a family, they'll ask about private insurance. Then it moves down into the different categories. How is this voluntary discretion of parent? Parents can say, I don't want to use private insurance, I want you to pay for all of it? Thank you, Mr. Chair. Yes, that is correct and that's based on federal guidelines. And that where these
services may not come to any cost to the family. So that's where there's also the issue of the co pay. However, Mr. Cherry, I just would like to note that this is on the list of strategies that we are digging into further. So we will be able to provide additional information to you regarding the complexities as well as more information on the funding hierarchy that is required federally. Okay. Senator Mabile. Thank you, Mr. Chair. I'm just curious. Do the private insurance how do the payments
compare between getting reimbursed from a private insurance company for the providers versus getting reimbursed by the trust versus getting reimbursed by Medicaid? I mean, is that the essence of the problem? Ms. Cohen. Thank you, Mr. Chair. Thank you, Senator. I will follow-up in more detail with that information. But what I would like to point out is one of the strategies that we were asked to explore was removing the speech language pathologist stipend. That when you look on that in the RFI, you'll see the difference between what is paid out of state general funds and out
of versus Medicaid. And so a few years ago, we implemented that stipend in order to pay the speech language pathologist a fair rate. When we brought that to the group, again, it was overwhelming. Please do not touch that stipend because if we do, we will have a significant impact to the number of speech language pathologists that are willing to take Medicaid children. And in reference to the different rates between them,
that's the most significant, but I'd be happy to follow-up with additional information. All right. I don't think we got to that last page. Ms. Stefanik? Thank you, Mr. Sheer. I'd like to follow-up on a couple of questions that Representative Taggart also posed. If we could start on Slide five really quick to talk through the 66%. This is in relation to the amount of services that have been provided year to date. So we anticipate that, that to fully mature as we do have an additional three months left in the year. So it's only showing 66% because it's all in reflective from July through March.
If we can get to Slide eight, please. And then I think I hope to answer the remaining Yes, Rep Tagger. Thank you. And I understood that. What I had asked for was what did those percentage get us charts on what those percentages looked like for the last two years. That was my request because getting from 66 to 100 is a big jump in one quarter. All right. Ms. Stefanik, back to you. Thank you, Mr. Chair. Mr. Taggart Representative Taggart will follow-up with that information. So on Slide eight, I do want to talk a little bit about the actual expenditures compared to the
appropriation as required in the RFA as well. With the adjusted budget, we do not anticipate between $77,000,000 and $78,700,000 which results in a range of $400,000 to $200,000,000 in roll forward federal funding. This is representing between a 0.52.7% of overall funding that would potentially roll forward. The last few months of the fiscal year, it's really difficult for us to have that 95.5% accuracy in the projections as there's typically a higher than average billing for direct services
in May and June and as the increased number of children receiving services in these months due to extended Part C. Any funding that is rolled forward could potentially go to offset future costs in the program and caseload costs. Regarding future expenditures, you can see detailed information on Slide 24 in the appendix. In twenty twenty five-twenty twenty six, the program has appropriated $87,400,000 and projected to spend $87,300,000 Based on the current projections, the program is not anticipating any shortfalls in the twenty twenty five-twenty twenty six fiscal
year. With your permission, I'd like to hand it back to Ms. Cohen. Ms. Cohen? Thank you, Mr. Chair. We are looking forward Senator Kirkmater. Thank you, Mr. Chair. I just have a couple of more questions and a couple of requests. So on Page 29, I think this is in the appendix, but it's 29 of your PowerPoint. It says, in 2023, you were instructed to broaden the eligibility to serve more children. What exactly does that mean, broaden the eligibility? And who instructed you to do that? Ms. Dunn. Mr. Chair, Senator Kirk Meyer. In 2020,
as the pandemic hit, we changed the eligibility to narrow it significantly. As we came out of the pandemic, the department did come back to the JBC with a proposal to leave the eligibility at the same level, but to add a program that would allow support to families who had rolled off, if you will, like the families that would be no longer covered under that eligibility. At that time, JBC made the wise decision instead to roll back the eligibility instead of going that other route. And so we did implement a broadening of the eligibility in January of twenty twenty
three. I'm sorry. So Senator Clay. Thank you, Mr. Chair. So the JBC instructed you to broaden the eligibility? That is correct. I think so. We asked there was a budget ask to lift a new type of services that could help families that had less delay. And instead, the JBC directed the department to use that the funding instead to go back and broaden the eligibility. And so we took that action as of January 2023.
