August 28, LSBA. Thank you. JBC will come to order. Yeah. So a lot to hammer about today. Thank you all so much for being here today. We've got governor Polis with us and then, speaker Ferrendino will, give a another more detailed presentation, I assume. We've got I think governor Polis said he'd be about five minutes, and then we'll open it up for questions. We've got a lot of folks online as well. As a reminder to the folks online, we will prioritize questions from JBC members, then folks in the room, and then anyone else who is up there. I don't think we have more than maybe ten to fifteen minutes with Gov after,
his presentation, so we will have to wrap it up. But, speaker Ferrendino is here all day. With that, governor Polis. Thank you, mister chairman. And, I think, speaker Ferrendino will be able to go into the different line items. I mean, you're welcome to, at a high level, address, any of them to me as well. But, I think he wants to go through those with you and make sure that, JBC has all their questions answered about the, the number of line items involved. I'll share a few thoughts. Happy to take your questions. Earlier this morning, I signed, Senate Bill one, and And then after that, an executive order in accordance with it.
I wanna thank Senator Amabile and Representative Sirota, for their leadership, on Senate Bill one. And, today we're gonna be outlining the necessary cuts totaling about $252,000,000 that will, restore balance to the Colorado budget. Our estimate is it leads a modest surplus of 10 to $15,000,000 here with the actions taken today. For months, of course, we've been communicating with Coloradans and our members of Congress about the disaster that was HR one. I encouraged our delegation to vote against it.
Unfortunately, four of them voted for it. Not only, did it, of course, increase the national deficit and our national debt, as an American, I care deeply about that, but frankly, it also took a Colorado budget that was in surplus with people scheduled to get refunds and, plunged us into a state deficit, much smaller, of course, than the national one. But unlike congress, Colorado balances our budget. We do the responsible thing. I hope that congress, takes heed and learns from the steps that Colorado has taken, the steps that you've taken, the steps that we've taken to, restore balance and fiscal responsibility to our budget with a healthy reserve.
First and foremost, I wanna thank the legislature for coming back and passing, fiscal changes that closed corporate tax loopholes, which help make sure that we're able to meet our shared goal of not cutting funding to our public schools, which I'm proud to say we're meeting today, and had the legislature not acted and come back, it's very hard to see how the necessary level of cuts would have left our schools untouched. So, I want to thank all of you for protecting funding for our schools, in this difficult time. We are making modest, fiscally responsible use of the reserve. The reserve reserve will remain in excess of 13% according to our projections.
I'd remind you when I came into office, it was 55%. We've been proud to more than two and a half times the size of reserve and, you know, it will be our goal that we hope you share to restore that to 15%. That is there for a recession. And, you know, some ask the questions why didn't you spend down the reserve? The answer is very simple. There's a 50% chance there's it's being forecasted of a recession. That's when you need the reserve. These, this round of cuts and the budget hole was not caused by a recession. Our economy is doing well. It was caused by HR1 and the concurrent rolling tax changes that were incorporated in
the state tax code automatically without your say so or mine automatically that reduced revenue by about $1,200,000,000 creating about a 8 or $900,000,000 hole. Obviously, we had a surplus that absorbed some of it and then the rest, is the reason that you came back and that we're taking the actions here today. The focus of our conversation today is really that 253,000,000 that we're here to answer about. Again, thank you that it's only 253,000,000. It would have had to have been a lot larger without your actions. But as our North Star in making these decisions, and I want to share kind of our guiding light,
we wanted to protect K-twelve education as well as protect public safety, one of our priorities. So you will find that there are no cuts to our K-twelve schools and there are no cuts to public safety. Other than that, I can assure you that nothing was singled out. This is really spread across different areas. You'll get to learn about the different line items. Our goal was to cause the least harm, the least damage. We hope, you think we did that. Obviously, you are able to revisit these and find alternative cuts in February. I'd also like to highlight the importance and the wisdom of acting early, us and you, in this regard.
Had no action been taken, the cuts would be far more severe for a shorter period of the year. So we are in, you as you well know, but some of our listeners may not. Colorado's fiscal year starts July 1. We had a balanced budget. We found out a few days later, that President Trump signed the bill, that we didn't know the size of the deficit. We calculated it within a few weeks. We knew exactly what the hole was. We presented that and kept kept doing the loop there. And here we are, just a month and a half later in August, solving that gap. Of course, if the legislature or the governor were to wait till January or February or March,
you would have enormous cuts for for, you know, four or five months of the fiscal year. We're able to spread them across ten months of the fiscal year. Most of them start September 1, as, director Ferrendino will indicate. I believe the provider rate piece starts October 1, the other starts September 1. Happy to get into the timing, but, they are less because, you acted quickly and we acted quickly. And in many ways, that's the Colorado way. To avoid just sort of across the board cuts and, you know, you could have said cutting everything, we took a hard look. And we put wanted to put every dollar to the best possible use as we
try to do in our budget as you do in your deliberations. It's not always a straight across the board increase. It's not always a across the board decrease. And, you know, we have brought forward some of these cuts before, and, this committee, did not accept them at the time. 68,700,000.0 we brought forward, but that was in a different budget situation. That's when we had the money. This is a time when we need to focus on the difference between things that are nice to have and things that we need to have. And we're focused on funding the things we need to have, and and we all know that in this time, there's some of the things that are nice to have that we can afford, but we can't afford all of them. We are also making the decision to activate the budgetary safeguard that was part of
proposition 123. I talked to some of the proponents of that and they were very thoughtful in putting in the ability to transfer funds in years that Colorado falls under the TABOR cap. This is the first one since 01/2023 passed. By the way, our projections, OSPB and yours, show us returning to a surplus in the following year and the year after, but obviously if there's a recession, we would not. But in years where we don't, there is the ability to shift some of those funds, which is exactly what we do here, about a 105,000,000,
not the piece that's managed by DOLA, but the piece that's managed by Office of Economic Development and International Trade, to help make sure that we can deliver a responsible balanced budget that will not impact any grants that were already approved, and, we wanted to make sure that we use the flexibility that the voters provided to help make sure that Prop 23 123 can be part of this effort. The Department of Healthcare Policy and Financing will see a $79,100,000 reduction, and, the biggest single piece is the rolling back to provider rates that turned on July 1. Again,
providers will see the benefit of those for the first quarter. They will have them July, August, and September that will start October 1 is our estimate. And, so it's it it wouldn't be accurate to call it a flat year for for providers. It would be accurate to say they're effectively getting one quarter of the increase that you thought and we thought we were were going to do be delivering to them when we, didn't have a budget hole that was created by, HR one. The Department of Higher Education will see a $12,700,000 reduction. That means that they will still see a $22,100,000 increase. For the current budget year.
Department of public health and environment will see a $5,000,000 reduction. Department of health and human services, $1,700,000. Those services are supported by higher than expected patient revenues, no impact on services. There are several excess balances that are, going to be reverted, disability support fund, mobile home water quality fund, college invest, cash balances exceed demand for services. Those funds are being transferred as well. And again, I wanna thank the legislature for passing the fiscal changes that help make sure that we were able to avoid cutting the public schools and avoid much deeper cuts for
provider rates, for other areas that you care about and that we care about. We will be able to retain a reserve level in excess of 13% as rainy day funds. The reserve is important to buoy the state in the times of recession or economic downturn, which this is not. This is caused by HR one, but we have to be ready, 50% chance of recession in the next two years. And, you know, with recessions, as you know and we know, it's not a matter of if, it's simply a matter of when. Whether it's in one year or two years or five years or six years, there will be another recession.
And when that happens, Colorado needs of a strong reserve to preserve funding for our schools and our health care. I wanna thank, the committee for your leadership. There's no easy decisions to make and, we all wish that we weren't here and that you didn't have to come back, of course, over the last week. But we dug deep, we looked everywhere to make government more efficient, to make sure that nothing was singled out and spread out the cuts in a manner that caused minimal damage to the people of our state. If we come together, we can make the right decisions, preserve and protect education funding, protect public safety,
and I'm proud that in a very challenging situation, we protected funding for our schools and for our students. I wanna thank all of you for your partnership, for your leadership. This is the first step in a path ahead as we continue to face budgetary pressure. We'll look forward to delivering a balanced budget to you, in November and appearing before you and beginning that process of the next year. As you know, the single largest impact that hit our budget this year is not in place next year. It was the appreciated, accelerated depreciation that corporations benefited from, a kind of stimulus that was in HR run. Doesn't mean some of the others won't still be there, but the single biggest one,
was an eighteen month hit in in in a nine month period. And and that's why the outsized effect was this year. It's not that this will have no impact in future years, HR one it will. But even with HR one, as long as the economy rains strong, we do expect that we can return to a TABOR surplus in the following fiscal year. We'll obviously be watching indicators like assessment and sales tax and all those as they come in, and we certainly hope that that's the case. And of course, the actions that you took, this last week helped make that the case. Thank you. And with that, I'll be happy to take some questions.
