According to the census, more than one-fifth of state residents were Hispanic or Latino/a in 2015. Colorado’s population growth of nearly eight percent since 2010 ranks third behind only Texas and North Dakota. Politically, Colorado has been trending blue over the past several election cycles. Some have identified the migration of Californians into Colorado as a contributing factor to the state leaning further in the Democratic direction . The state awarded its Electoral College votes in 2008 and 2012 to the Democratic ticket, and the party appears poised to carry the state in 2016. A streak of two consecutive wins for the Democratic Party’s presidential candidates has not happened since Colorado voters supported Franklin Roosevelt in 1932 and 1936. Democrats emerged victorious in the last three gubernatorial elections and won three consecutive elections to the U.S. Senate beginning in 2004. The state’s march toward blue-state status was interrupted in 2014, however, as Republican Representative Cory Gardner defeated incumbent Democratic Senator Mark Udall in a competitive race. Republican candidates in this election cycle swept three of the remaining four statewide races, and the GOP regained control of one chamber of the state legislature. The single bright spot for Democrats on election night 2014 was the reelection of incumbent Governor John Hickenlooper who narrowly edged out Republican challenger Bob Beauprez. Colorado continues to receive national and international attention over the legalization of recreational marijuana, which has important budgetary implications. Though revenues associated with legalized recreational marijuana have fallen short of early government forecasts, pot for cannabis marijuana tax revenue continues to grow steadily. The sale of marijuana to adults over the age of 21 became legal on January 1, 2014.
By the end of the year, the state received $44 million in revenue from recreational marijuana. Combined with the preexisting medical marijuana market, the state received $76 million in 2014 .Despite an improving economy and a new stream of marijuana tax revenue, legislators remain wary about approving new spending measures. This is partly attributable to uncertainty regarding potential tax rebates mandated by the Taxpayer’s Bill of Rights . In the current legislature, Democrats hold a slim majority in the House, while the Republican advantage in the Senate is by a single seat. An analysis of roll call voting in state legislatures concluded that the Colorado Legislature is among the most ideologically polarized in the nation . Divided government, coupled with greater ideological polarization, has made dramatic changes in spending less likely to be successful. Governor Hickenlooper’s approval rating remains above 50 percent, but he faces a divided legislature and does not enjoy substantial political capital, having barely survived a close reelection . When submitting requests to the Office of State Planning and Budget , departments must outline a strategic plan to accompany their request. The governor’s budget request is submitted to the legislature in the fall. After consideration by the Joint Budget Committee , the full legislature typically passes the budget in May in time for the start of the fiscal year on July 1. The constitution mandates a balanced budget. Last November, the priorities reflected in Governor Hickenlooper’s proposed budget for the 2015–2016 fiscal year were similar to those in prior budgets drafted by the governor in collaboration with the OSPB. In his accompanying letter to the six-member JBC, the governor emphasized “enrollment and inflation increases for K-12 education, the return of General Fund support for transportation for the first time since FY 2007‒08 pursuant to S.B. 09‒228, increased caseload in the State’s Medicaid program, an anticipated decrease in the federal Medicaid match rate, the continuation of existing capital construction projects, and essential projects for the state’s information technology infrastructure” .
Spending in just two areas—K-12 education and health and human services—constitute two-thirds of all proposed General Fund appropriations. Governor Hickenlooper’s budget letter detailed how economic progress in Colorado has outpaced the nationwide recovery. In that sense, the budget reflects a cautious optimism about the state’s economic well being. The Bureau of Labor Statistics reports that Colorado’s seasonally adjusted unemployment rate in December 2014 was just 4.0 percent. Tied for seventh lowest in the country , it is a product of 35 consecutive months of job growth. The national unemployment rate for the same month was 5.6 percent. After a decrease in gross state product in 2009, the state has logged increases averaging about 2.5 percent a year for the past four years, and per capita income levels have increased. Against this backdrop of economic improvement, the governor’s budget includes $26.8 billion in total spending with a General Fund allocation of $10.3 billion. The sums represent spending increases from the prior fiscal year of 7.0 percent in total funds and 9.6 percent from the General Fund . During the recent economic recession, General Fund revenue in current dollars decreased over two consecutive fiscal years. Since the low point of the 2009–2010 when the General Fund fell to $6.4 billion, this number has increased by an average of $0.65 billion over the past four years.2 A March 2015 estimate projected that General Fund revenue was on track to grow by nearly nine percent in the current fiscal year, but contraction in oil and gas industry-related ac-tivity is projected to slow revenue gains. The projected General Fund amounts for the fiscal years beginning in 2014 and 2015 are $9.6 billion and $10.3 billion, respectively. One novel aspect of this year’s budget debate is that economic gains are substantial enough that lawmakers will have to consider tax refunds under TABOR. According to TABOR, which voters ratified in the state constitution in 1992, the state must issue tax refunds if revenues exceed the prior year’s spending after accounting for inflation and population growth.