So the suggestion for the department was to sort of bifurcate the services? Correct. And JVC said, no, just do everything for everyone. Got it. Senator Kirkmeyer? And that was do everything for everyone whether they were determined redetermined to be eligible? Senator Mr. Turner or Senator Kirkmeyer? No. It was just to go back to a eligibility that allowed more children to be able to access the program because of eligibility. So we still aren't serving everyone by any means and we actually are not yet
at the eligibility all the way back before 2020. But we are at a broadened eligibility from where we restricted to during the pandemic. Second Floor. Thanks. And what is the eligibility criteria? Okay. I mean, is this going to be lengthy? Because you can just e mail it. It could, yes. Let me e mail it to you because it is a little bit complicated. So there is no income eligibility? Level? It is not income eligibility. It's about the amount of delay within a certain type of area. And then if you have multiple delays in multiple areas,
there's a slightly different eligibility. So that's why I would prefer to just email you that. Okay. That'd be great. And then if I may, Mr. Chair? Sure. Go ahead and dialogue. Just want to comment on Slide 30. I just have a couple of comments. Mr. Chair talked about the use of private pay in your hierarchy one and two. I'm just going to say number five, I don't see where that is even viable. I don't know why you're including that. Child welfare and temporary AT and T families, I mean, those children are probably going to be covered by Medicaid in the first place. But second of all, there aren't funds there. So I don't know why that's included and I probably wouldn't include it or I
think that it should be included. Is it federal, this EI funding hierarchy is federal, including the voluntary discretionary parent in that opt out form that parents fill out to say don't use my insurance. I think you said something about in home services wouldn't be covered by insurance anyway. So is this a way like is that there are no in home services that would be covered by insurance? Ms. Cohen. Thank you, Mr. Chair. I'd be happy to follow-up with additional information here. We also are going to hold a session because this question comes up frequently of
what is part of the medical model and what is part of the early intervention model. There any of the services that a family is receiving as per the medical model is covered by insurance. It is those that those services that are part of the early intervention model that would not be such as developmental intervention and others, yes. Thank you. So I wasn't suggesting that you take it off the list. I understood what it says in accordance with state law. What I was saying to you is I wouldn't count on it is what I
said. There isn't funding, Child Welfare or in TANF, to be transferred over to this to be able to be used for that. I mean, there just isn't. And that's after talking to several human services directors and looking at what's going on in Child Welfare and Tanner. But I do want to just kind of reinforce what I was saying about the brokers because it sounds like there's a lot of inconsistencies across the board when it comes to the brokers, not only the percentage that they're getting or the pay rates that they're getting, but and then the pay rates, the Medicaid billing,
their session lengths, reporting requirements, documentation requirements, all of those things. I think we need more information there. And I think the people who are parents and others, providers certainly who are involved in this, would like to know that information as well. And then, I want to know also if you're putting together a plan to address provider retention. Ms. Cohen? Thank you, Mr. Chair and Senator Kirk Meyer. There is there was a committee that met, the workforce committee I'm sorry, I apologize, I don't remember their official name, but put forward multiple recommendations.
Many of those recommendations are ones now that we are considering as part of cost containment strategy. For example, paying for the no shows, paying for mileage and travel, those all came out of the workforce committee. Senator Kirkmeyer, we'd be happy to get you that report. Okay. And I'm going to send what I asked, I'm sending that to Craig and Llewellyn so that you have it, so you don't have to worry about writing it all down. But it would be good. But I still think there needs to be a plan on how you're going to address provider retention, specifically. I'll just, I think, wrap us up by saying I deeply appreciate these services.
I think everyone here knows I've been personally impacted by them. These are incredibly expensive for the state and changes need to be made, and doing that in a way that has the least impact, both for providers and for the kids who are benefiting is critical, but cost containment has to be done. This is something we're going to need to face in Medicaid as well. We are going to have a really terrible year next year, as we all heard this morning. So this is not the place that I think any of us want to cut, but insofar as there are ways to shift these costs to other folks,
as there are ways to trim around the edges or rethink the way that the program is provided and eligibility is determined, whatever it is, we need to do some pretty serious thinking on this. So appreciate, everyone's work and appreciate that folks understand the challenge that we have here in the state. So with that, thank you all very much. And as a particular shout out I have two things. Oh, Senator Krekmeyer has two things. Not for these ladies. But, if Lou Ellen could come back up, I have and I gave her a heads up. I just want to bring this up with the JBC, with regard to so it's not for early in the year.
Thank you all. Yeah. You're good. Thank you so much. Doctor. Roy, thank you. But I just want to, remind you all back what we did, and we had a bill for behavioral health services for Medicaid members. If you remember, this is when we were talking about with HCPCS, the workforce shortages stuff and then also the capitation and the managed care for behavioral services for children and youth with Medicaid members. And if you remember, we I asked to get it postponed for two years. We said, let's do one year, see how it goes, see if we can get if DHS will get the step down placements in place.