Alright. Team, any questions for governor Polis? Senator Kirkmeyer. Thank you, mister chair. I'm just curious as to why that you cut provider rates and you cut health care essentially for making it difficult for families that are on Medicaid to access health care. Those provider rates and that Medicaid, they draw down federal funds. So I'm wondering why you cut those and why you did not cut covering all Coloradoans. Governor Bullets. So, you know, again, I don't look at it as as us cutting health care. I look at it as us delivering the cuts that were in HR one.
HR one, and this will be a long process for the legislature, this is just the tip of the iceberg. Many of the cuts on health care are in two years, in three years. It's gonna be a very challenging time for the legislature. I won't be here as your governor. Some of you will be here, some of you won't, but, we have a very difficult future sessions. This was just the first, ball to drop, with regards to challenges to health care funding. And, again, as I indicated, provider rates will have an effective increase because of the first quarter increases of about one quarter of your scheduled increase. I know we worked with you and negotiated with you on that,
and obviously, it's a difficult time for everybody, of course, our providers among them. Senator Kirkmayer? Thank you, Mr. Chair. Yeah, I understand, that and you talked about the need to have and I'm thinking we need to have providers, to provide for families who are hardest hit, who are the most, poorest among us, in our communities, and they actually draw down federal funds. So, my question still is, again, why didn't you cut covering all Colorado ones? It doesn't pull down any federal funds. Governor Bullis. Well, we also, of course, believe in in making health care affordable for every Colorado and,
we, supported we we talked mostly about the direct fiscal work of the legislature in the extraordinary session, but there was also the bill that, helped provide support for people who do get their insurance on the exchange. We're very grateful for that. There is still time for congress to act in this regard, in which case it's my understanding that the work we did at the state level will not be necessary. Those funds would not be used and the ask of congress there, which we hope would happen in September because the enrollment period opened shortly thereafter, would be to renew the tax credits.
The work of the legislature in the shortening session does not negate the health care premium increases that people will see if congress does not renew the tax credits. It reduces the level of the increases, it doesn't negate them. But no, we we are very supportive of health care, whether it's provider provider fees, whether it's CoverAll Colorado, whether it's, a number of different other areas that we invest in, and, these are always difficult decisions. Obviously, the joint budget committee will have the opportunity, if you choose to, to find different cuts or modify them, when you come together in February. We're obviously open to that conversation,
and we also look forward to seeing the situation of where the state budget is at that time. If I can follow-up on the provider rate question. We we gave providers a 1.6% increase. It was actually not requested by many of them, but we know that we wanna have a robust provider network here in the state for Medicaid patients. After we created that, they built their budgets. They gave raises. They essentially planned for that to be part of what it is they take into this next year. Now I know none of us expected that bill, HR one, to create the kind of cuts in our budget that we've seen.
But is this knowing that that our budget will increase next year, assuming we don't have a recession, can we expect some increase in provider rates to be part of the budget that you proposed to us, for 2627, governor Polis. Yeah. I look, we don't have nor do you have the estimates that's based on September late September estimates, and, obviously, then we begin our work. So it's hard to it's hard to forecast anything, and, you know, it's a it's a shared value we have to fund our providers. So we hope to be able to deliver that. We're going to work on that.
You know, I I would just add that everything that you did and that we did at the original budget was very much in good faith. We were able to afford the 1.6% increase. I signed it. You delivered it. We had a surplus on top of that, and then boom, HR one hit. State revenue went down. And, while we did everything in good faith, obviously, we now, unlike the federal government, have to balance our budget. And so, again, we'll certainly look forward to working with you on that in the upcoming budget year and hopefully having some level of increase. Senator Mabile. Thank you, mister chair, and thank you, governor Polis, for being here. And, thank you for all the work that went into this.
And I do think this is a pretty balanced proposal. But as an advocate for people with serious mental illness, it feels like there are quite a number of cuts in that area, in a couple of different ways, including the the prior authorization. So I'm just wanting to ask that when we see our balanced budget proposal for next year, that you will take into consideration the cuts that we're making here today and make sure that we're preserving robust services
for that population, which connects to public safety and connects to expenses in ERs and connects to, homelessness and all of these downstream impacts. Governor Polis. We will absolutely take, these actions into account in preparing our next budget. The reason I wasn't able to make specific assurances to chairman Bridges is we don't yet have the projections we're acting on. We don't know how much we have nor do you. So, but we will absolutely and I know you you will as well as as a body, take into account,
the actions that were taken with regard to the future funding for, for for a number of different areas, including the one you indicated. Feel free to just say yes. Representative Taggart. Thank you, Mr. Chair and thank you Governor and Executive Director for being here. My question has to do with the hiring freeze and it's a twofold question. First, when you calculated the $3,000,000 is that for the three month period of the executive order or is that from
September 1 through the end of the fiscal year? So that's the first part of it. The second part is that you call out the HLD Health, Life and Dental. And I'm curious what happened to the compensation component of the hiring freeze or is that in there and I'm just not seeing it because of the fact that it's called out as HLD? I'll address the first part. I'll give the second part to director Faridino. So the hiring freeze took effect August 26, I believe. We we we,
you know, announced it a week or two ahead, give everybody time. The estimate is we'll save the state about $3,000,000 that estimate is, will, you know, obviously deliver to you what it actually saves. We we don't know because we don't always know who's gonna leave the state, how much attrition there is. We kind of estimated it. Certainly could save the state 2 and a half million. It could save the state 3 and a half million, but jobs will not be posted, with the notable exceptions we made, obviously related to health and safety, and, we do not include the various enterprises that are not part of the budget, that have their own funding sources or federal funds. But, we do expect that,
with normal attrition rates and delaying that hiring, we'll save approximately $3,000,000. Mark, do you wanna address the second part? Speaker for Andino. Thank you, mister chairman. Mark For Andino, OSB director. Representative tagger, as you if you remember last year when we did the personal services reduction, we did it through the HLD line. This is similar because it's just the easiest way to effectuate the actual reduction than in the personal services line item. So it's just how we account for it. And so and it's temporary. It's a reduction for the year with that.
We will provide to you once this is done, probably closer to the March timeline by line item, which departments have the reduction so we can put that into a supplemental package or a long bill add on. Representative Serota. Thank you, mister chair. And I don't wanna monopolize the committee's time while the governor is here, but maybe this is more for, speaker director Ferrendino. When you are going through these in particular, I would appreciate if you would point out, what is included in the, in the fiscal year twenty seven savings proposals when you're looking at these reductions just
so we have a sense of what is to look like going forward. Who wants to take that? I don't I don't think we're gonna have that yet in a definitive way, representative Sirota. We certainly, as we kind of indicated with senator Mable's question, I mean, it factors in, but I don't I don't know if we can give you hard numbers on that. Yeah. And Speaker of Farrandini. Thank you, mister chair. And so as we are in the process of preparing the the budget for the governor's review and then ultimately to be submitted to you, we are looking at these and these will come in front of us as we are making decisions on how we balance and do we want to include this or
not include that so that these decisions haven't been made on what would we reverse or not for the next budget cycle yet. Senator Kirkmeyer. Thank you, mister chair. So it looks like you're cutting, dental provider rates by about forty four percent and, of course, pediatric behavioral therapy by about twenty three percent. So it does look like we singled people out or singled out certain programs, but that's not my question. I wanna know why I have two questions. First one is, how come there's no cut to staff? And the second one is, how come in the special session, we weren't allowed to make cuts to spending?
Only increased And you wanna take the first one, director Ferndino? I mean, the the non question, if you could take that just to set the record straight, and then I'll take the second one. Speaker Ferndino. Thank you. And, senator Kirk, my role go through the reductions. It is a on the PBT and the dental rate, those were what the increases are. Those are not what the reductions are. Those are what has been increased in the last few years. Reductions are are smaller than that. So for ABT, we're going from a 100% benchmark to 95% benchmark of where they are. And then on the dental,
I can get you the number. I don't have it. I will get you that, on that. So some of those, I would I'll leave you with director Ferrendino after this, or I can take perhaps one more question. But I think as you get into line items, he can explain what the percentages are and and and where that is. I would add that, again, the JBC does have the authority and and we welcome if as you meet and you you I think for your February process, if you find different cuts you'd like to make, you are able, to do that. We're we're we're open to that. I mean, again, we have to balance. We want to do that. Acting early is in all of our interests because it makes balancing easier than making
severe cuts later. So, very open to, to that, discussion as well, in the in the coming months, as we, make sure that we are able to maintain a balanced budget and also, of course, further refine it with additional economic forecasts as they come in regarding the current, fiscal year as well as, of course, the ones that we're gonna base next year's budget on. For the final question, madam vice chair. Thank you, mister chair. And thank you, governor and director Ferrendino, for coming in to present. I know that these are circumstances that none of us wanted to be operating under. A question I have with is with respect to the cuts that are proposed to
higher education. A concern I have is that I know a lot of these universities have already set their tuitions. They they all have, and, they've set their budgets. And with these cuts, I'm just wondering what the conversations are between the state and our institutions of higher education. How are we thinking that they will navigate through this? Just any thoughts you can share. This seems like this might be hard these would be hard cuts to absorb midstream given that the sesh or that the semester's already started. Governor Polis.
Yeah. Thank you, madam vice chair. Even in a difficult time with HR one, our higher education institutions are still seeing a $22,100,000 increase for the current budget year relative to last year's budget. I understand it's not the full increase they thought they would see about a third of that increase is is is what this cut is. But again, there have to be to balance the budget, there have to be a number of cuts across state government. And again, I believe that you and us, and with your long dedication on k 12 and MS 12 share the value of
not cutting our k 12 schools. You know, the more things you exempt, then the greater the cuts have to be. So, I mean, some of you indicated provider rates. Well, if you left out higher ed, there'd be greater cuts to provider rates. So, while protecting k 12, we did try to, and I believe accomplished here, spread those cuts across many different areas. So the cuts are relatively, again, small to higher ed. It's not that they're easy for them in the current year. They about they get about two thirds of the increase they were expecting, and and they would be foregoing about one third of that increase, with these actions that are taken. And of course, we're happy to have those,
discussions and will and, talk to the institutions, as well as through our, CCHE, in the coming days to make sure they're fully, understood. Governor, we have a lot more questions. We know that your time is short. Thank you for coming here today. Speaker Ferrendino will receive the brunt of our attention from here on out. Thank you, mister chair. And I'll turn it over to Director Ferrendino. We call him speaker because it's a legislative title, so it's a higher honor, we think, than, director. So speaker Ferrendino. Thank you, mister chair, members of the committee. Let me just get my slide deck and I know your It's just I to
follow-up on the question we just had, I I thought this was part of the legislation. Representative Sirota just looked it up for me while we're sitting here. It does require that you speak with the governing boards before these cuts go into effect. Have you spoken already with the governing boards, for the higher ed cuts? Speaker Friendino. So, mister chair, we did look at that statute. The statute requires that, it it's strangely written, actually. It's like a 100 years old. So yeah. I know. It's a strangely written statue and I have to remember exactly what it said, but it is I think we how we read it was not that we had to do that,
but I think we should probably have and I don't remember. I don't wanna talk of illegal issues around that. We did, just to be clear, this morning, met with all the presidents, CFOs of the institutions, the department knows. So we have had, you know, conversations as of this morning. They did ask how we and we'll get into this, how we were doing the change, and they were appreciative of that we did it through the formula, as it was instead of picking winners and losers losers in that and, like, deciding who gets the cuts and not. So they were appreciative of that,
but I think that's we can get into that. Okay. You're up. Speaker Ferndino. Thank you, mister chair, members of the committee. Mark Ferndino, budget director for the governor. Okay. As the governor said, and we'll go through these pretty quickly, we, had a $1,200,000,000 revenue hit in the current year. We will, I think, continue to go back and forth in this this conversation between both where we are with a significant revenue loss in one year and how we think about this both long term with the structural issues we have within our budget. There there are both real things we have to work on,
but they are distinct things. And the question is, as we make these decisions, we try and look at both the immediate and the long term. You have seen this chart before. This is showing us that we were 289,000,000 above. The total impact of the one point two was a million a billion dollars to the general fund, which got us to 742,000,000 in the in deficit. But then we had, as you know from the June forecast, about $40,000,000 under the 15% reserve, which gets us to $7.83, of a whole. Also, as the governor said,
and we just keep reiterating the reserve and where we're at with the reserve. If we had done nothing, we are projecting roughly a 10% reserve. And if we hit a moderate recession, we would be basically at no reserve. That is, as the governor said, why we are concerned with, using too much of reserve and why we, used, we thought responsibly 2%, basically, of the reserve as we look at this. One of the other things, and the governor pointed this out, this is, I think the first time we're showing this, because we've been working on these numbers. HR one had a big impact in the first year on the finances,
but we said HR one has a has a growing impact over the years on the budget, in especially in the out years. And so you can see that starting in next budget year, it's pretty small, about $50,000,000, but grows significantly as the snap match, grows and then as the change in the provider fee. And this is assuming we backfill the provider fee to continue to make the hospital payments as well as the expansion population. So by the start of the next decade,
we're over $750,000,000 of cost to the state and then close to a billion dollars the following year of increased pressure on the state budget. This is also why we are concerned about using too much of the reserve because we have to fit that reserve payback within the spending cap while we are also fitting in these costs within the spending cap. And we already know we have pressure from the current budget and demands within that budget. So as we look at this year's budget,
a few things to note. This will if not public yet, will be public soon. And I mentioned this at the time I was with you a few weeks ago. Department of Health Care Policy and Financing had an over expenditure of $43,500,000. So, of course Representative Taggart would like to know if we can ask questions as we go. The answer is yes. Representative Taggart? Thank you, Mr. Chair. On your slide number five, I'm sorry. I'm assuming that these, that this bar chart does not take into account, propositions LL or Am I correct there?
Speaker Farneider. They were to pass. Thank you, mister chairman. Representative Tarraglia, this is the expense side. So one way we are proposing to pay for a portion of the f of the, match on SNAP would be, those ballot initiatives. We estimate that would be between 50 and a $100,000,000 of this would be able to be paid out of of those funds. Per year or total? Speaker for Indian. Thank you, mister chair. Representative Taggart, per year, we expect the first year, we expect to have enough to fund fully fund the program plus the grants and
the reserve and have some money over, somewhere in the 20 to maybe 50,000,000. Then after that, we'll grow between 50 and a 100 annually of resources. We estimate the impact and this is assuming the per, which is that error rate, stays where it is between 810%. We're assuming that plus the administrative match that moved from 50 to 75% is somewhere in the 150 to $200,000,000 annually and growing as inflation and population grows. So that amount of money will,
you know, at a max hopefully could cover half of this snap cost increase, but, that's probably the upper bounds of where we currently estimate that that would be able to cover it. Okay. Moving on to as we look at the budget, we talked about the $783,000,000 As I said, we had an over expenditure of hip puff of roughly $65,000,000, from last year. That is better than a $150,000,000 the year before, but net, we had a 43.5 over expenditure because there was $21,500,000
of reversions within the Department of Health Care Policy and Financing. So as we were balancing, we were factoring that in because that is already spent and impacts, the reserves in, the year. It's also as we look out long term where we are thinking that the money just bakes into the next year as the baseline of where we are at, for it. The biggest areas were home and community based services and long term, health care. In addition, we knew that there are 3,300,000.0 for HCPCS and DHS related to HR one costs, and so that gets us to a expected below the reserve of 829.9
or $830,000,000. In addition, we expect next week to submit somewhere between 10 and 20,000,000 in emergency thirteen thirty ones. That is why, as the governor talked about, we are roughly 11,000,000 above a 13% reserve. We did that to make sure that we had money to cover what we expect to be those thirteen thirty ones, that we are still reviewing from departments. So as we said, we, you know, really tried to find a balanced approach looking at both fiscal solutions, close closing corporate loopholes,
using the reserve, and being able to, reduce, funding. So, really, as the governor said, thank you for the work of the legislature. We were able to pass house bills one through five, which moved that from that 800 and so million dollars, we just talked about to now a, below the reserve of 15% by $584,700,000 and without with with that not being there, we would have been in a much tougher spot having to make these reductions. As we as the governor talked about,
you know, we looked at when we were making these decisions, previously proposed reductions. We also analyzed what departments we're proposing for next year that we could move forward into this year, what are underspends that we knew were going to happen or had a good ex expectation that they would happen, and how do we realize those savings now so we could cut without having an impact on those light items. Preserving both k 12 education and public safety as the governor said. Assess the short term and long term impacts. So focus really on,
not just how do we immediately deal with the revenue shortfall, but how do we set ourselves up to also deal with the structural issues as well long term. And then as we said, limiting that reserve usage to no more than 2%, given the pressures we know within the budget. So getting into the specifics of the reductions, we have transfers and cash fund impacts of a $146,700,000 and we'll go through those. The biggest one being proposition one twenty three. This is, a $105,000,000
from proposition one twenty three. The ballot language passed, and the blue book allows for, the OEDIT portion to be swept if we are below the taber cap. The language implementing language talks about, I think the March forecast, we're gonna have a proposal to update that language in the regular session. The blue book did not have that restriction. The blue book was very clear of if you're below the Tabor cap, you may use this money, the o edit, which is 60% of the total funding from prop one twenty three. We estimate, that would leave 79.6
or roughly $80,000,000 in prop one twenty three really to make sure we are maximizing the federal dollars, and be able to bring those down. I will just as the governor said and make sure everyone hears this is next year's money. How it is done as most cash funds are other than MTCF as we know is a pain. This is done in arrears. So we collect the money this year. It's spent next year. So contracts right now that are going out and programs right now are not impacted because that's the money we gained last year.