Remember, this is the whole thing about HCPCS not paying, Medicaid not paying and then it could be on the child welfare block to pay it, which I think it can end up being. So it was my understanding, and I want to make sure you all have the same understanding, that the program, the whole capitation, the whole program, it was supposed to be delayed for a year till we could get placement stuff things in place for these youth and children. So they don't end up in this revolving door kind of thing. My understanding in talking with some Human Services directors that they were informed by HCPCS that, well, that was just for the capitation portion of it,
the Managed Care portion And that beginning in November, they're going to start doing evaluations with regard to medical necessity, which would mean children could be youth and youth could be pushed out sooner again rather than later, and there is no place for them to go. So they end up in hotel rooms, they end up in the wrong placement, then they end up in the hospital and then they end up right back into this placement again, these PRTPs and these other residential treatment facilities. But I'm really disappointed in hearing that. I thought we were pretty clear. And I guess I would like to get information from HCFAF like why they think
that they can do that. I mean, I know they can pass rules. I know they probably can do that. But why they think that is personally, I just think that's extremely disingenuous and is not following the direction that was given by the bill that we passed. I mean, we actually end up passing a bill on this, and it was $2.94 percent. And I'd just like to know why they think they can just work around us that way. Ms. Pope, why do you think they can work around us? Thank you, Mr. Chair. Emily Pope, JBC staff. I don't think I have anything to contribute. I was just here to because this is my subject area and can work on
getting a response for you. Great. But I think I agree with Senator Kirkmire that, that direction does not align with the attention of your bill. So I can work with HICPAF to get a response, and maybe we can consider having them come into your September meeting if that is something you're interested in. Busy meeting. That would be great. Sarah Kirkmeyer, second. That would be great. Thank you, if you would drill down on that. But the fact that they just once again are essentially blowing us off, which is how I feel it is and maybe nobody else feels that way, but I do. Before they do that in November, I guess maybe and I can have more of a little bit discussion with you,
I think an RFI demanding that they evaluate meet the medical necessity and who's not and what's that going to end up costing us because this will impact the child welfare block, which will impact us. I mean, it impacts all of us. But the worst thing here is it impacts these kids and these youth. That's the worst part of this. And then I think Number two. My number two thing was with regard to the bridge, the Snake Bridge that was in the governor's budget and then it got hit over the CDC and it was apparently history Colorado. When it wasn't really history Colorado,
it was like number 47, I think, or something like that on the CDC list, but it did not get recommended. So imagine my surprise when I'm sitting at a dinner and the governor announces about the bridge. So I just want to make sure that everyone's clear in the administrative branch, the Snake Bridge, the bridge over Lincoln. The big, beautiful bridge. The hideous bridge. The bridge that no one likes. But back to our comments with regard to how things have always kind of got, you know Everybody walks. The the executive branch likes to sometimes do things and then say, oh, well, we already did it,
so too late. I would like to make sure that they are informed they cannot start a structure. They cannot build a state structure without a recommendation by the CDC and approval by the Joint Budget Committee. And they need to be aware of that because it seemed like pretty clear at that Mizelle dinner I was at that we're going forward with building a bridge no matter what, and they can't do that. So I would like to make sure that that's known. And as I saw on Kyle Clark, nobody likes this bridge. I know at least one person who likes this bridge. I know at least one person who likes this bridge. No, I'm not saying that you like it.
Paul is in Israel. Mr. Chair, Senator Kirkmeyer, I would actually clarify, the bridge, actually, I don't believe was ever even submitted as a capital project. It was a hit the pop up museum for the $1.52 50 that was on the list that got, like, bumped all the way down. So I I saw the articles about the bridge, and I was equally baffled, that, like, that has never been put before the CDC. So it is unclear to me where that money would come from. There's not any extra money, like, for capital. There's no slush funds in capital construction.
So it is very unclear to me how that project could be stated as moving forward when the CDC is not. Me too. Maybe they need a reminder. I'm wondering if there's a lot of private funds involved or something like that. So, well, I think this is something that we can visit in the context of capital conversations, which will be ongoing. And, yes, go ahead, Sunny. I just want to say, it doesn't matter if it's cash funds, outside funds. I mean, just like when the universities come in with their cash funds and they came in, they still have to come and ask for permission because they're building a state facility
that we end up maintaining. And that's why it has to go through the CDC process. So Alrighty. Doesn't it? We are way over time. Really appreciate that. Miss miss Low, you thought you were never gonna sit up there again and look at this. Thank you. Thank you. Thank you so much. Again, thank you really genuinely for all of the work you did on early interventions. Yes. The reason we're having this conversation is thanks to you. And the reason that kids are getting the services they are is thanks to you. So we are gonna miss you dearly. And, with that, a fond farewell. Joint Budget Committee will stay in recess. And are you going on a vacation too? No. Oh, sorry.
It was