Not this money we're talking about. So we're able to hold this money. We'll we will have our proposal to sweep the 105 during the regular session. That will impact 26, 27 projects, as we look at this. For folks who don't track where the various different $1.02, $3 come from and go, when you say this is just the OEDIT dollars, what exactly does that mean in terms of housing in Colorado? Thank you, mister chair. So on the OEDIT side, there is land banking. So, that would be eliminated. There is,
equity funding for projects, and I am not the expert on that piece. There are a lot of extra words right behind me. And then there is the light tech gap funding. So we are really focused on making sure we can protect that light tech, the low income housing credits, because that's really where the maximum federal dollars are. That's what that $80,000,000. And I think we're open to conversations of is there a where should we put those money, and how we figure out allocating those. Luckily, that doesn't, as we said,
happen till next year. So we have regular session to have those conversations. And when you say that the the land banking piece goes away, you just mean for that fiscal year, not forever. Okay. Thank you, mister chair. Speaker Ferndino. Thank you. Next transfer is $4,000,000 from the climber fund. This is, money in the treasurer's, actually it moved from the treasurer's office to o edit. There is $4,000,000 remaining of the money that went out here. So this is to sweep that money to be able to, help with balancing. Then, in addition, we have 9,200,000.0
from college invest that's sitting there. This is not, just to be clear, not the $5.29 money that people are investing. This is administrative fund. Things are sitting in their fund that we are allowed to, sweep. It is, you know, it does count towards TABOR revenues. So we have not swept this during when we were below the TABOR cap, but can sweep it now. We have 5,000,000 from the CDLE, disability trust fund. They are sitting on a balance of around, dollars 20,000,000. This is the black and mostly black plates.
How much higher revenue The green, which I have. Thank you, speaker for India. Thank you, mister chair. The beautiful green plates, and those not so great black plates that my husband has. Yeah. So this is that those funds, this is money above their spending authority. We are and I know we've had numerous conversations with this committee about that fund and how we think about that long term and we continue to review and see if there's ways to, deal with the impact of this, in terms of TABOR impacts on those funds. Next CDPHE,
there's several funds. One is the mobile home park water quality fund. This program is sitting on a $3,800,000, balance. It has about a 3,000,000 annual appropriation that is not touched. This is sweeping 3,000,000 of the $3,800,000. So they still have a reserve to be able to deal with needs, but given where they are, we felt this was not going to impact the programming. Representative Serota. Thank you, mister chair, and thank you, speaker Farandino. I I appreciate your your pointing out just the the balance that's in the account,
but I just, want to make it clear on the record how important I believe this program is, and how hard fought it was, on the on the part of legislators, advocates, and, people living in mobile home parks and, and the conditions, that they were dealing with related to their their water quality. And so I am grateful that this program in GRIM exists and, look forward to its continuance, in future years. Speaker Farandino. Thank you, representative Serota, and appreciate that and duly noted, as we work through this.
Community impact, cash fund, these are from fines that come in. This fund is sitting on or expects somewhere between $10,000,000 and $15,000,000 of revenue this year and we moved from the waterfall of them getting 80% of those fines to now gain 100% of the fines. So we felt we could be able to sweep, a portion of the balance given the increase in revenue coming into, this fund. And then, the last one in c d p h for this is the school and childcare clean drinking water.
They are sitting roughly on about $14,000,000. The $10,000,000 will allow them to continue the work they're doing and potentially look at, ex potential expansion during the next legislative session, to continue continue the work they're doing in schools and childcare centers, on drinking water. And, on DOLA and DNR, there are basically $6,600,000 spread between the two departments. As you know on the committee, severance tax goes and is spread and then DNR is spread twice between the operational
account and the, perpetual base account. This is money from when we set the budget you set the budget last year as a committee. We have seen at the end of the year 6,600,000.0 more of revenue. And so this is not money that anyone was expecting. Now I would assume the departments and others who are beneficiaries would have happily taken the money and used it, but this is money that is above what we had assumed and so that's why we're proposing to remove it. We are reducing about one third for the, substance abuse,
substance, training program within, the marijuana tax cash fund. It was increased just several about, I think, late last decade, from about 750 or a million dollars to the 1.5. So this is a proposal to reduce that by $500,000. And then lastly on the reductions is or the transfers is $5,400,000 from the the discretionary custodial funds, that sit in the governor's office from ARPA. This was $15,400,000,
but house bill $251,006 used 10,000,000 of that. And then this is the remainder 5.4. The only other money that was it's there's an unexpended money, but it's all allocated including 15,000,000 for DSHEM the homeland and emergency management, to make sure depending on FEMA where we are in an ongoing litigation. If those dollars go away and that money is roughly 8 to $9,000,000 in state, staffing and resources. And the remainder of that 33,000,000
is money that goes across counties to fund emergency management in those counties. That's why we're holding $15,000,000 if we are to not be successful in the lawsuit or the lawsuit drags on so that counties can get funded and staff within the department get funded to make sure that we don't have to, do layoffs in these areas. On the expert, piece, will you be transferring those funds from marijuana tax cash funds just over to general fund to realize those savings? Mister chair, yes. This has been which bucket to put this one has been a little difficult,
and we've moved the numbers even last night, like, 11:00. But, yes, that is the proposal is to reduce the funding and then transfer the MTCF into the general fund. Representative Serota. Thank you, mister chair. On that note, I mean, how how confident are you feeling about this potential transfer given the way we balance this fund and historical sort of predictions about where the fund would land and then where it actually did, I I'm do you feel confident there will be $500,000
to transfer? Speaker Ferrendino. Thank you, mister chair. Representative Sirota, I I think it's a great question. It's one where as we looked at options of refinancing and looking at MTCF, we were cautious to go too far there because of the the revenue projections in MTCF. We felt this was a acceptable risk given the size and given some of the under other under expenditures that we've seen. We will have proposal on balancing and update it for the September forecast. But right now, we we felt comfortable with this amount.
That's why we didn't go much higher than this because we were worried what that could mean. But, yes, right now, we do feel that this is will based on current forecast and there's gonna be a lot of things move between now and when we finalize the current year, we feel like this is a there will be the resources within the fund to be able to do this. Representative Sirotta. Thank you, mister chair. Well, you know, I I do think the SBIRT programming is important. It is delivering important services across the state. And I guess I I will just say I I am concerned as MTCF
projections continue to drop, that I think we as a committee have known we are going to have to have continued discussion over, funding from the MTCF and who ultimately gets what because it clearly is not on a track to be able to sustain, current, appropriations, you know, as as they are currently outlined in statute. It's been a difficult conversation for our committee, and I anticipate it will be difficult going forward. I just, I guess I'll just say on the record that I would at least, I think it's going to be critical that we all do this collaboratively,
that I don't know where I don't know where the fund's going to end up, but I think it important if we are going to be sweeping funds from MTCF that we have a, going forward, more balanced approach and that if we're talking about half a million dollars from this particular program, if ultimately we're going to have to go even deeper than that because we don't have the revenues coming in to support current appropriations, I'm I guess I'm just putting on the record. I think that that, pain should be more spread out across programming, in the MTCF and not continue to take from this one particular program.
Speaker Ferndino. Thank you, mister chair and, representative Serota. I, you know, I appreciate the hard work that the committee did, especially at the end of last budget, to work on balancing the MTCF. Those were not easy, conversations and easy decisions. I think we were just talking internally on how do we look at making sure that within the, submission that we submit to you, it has a significant enough detail, so that we can start those conversations earlier and, in collaboration. And so we are committed to working with you on a long term solution.
It's, you know, this is one where the decision at the time was we should move this to not being in arrears, and that was probably one of the worst decisions, in this fund, because we felt like we had enough money. We should be able to do this, and given the timing with COVID, this day was that decision. We have been paying the price altogether on that, and hopefully, we can get to a better place on that together. We've got, someone who paid a lot of attention to the marijuana tax cash fund last session with the question rep Taggart. And then we'll have Senator Amabile and then Senator Gonzales has a question.
Rep Taggart? Thank you, mister chair. I would also, duplicate the comments of representative Sirota in the sense that I would rather see these dollars spread, capturing or identifying through screening potential issues with alcohol and other substances just bites us really hard down the road if we don't catch it early. And so I would rather see it spread. But the other question that I had is,
and I voiced this during the hearing, the appropriations hearing, I think you know that Western Colorado has been burning up this summer. Thank goodness this moisture couldn't I wish it had come a month earlier, but we'll take it right now because it's had a significant impact particularly on the Lee Fire and getting that under some kind of control. But I just want to make sure we're not cutting that
those numbers in terms of helping our counties and on the fire, on the emergency side of things especially given the unknown on the FEMA lawsuit, I just I would hate not to be able to compensate these people that have worked so very hard to bring all these many fires under control. Speaker Friendino. Thank you. Mr. Chair, Representative Taggart, I couldn't agree with you more. The the work that's being done, to combat those fires by both locals and state,
is having a huge impact and we need to make sure the funding is there. Luckily, this committee and this general assembly has, you know, put significant amount of resources aside for disasters. Those money needs to be replenished, but we are, you know, in good shape right now with those as well as, while I will say that the we are in a lawsuit with FEMA over the some of the grants. We have seen, support in terms of helicopters and others to help with the fires, and we have seen the normal disaster
recovery and the the funding, those continue, and so we expect to be able to get, federal funds reimbursed for a significant portion of the fires, but that is we will continue to track that and we are committed to making sure that we are, having the teams ready to respond and and supporting the locals who are leading in those efforts with the state. Rob Taggart. Thank you, mister chair. Just as a follow-up because, the governor, as you know, was with us at one of the major meetings, and he called me out, in that meeting and said said,
basically, Rick, we may need your help out of the JBC on these. So that's why I keep asking these questions because the governor looked right at me and said, we may need help here. Gov's fault. Also, are the fire hawks engaged? Speaker Ferrendino. Thank you, mister chair. Yes. My understanding is both are. I believe we did get our second. There was a little time for the first to be down for typical maintenance, but they are, I believe, both up and running, as we speak or at least out in,
and I I do I think senator or, representative, sorry to demote you, representative Taggart. The can't resist. The It's okay, director Ferndale. Well played, mister chair. I I do think we do worry about the federal government because there's just uncertainty more than we've seen in past administrations and that worries us but and we are monitoring closely and luckily, you know, we have been seeing the response in a, you know, in a typical form that we've seen. But if that is to change, we would raise that very quickly to everyone.
Senator Motley. Thank you, mister chair. So I would just say I'm disappointed that the joint budget committee had some recommendations about cuts that could be made from the marijuana cash tax fund, And those are not reflected. That didn't happen, and they're not reflected here in this proposal. And, in my opinion, cutting back on things related to substance abuse is the wrong direction for the marijuana cash tax fund. That should be a top priority and, not the thing that we cut first.
And so I know that I will be next year advocating for us to cut back on some other things that I think encourage substance use rather than, discourage substance use. And we will fight with the legislature about it again. Speaker Ferrendino. Thank you, mister chair. That's duly noted. We do have a question online. Senator Gonzales. Thank you, mister chair, and thank you all. Just to potentially complicate, this discussion regarding the marijuana tax cash fund,
you all may be aware of, president Trump's, comments recently about, you know, potentially rescheduling or reclassifying, cannabis at the federal level, and, that may also then relate to a potential discussion here around, taxation. And so, just know that, those of us who have been active in this policy space have been watching that discussion quite closely for what the budgetary implications may be. Perhaps it's more of a comment than a than a than a question,
but I wanted to make you all aware of that information. Wouldn't you agree, speaker Ferrendino? Mister chair, yes. I completely agree. And senator Gonzales, I appreciate that is when I think we started having conversations in my old role as head of Department of Revenue talking about what when we saw in the previous administration these conversations happening, what may happen to tax revenue and our tax structure and how and if we would need to adjust that. And I think we've been continuing to have those conversations internally and with stakeholders, and I think if that is to go through,
we will need to have conversations to make sure that we are both, protecting what's happening in Colorado and make sure we're prepared, for the change in, scheduling. So was that an eye scratch or a question, Senator Weissman? A little of both. Thanks, Mr. Chair. There's there's been a question brewing and I'm happy for the director to answer it when it makes the most sense in the arc of the slide deck. Backing up to the issue of Medicaid provider rates. In the HCPCF budget, we have simply one line, medical services premiums.
It's a sizable line. And then, you know, on the other end of the that process, we have 1,300,000 covered lives. And we have a lot of steps and administration in the middle, particularly in this climate of dire consequences. I think our looking really closely at, for lack of a better way to put it, any administrative overhead in the middle is of heightened importance as we do need to keep providers in the equation and we do need to make sure that covered individuals
get care. So, I mean, this is maybe more of a hip hop question than an OSPB question, but it's been on my mind all interim now. And I think that this budget committee, and others ought to look at it, so I won't take any commentary you have. Senator Weissman, you drove out the cameras. Speaker Farandino. Thank you, mister chair. And, senator Weisman, we are about to get right to hiccup, and so I will address that as we go on to the next slides if that is okay. Alright. Next. Okay. So, spending reductions, we in the executive order had a $102,500,000
in today's executive order plus $3,000,000 assume from the hiring freeze to get to, a $105,500,000 of general fund, reductions in the budget. Just to note, as you look at the budget last year, and this is just for the executive branch as we, you know, we don't have ability through our executive power to touch the legislature, judicial, or other elected officials. So the growth of just the executive branch under the governor's control last year was 347 sorry, 3.47% increase.
After these actions, that goes to 2.79, so a point six six reduction, and you can see which departments are impacted by the size of those. I will note, last year, hiccup grew by 7.1% and now is growing by 5.59, double the growth rate of roughly the entire rest of the executive branch, and we will talk about that because as we look at, Medicaid growth, Medicaid is growing at a significant rate. We saw, as we said, $65,000,000
over expenditure this past year. If you look over the this decade, Medicaid went from 25% of the general fund to now close to 34% of the general fund. And if you look at it compared to the TABOR, spending cap, the total spending has grown by 25% allowable under the cap. The Medicaid general fund expenditures have grown by 75%. So at a rate of three to one, that has grown. I will say early estimates, and it is very early,
for next year's are close to north could be north of a 10%, caseload increase for Medicaid. That would be the entire increase of allowed under the TABOR cap. So as we look at the impacts on the budget and we make these decisions, it is important to understand the long term trajectory of Medicaid. Plus, when you add on top of that the shift in costs from the federal government to the states due to HR run, Medicaid is going to be the conversation for next year,
the year after that, and for years to come as we deal with the impacts, of both HR one and just growing Medicaid, expenses. So as we look at these reductions Before we go to the next slide, you know, looking at this increase, what is driving this? Is this sort of we if we overlaid costs for medical care in The United States generally over top of this, right, medical inflation broadly, would it would the curve roughly match, or are we seeing something different in Medicaid and an increase in costs in Medicaid
that we're not seeing in the general population? Is this being driven by the unique kind of population that's in Medicaid, for instance? Speaker Ferandino. Mister chair, so it's a little bit of a couple of things. One is Medicaid does most of the long term care in our country, and so it is growing at a faster rate. And so it's there's not really comparable private sector long term care to the same level, and that is a significant increase as well as, services to developmental to disabled and those costs,
and that that's with the HBAS waivers and that's why as you saw in the over expenditure, it was really in long term care and HCBS waivers. In addition and why some of our decisions here, the private sector does work on controlling costs through prior authorizations, through plan designs and things like that. We have removed some of those and now we are putting those back in to make sure we are trying to slow the growth within the the Medicaid expenditures. Have other states seen this kind of increase in, the proportion that Medicaid takes up in their budgets?
Speaker for any mister chair, I don't know from the percentage on their budget. They've seen growth similar to ours in terms of expenditures. Some have mechanisms that control it. Several states have caps on how much it can grow and if it grows by more than, let's say, 3%, I know one state, as a 3% cap, if it grows by more than 3%, where rates are reduced if utilization is expanded to be able to keep within the 3% limit that they have in their state.
And there's exceptions to it, but that's, you know, how they manage it. We have seen and we'll go, you know, in the next slide as we look at provider rates, we are seeing, Idaho just last week announced that they are cutting provider rates by 4%. North Carolina announced they're doing 3% provider rate cuts, with some going as much as eight to 10%. We saw in Nebraska that for a b a, p b t 48% reduction in provider rates. So we are not both from the fiscal impact of HR one,
both short term with the revenue loss and the long term cost implications as well as the increase in utilization. States across the country are struggling with, the cost of Medicaid and are taking action to address those. Rep Serota. Thank you, mister chair. Speaker Ferrantino, as we continue to have these conversations about how we address the growth in Medicaid expenditures and different methods for, trying to get a handle on on on some of these components,
in in my I guess, trying to avoid, cutting folks' access to to care, I there has been really a back and forth discussion about prior authorization and whether it saves, whether it costs. In in different instances, we have run different bills to, to address prior authorization, for different conditions that that people experience. And I guess before we, as we proceed in these conversations, it would be very helpful to have, data that HCPCS might provide about,
about those expenditures before and after, these policies were enacted just to to really have the numbers to go along with the conversation. Speaker Farandino. Thank you, mister chair. And, representative Seroto, we can definitely get you some of those, and we have some of these in the deck right now, but we will, as we not on this slide, but on some of them. We'll talk about how those prior authorizations have helped in certain areas. And, you know, I think we've looked tried to look at where we think they are useful, and where we've seen significant growth and where it lines to what private sector is
doing as well to understand what they're doing and seeing if it makes sense in the Medicaid space. But, you know, I think this is a this is we are dealing with the immediate here, but we have to have a long term conversation, about how we think about the Medicaid because, you know, if we're thinking about next year's budget and if it all gets the entire increase allowable, it gets eaten up by Medicaid alone, that is going to make next year's budget very difficult. Mr. Chair, the question on the 1.6% increase, a twofold question.
The first question is centered around when we build in an increase for our state employees across the state, I think we're very sensitive to making a change into the year. I just don't see that sensitivity here in the sense that if our providers and their leaders of those organizations have already passed through this 1.6% into compensation, I don't know how they can do this without damaging the providers significantly. We already talked about this in relationship,
Representative Byrd brought this up in relationship to tuition. When it's an annualized approach, it's very difficult to do things like this and not really harm providers and also our institutions. So my question is, would we have the opportunity to look at alternatives in the area of the $38,300,000 here and in the $12,000,000 I believe that's for the institutions of higher education because I think we could find it someplace else.
I'm just really uncomfortable with putting people in a position that they have made decisions based on what we've done, in a budget. Now we're saying, okay, we can't do this, which we would never do to our own state employees. Speaker Ferndino. Thank you, Mr. Chair. Representative Tackard, I I appreciate that. I will we we have requirement to balance our budget. And we have to make when congress passes legislation that loses $1,000,000,000 of revenue to the state and 700,000,000
ongoing, we need to make decisions and then pushes as you saw up to a billion dollars of cost to the state. We have to make decisions that are both going to support the immediate shortfall caused by congress and make sure that we're sustainable, for the long run. And that is where if we are seeing growth rates of Medicaid expenditures, three times the allowable cost, if we do not make decisions that are different than what we are making now
in terms of cost drivers, we will the the increase just to be clear, the increase for Medicaid could be for next year, the equivalent of 13 full departments general funds budgets. So that and that includes the governor and the legislature to be clear on that. Just the increase. Is that a The increase is the equivalent of 13 fold not their increase, their department's full general fund. Okay. And so and as we said, we've already spent over 65,000,000. So if you look at the the the reduction in in Medicaid in these proposals
is roughly $80,000,000 They over expanded by $65,000,000 last year. When you factor in cost increases another, it's going to end up being, we know there's a supplemental coming this year within Medicaid. It will still be above that amount. And so we are trying to slow the increase and if we just say we're not gonna address Medicaid and when you know, I Medicaid, you know, I worked there for a while, and I've dealt with this. Like we have three things in Medicaid. We have to talk about the rates we pay,
the level of services we provide and the people we cover. Those are your three controls and you can't you have to decide which one you're doing and there's trade offs if you lower the coverage, which is what is, you know, I think a proposal you know, congress for a while, we thought we would have to, you know, get rid of the expansion population because they were going to move from ninety ten to fifty fifty and that would be really difficult. That would be $400,000,000 on the uninsured roles and that would have huge impacts on providers because of the
uncompensated care. But it's also what are the coverages? What are we trying to cover? What can we cover? What can't we cover? How do we put in controls? Where do we put controls? And then what do we pay for those? And that has to be a balance of all three as we're thinking long term on Medicaid. And so I I understand the frustration. I understand people and the impact on this and the budgeting on this, but we have to not only think about today's budget and that is what we're dealing because of what HR one did, but also what is the long term structural problems caused and,
you know, significantly by what is happening in Medicaid. And that is why you see, you know, our proposal is $80,000,000 in Medicaid to both address the shortfall but also set us up to be in a better place moving forward. That doesn't mean we're not gonna have really hard conversations next legislative session and the next one after that, whoever is sitting in these seats, around what is the what does Medicaid look like? But if you go back, you I mean, if you're growing at 75% compared to the allowable,
cap on spending and this is where it's tough, you know, mister chair, would you ask if their percentage of other states, other states have other lever levers. They don't necessarily have TABOR and what that does to the state in terms of available resources. So it's hard to do that, but they've seen the growth in expenses to the same. But if we do that and we grow we are going to have a department of education and department of Medicaid and like this is we need to have these conversations and I'm I'm not trying to you know
I'm trying to be blunt because it is a real reality of what we have to deal with and we can put our heads in the sand and say this is, you know, like, we we this is a problem. We can't cut providers. But right now, if we don't do anything, we will be looking at significant either cuts to services or cuts to rates to be able to control where we are. And so I appreciate the this is not easy and I get that and I get all of this, but we have only so many choices and so many levers that we can use
to try and address both this budget shortfall and the long term trajectory that we're dealing with. Rep. Taggart. Thank you, mister chair. I guess I will be equally as blunt. First off, my head is not in the sand. And secondly, I am conservative from a fiscal standpoint. And thirdly, part of my question was, can this body help in the sense of looking at other areas to make up for this? And you never answered that question, but you did say that we that and Mike,
the reason I was asking the question is this is a priority in this particular area from this committee because the 1.6% came from us as a joint budget committee. That doesn't mean that we can't see the trajectory, which is not good. It's not sustainable. But I don't think you have to lecture us that we're not we're not seeing that. We see that. I just asked the question, can we are you open to us discussing as a group other areas that we
might consider reducing spending? Speaker Ferndina. Thank you, mister chair. First, representative Taggart, I did not mean to imply, and I'm sorry if that was how it came across, that you or other members of the committee, I said that in a, like, collective as a society putting our and I did not mean that towards you, and so I'm sorry if that that's how it came across. And, yes, I think the answer to your question is yes. We are open to other ideas. I think we need to have those conversations within the Medicaid space likely because of
the long term trajectory. That's what I was trying to say and I might have got on my soapbox and I apologize for that. But, yes, I mean, I think if we need to think about how we do this and we do it in a sustainable way and if there are other options that we are gonna we want to look at, we are completely open to having those conversations. Thank you. Please continue. And and I I will also note, both both, for you, mister speaker, and the committee and and the general public, Medicaid, only this year became the largest single part of our general fund budget surpassing public
k 12 education. The trajectory it's on is deeply disturbing. I think we have conversations and debates about whether prior authorization saves us money or costs us money. Whatever it is that we do in this space, it is clear that the rationing limit we have in Tabor is on a serious collision course with increased requirements for funding Medicaid the way it currently stands. So, I think this is a conversation that needs to happen, not just in the context of these particular, cuts, but in that broader context of just controlling costs for the state and the real
requirement we have in Colorado to control those costs. I don't know if this is the right body to make those sort of medical decisions about what is the right amount of care that we provide. I I certainly don't think that JBC is is a a death panel. I don't think death panels are something we should institute, but a conversation about the level of care that we provide. Well, the last time there was a serious conversation about reducing Medicaid, that that's the accusation that gets thrown around. I mean, this is these are these are real impacts to real people and has serious, life threatening implications for for people across Colorado.
But we have to figure this out, and we have to do better. So, I look forward to whatever context those conversations take place in, and, I think it it is urgently needed for those to start. Speaker Ferrantino. Thank you, mister chair. I think senator Weisman might have a question. Senator Weisman. Thank you. Maybe more just something to share for the committee, including JBC staff, and frankly all of us. Weeks ago before special session, I had a fascinating conversation with, I will just say, an advocacy group in the form of that group's directorship.
I'm hewing to the rule against personalities here by not saying which one it is. But, this is an organization that cares very much about the availability of services through Medicaid because a lot of their sort of core constituents are forced through life circumstances to be heavy utilizers. That said, they're also very eyes open about the fiscal pressure that the state faces, and they're ensued a conversation. And I invited some notes from them in writing by way of follow-up, which I got. This was their assessment. You know, look. We know that you, the general assembly, are under dire straits, and and they're followed,
something of a prioritization from our standpoint. You know? Please don't cut this. Preserve this at all costs. This, hey. We've noticed there's something of an incentive problem, you know, and and you could maybe do something here and the impact on the ground candidly, quietly, wouldn't be as severe. I found it very helpful and, frankly, very refreshing. I know that the budget committee members are under a great deal of pressure, shall we say, year round because of the role that you assume for the the other 94 of us. I just think eliciting that kind of input from every constituency in the state is
gonna be more important than ever. We we we can't know everything here. Right? We're forced to be generalists. So as we're looking at more cuts, I certainly want to know as somebody voting across the street, just to pick something I've worked in a lot. Alright. If we have to sort of pair back in the vein of, you know, environmental issues broadly, let's go talk to those folks. What types of enforcement matter most? Where could we least suffer from a one year reduction, or if we're gonna cut down on grant funding, cut this and don't that, this kind of thing times the entire budget.
I mean, I'm sorry if everybody's doing that already, but I, I just wanted to share that because I think it will help us in the path forward and it will help us particularly with some really tough issues like how we deal with Medicaid. Senator Kirkmayer? Thank you, mister chair. I'm wondering throughout all this discussion, why are we not pausing tax credits when we're below the cap? Why is that not happening? Speaker Ferrantido. Thank you, mister chair, senator Kirkmeyer. I think we did have in the last legislative session, we eliminated tax loopholes that made this better in terms of how the budget was.
I think we, you know, I think that was our place to look at taxes and to close these tax breaks. I don't think there was the support in legislature to change that. I don't think we supported that. I think we continue to believe that the programs that were put in place are important. Those are getting G E ITC and F ATC, which is I think I I don't know, senator, but I assume, given legislation that is what you're referring to. Please correct me if I'm wrong. But I think those are gonna be turned off next year and the year after
based on the impacts of HR one, on how we're, looking at the long term budget picture. Mister chair. Senator Kirkmeyer. Actually, I'm asking why we didn't pause tax credits in this tax year and know that wasn't allowed underneath the call. I looked. So it wasn't really allowed underneath the call. In fact, I think it was senator Weissman who asked me about some of that that I had in a bill. So I'm wondering why. I mean, why didn't we pause the tax cuts to electric bikes and tax credits? I'm sorry. Did I say cuts? I meant credits.
Excuse me. The tax credits for the electric bikes, for the electric lawnmowers. I mean, we have over $2,000,000,000 worth of tax credits. I'm not talking about canceling out or or pausing even the earned income tax credit or even the family affordability tax credit, but we have over $2,000,000,000 worth of tax credits. Why aren't we stopping tax credits in the years when we don't when we know we don't have Tabor surplus? I mean, I get it. Tabor the tax credits turned into essentially refund mechanisms
to some extent during those TABOR surplus years, but we don't have a TABOR surplus. So why wasn't there the opportunity to pause certain tax credits? Not sell them, pause them. To electric lawnmowers, speaker for Indeeda. Thank you, mister chair. Senator Kirkmeyer, you know, I think we as we looked at the impacts of HR one and how much it, was 70% in the first year and then almost close to a 100%, in the 90% in the out years on the corporate side. That is why the the call was focused on closing corporate tax loopholes,
because the impact on the benefit was so heavily cited to the corporate side. And so that was why we decided to move forward in that way. And happy to have those conversations in regular session, but that is that is why we did the call the way we did it. I'm quite certain we will have those conversations. Yes. Senator Kirchmeyer. The problem is with having them in regular session is the same problem we ran into last year with the property tax deductions and the previous year before that with property tax. If they're not done in the current tax year,
we can't take advantage of it. It they're going to go on just like what's going on with the FADC and the earned income tax credit. I mean, they're paused, but not in this tax year. They're paused in the next tax year, and that's what's causing the some of the issues that we're having. You could still do the tax credits. We could have paused the refund in the family affordability tax credit, whereby, essentially, 93% of the people would have had their tax liability because of still getting tax credits, would have had their tax liability reduced to zero.
And instead of refunding now to people out of the you know, what what we're trying to do, apparently, before was refund out of the TABOR surplus, now we are refunding to the tune of $633,000,000 out of the general fund because of what's going on in this tax year that will impact us in '26. So that was my question about why aren't we looking at those tax credits, those refunds that are in some of those tax credits. Even just one of them, quite frankly, would have assisted greatly with the initial,
you know, loss of tax collections and revenues in this state. Speaker Ferndino. Thank you, mister chair. I will note that both many of the ones you referred to do have, guardrails within them that shut them off or reduce them based on revenue growth or revenue forecasts, where a significant senator Weissman knows as well, a significant number or, I mean, almost all of the ones on the corporate side do not have those type of restrictions or changes in them and that's why we, you know,
think felt more comfortable looking at corporate tax loopholes versus ones that already have mechanisms in them to reduce them and make sure that they are moved within revenue projections, and so Can I just follow-up? Sure. Senator Kirk Meyer. I'm not talking about tax deductions that were caused with regard to our rolling conformity and what happened at the federal level. I'm talking about tax credits this state has put in place, that this legislature has put in place. That's what I'm talking about.
The tax credits that we've put in place. Even, like, last year, we talked about pausing. I think it's $90,000,000 on that, Colorado promise. We should have paused it. We we could have paused it. And as you know, they have to be paused in this tax year or they do us no good and, I mean, maybe they'll help in the next year. If we but, of course, if we don't pause it, it doesn't. And the triggers are not retro. They are prospective. So that doesn't help us at all as you know. So it's a frustration. I you know, you don't have to try and attempt it,
I guess, try and answer the question because it needs to be done in this tax year, not next year. It needs to be done in this tax year, and we failed at looking at our own tax credits that we do, not tax deductions, but tax credits. It's a difference. There's a difference in what you're talking about and I think we all know it. So thank you. I don't have any more question. Thank you, Mr. Chair. Could I just ask a favor in terms of the way we converse on things? What we ended were and with rolling conformity
in the special session were approved federal deductions that in the past we have by rolling conformity made a part of our tax code as well. That is not a loophole and that term should not be used because people are picking it up as if it is a loophole and it's not. It was a federal deduction and with rolling conformity, we matched it in one way shape or form. But I'm fine if you use the word deduction,
I'm fine if we say we're not gonna do rolling conformity on every single federal deduction. I am not fine with the term loophole. There is some disagreement on that committee about this, but we have a lot ahead of us here on HICBAF and other deductions. Speaker Ferrendino, can we get back to the slides, please? Thank you, mister chair, and, appreciate that. So move on to HICBAF and or just tag her to appreciate that. And I do think, you know, these are deductions and they're deductions on the corporate side. There's deductions on the individual side and how we address those.
There are and I will just and then I'll move to the slides. Some of this is how the I can't help myself. The federal and differences between individual side and federal corporate tax rates and how that plays out at the federal level makes sense sometimes at the federal level. That doesn't make sense at state level where you have a at one tax rate for both. And so there are differences in why it needs to be looked at in in different ways. But I it's duly noted as you said, representative, Taggart. So moving on, Medicaid, we did we talked about the provider rates. We have also the incentive payments for the accountable care collaborative and the behavioral health.
It's about 0.8 thou 800,000.0 for the accountable care collaborative and 3,000,000 for the behavioral health. This is out of both pots that are about $9,000,000, annually in those. So reduction in, those incentive payments. And then, adjustment to the community connector rate to be consistent with similar services. These are higher, than where they are for others, and so this is, adjustment to, move that forward. This is implemented on January 2026. So it's half a year of savings.
Moving on to other provider rates, the nurse facility, minimum wage pay supplemental. This is a reduction of $4,400,000. Because of the way we the minimum wage has worked, and where this was intended to address and how funding is done, this actually would have gone underspent. So this is not actually a reduction. It's money that would have, been reverted back, because of the way the formula works. It wouldn't have been spent. 1,500,000.0 reduction in the, stabilization, payments. This is money, for implementation,
for the most part in, let me find hold on. Rural, small, and pediatric providers, as they move to cost based reimbursement as the as part of the accountable care collaborative. A lot of the money in the rules, one of the things in HR one that is a positive is the money for rural funding. So we felt this is absorbable, not easy, but absorbable. The 2.5 on dental provider rates. So, yes, it's a 43.6 reduction reduction of the increase, not a 43.6 reduction of the rates. So it's the rates. I forget exactly how much the rates went up,
but this is roughly a 40%, 43 reduction of that increase, not from where it was. And then a reduction of 2.7 to the PBT rates. We, as I said, Nebraska just lowered their rates by 48%. This is getting us at 95% of the benchmark, and we are seeing annual growth of, 30,000 30% in this area. And as this says, you know, last year alone on for 6,000 kids, we spent more than we spent on 400,000
people, that's the expansion proposition, in emergency rooms. And so while very important program, trying to make sure we're thinking about the cost containment here and I'll we'll talk about that in a second. Talking about cost containment, prior authorization for outpatient psychotherapy, to align with clinical best practices, We did as this is, when we saw the elimination of this prior authorization, we saw 17% increase in utilization. And so that is why we are looking at putting this back in, definitive drug testing, putting in a prior authorization for more than 16 tenths tests a year.
So 16 tests, you don't need prior authorization, but after that would need prior authorization. And then, implementing a post and pre and post claim review for pediatric autism behavior therapy codes. And I'll go to the next slide because this is we are under nationwide under an OIG audit around, PBT and ABA. As you can see, we've seen significant growth in the expenses, from just a few years ago being at 51,000,000 to now $207,000,000, of cost while the population has gone from just about 2,000
to just 3,500. So a 1,500 person increase, but a four time, increase in the expense in this area. And so that is why we're looking at both those changes in the rates of 95 Percent of the benchmark as well as the pre and post review given the audits, that are occurring in this area. Additional reductions in Hikpauf, 5,600,000.0 in the elimination of the continuous coverage for children at age three and under. This is actually it's gonna happen regardless. The federal government has denied or is in the process of denying the waiver for
continuous coverage. And so we are not gonna be able to implement continuous coverage as the law right now requires. It says we must do it if approved by the feds. The feds are not going to approve it. So we will see 5,600,000.0 of savings because we are not going to allow those people to those kids to stay on, up to three years old. They will have to renew on a regular basis. The individual residential support services aligning those with host homes, the savings of 1,500,000.0 and then additional there's series of a smaller reductions and changes to,
get to $600,000. Next, we have higher education, CDHE. We have, 9.5, which is a 30% as the governor said, reduction in increase, from last year, in the letter you were provided, that did have the breakout by institution as well as a, reduction of half of the limited purpose fee for service programs, and they're listed here what those are. This was able to, you know, limit the other side of it and the fee for service trying to target, here. In addition,
I know there were conversations around controlled maintenance and a lot of higher ed cared about those resources. We did or in the process of, having the state architect, unpause the controlled maintenance projects and, moving forward with those those projects. Next, moving on to CDPHE, we have $2,000,000 reduction in the health disparities grant. This has grown over the last couple of years, but, this will remain $4,300,000 in this, the funding for this. So reduction of 2,000,000, but we're maintaining 4.3. Then we have the,
local public health funding, which this is a $3,000,000 reduction. As you can see, it has been significantly increased since pre pandemic. The decipher, which is the state's prod states you know, we had seen a significant increase, but that has gone down to now we are roughly 30 FTE higher than we were pre pandemic. This will get us to a place where we're still roughly 50% higher than we were pre pandemic on local public health. But we as we were looking at reductions, we felt this was, well, not easy,
seemed aligned with where we were in other places. Senator Kirkmeyer. Thank you, mister chair. And, of course, this just seems like one of those areas again where we're singling out. But I'm just gonna point out the local public health agencies basically are taking a double hit here. They are getting the reduction of the $3,000,000, and they're also getting the reduction of the provider rates. So, I mean, I just know, like, with Weld County Health Department, they provide, Medicaid and are reimbursed on the Medicaid. But when the rates go down, basically, this becomes a double hit for them. Just wanna point that out.
Speak for Indeeda. Since we're all putting stuff on the record about things that, we think should still remain funding, it's just one more hit to health care for those families who can least afford it and are extremely poor. Thank you, senator Kirkmeyer. Speaker for Indino. Thank you. Next, a few of the final decisions. DOC 3,700,000.0 on the transgender health care as we talked about, I think, a little while ago. This is the line item is under spending, by this amount. So this is still providing the services that people, are requesting,
but we had seven a little over $7,000,000 in, this is an under expended under expenditure. CDHS, 1,700,000.0 reduction in the mental health hospitals. This is, a general fund reduction, but we have seen increased, reimbursement from private payers in this area. So net to the, mental health hospitals, it's a a, wash. Just means that they were able to get the money from private payers to be able to pay that. So relieving some general fund pressure. We have d o r, cost containment controls that they were plan on doing next year that we moved into
this year. Reductions in OIT from Dola for their payments. And so with that and there are, you know, a lot of some other little things across the in the reductions, we get to a place where as you look at the the kinda summary of the budget, we had 820, $830,000,000 hole when you factored in the, administrative expenses and the over expenditure. Fiscal changes raised $245,000,000. Your cuts and balancing are 252. That does impact the reserve. So you have a reduction in the reserve requirement because of the 105.5
reduction that reduces the 15% reserve requirement by 15.3. That leaves you with, under the reserve by $317,000,000, or 11,600,000.0 above the, 13% target for the reserve. And as I noted earlier, we do expect somewhere in that range of emergency thirteen thirty ones being submitted in the coming week or weeks. I think it's sometime mid mid September being submitted to you for the, discussion on the September 22 at that time.
And with that, happy to take any other questions. We have asked you lots of questions as we've gone through. Any final comments? Any questions? Senator Kirk Marr. Thank you, mister chair. I just wanna know, I remember the, tax credits for the electric bikes and the electric lawnmowers and such, and I think the heat pumps, that was set could you remind me what that trigger is? I know it's based on September, I believe. And I think at one point, I I remember the forecast. We're talking about that half of it would be paused. Can you remind me what that dollar amount is? Speaker, please. Thank you, mister chair.
Senator Kirk Meyer, I I do not know that off the top of my head. I know as we had that con discussion in, I believe it was in June on all the different triggers and when they are and the need to actually try to work to align those so that we're not dealing with different forecasts and the cascading of how those work. But I do not know that we can get it back or I I know your staff can also get that. I know it was in the ledge council forecast, from the June forecast. We can provide that. I don't know if that For '26 is projected to shut off. Correct? We can't shut it down for the current tax year because of Tabor.
But for the next tax year oh, yeah. Senator Weissman has the answer. Senator Weissman. Maybe only the beginnings of one, mister chair. So the consumer facing credits as opposed to the industry facing credits in HB twenty three twelve seventy two were set to trigger down in certain ways on certain economic conditions and were there. The thing is the industry ones were written in that bill to be certificated to a maximum level, so we were controlling the spend that way. The the then, as of the time the bill passed,
score on the consumer facing ones were, you know, the best estimate based on likely demand, raw and, you know, times the value of the credit downrated by economic conditions, if any. There wasn't a maximum ceiling on on that spend. So, like, that part of the note was kind of a more standard note rather than a a codified ceiling. And now we're we're cutting down the spend that's happening on EV. I believe that's happening on electric truck. It is happening on the other consumer facing. Ones. I am scrolling through the bill right now trying to find the right,
trigger language. It is different than the EITC FTSE trigger language that we did on the twenty fourth. It out, senator. Thank you. Alright. Any other questions? There are a couple of folks who reached out to me about, three things in particular. I will shoot you a text for that just to get some detailed answers, especially when does some of these targeted cuts go into effect. Is everything September? The government mentioned something about October for some of these. Mister chair, so the, for most it's September, for provider rates, it's October 1. Some of the other hiccups and and I think hiccups can give us a schedule of when some of those will take longer because of the requirements on,
federal CMS approval with these. So summer January, for, hiccough, but we will ask hiccough to provide the committee with a, of the reductions, what are the expected implementation dates and those will be expected because, some some you can we just notify CMS and then we can implement them assuming approvals. Others, I think we need to get their actual approval on that. And so, we will get that to you from the department. I think there are many folks online and in the audience who would very much appreciate a schedule on those.
So the sooner the better. And some details just when we say percentages, sometimes folks are struggling to know if that's in total or if that's of the increase, or it's a decrease in the increase, things like that. So some of those details would be appreciated as well. Although I will say your executive order was more thorough than the previous three that I looked through from other administrations. Still some details we need. Any other questions before we go? JBC will stand in recess.