TABOR refunds have not been possible for at least a decade. The governor’s budget includes a rebate forecast in the amount of $167.2 million.3 Legislators may ask voters to forego refunds in lieu of providing spending in a number of areas. The governor’s budget letter outlines several contingency plans where additional legislation or voter approval may be necessary to enact the spending items it includes. The governor’s 2015–2016 budget proposed increasing appropriations from the General Fund for most state departments. Table 1 provides summary data comparing the proposed budget with spending levels from the prior year. The first items discussed in the governor’s budget letter concern education,dry racks which is among the governor’s highest priorities. Since Governor Hickenlooper previously campaigned for passage of Amendment 66—a tax increase to fund K-12 education— it is not surprising to see his budget propose increases in education funding in the aftermath of its defeat. Put to voters on the 2013 ballot, Amendment 66 proposed an approximate 10 percent increase in the tax rate on income up to $75,000 and a 25 percent increase on income beyond $75,000. According to the state, the amendment would have raised taxes by $950 million in the first year following adoption. Despite the fact that supporters of the amendment raised in excess of $10 million to promote the measure, Colorado voters overwhelmingly rejected the tax increase with 64 percent of the electorate voting against it. Following this resounding defeat, the governor’s proposed budget seeks to increase education funding. The defeat of the tax increase to fund education could make more modest increases in education spending more acceptable to Republican legislators. Many Democratic lawmakers who supported the tax increase view the governor’s increase in K-12 spending as all the more necessary. Accordingly, the budget for the upcoming fiscal year increases total spending on K-12 education by 8.1 percent , an increase in per pupil funding of nearly $475 that brings total per pupil funding to about $7,500. Spending on higher education will increase by over $100 million after agreement was reached in 2014 on legislation limiting undergraduate tuition increases to no more than six percent in exchange for greater direct support from the state budget.General Fund increases for public institutions of higher education was set at about $75 million. This amount allocated to the governing boards of higher education institutions reflects an increase of 12.5 percent in General Fund spending. An additional $30 million would be allocated to a new Colorado Opportunity Scholarship Initiative, which would go toward student scholarships funded jointly by public and private sources. The budget from the previous year included about $60 million from the General Fund to institutional support with $40 million designated for student financial aid. After education, the second largest increase in spending is proposed to go to the Department of Health Care Policy and Financing where, as in previous years, caseload increases have necessitated greater funding. Accordingly, the budget includes an increase of $82 million from the General Fund. An additional $154.7 million in General Fund spending is pegged for future casework and modernization related to Medicaid, children’s health plans, and other health programs. Another notable increase in health care spending is a proposed increase of $11.4 million for 1.0 percent raises in provider and targeted service rates.
Nearly $7 million of a $25 million General Fund increase in Department of Human Services spending is proposed to allow counties to hire 130 additional child welfare caseworkers, and mental health and juvenile correctional institutions are scheduled to hire more than 100 new full-time employees. The governor’s budget continues to make investments in improving the Department of Corrections. Interest in directing greater funds to this area grew after the murder of Department of Corrections Director Tom Clements in 2013. The new director, Rick Raemisch, has championed meaningful prison reform. After increasing General Fund spending for the department by more than six percent last year, the 2015–2016 budget proposes a more modest increase of 4.0 percent, or nearly $30 million. The department estimates a small increase in the number of offenders housed in its facilities, and greater funding will allow the department to improve operations and facilities, including the addition of 330 beds. The state expects to hire more than 20 full-time employees to better assist people in the criminal justice system with mental health issues. A 1.0 percent provider rate increase is also included in the budget. The only departments with proposed reductions in General Fund spending were Public Health and Environment, Public Safety, and Revenue. Funding requested for the Department of Public Safety is 8.5 percent lower due to the absence of nearly $10 million in funding allocated to purchase aircraft and equipment for an aerial firefighting fleet. These funds made it into the prior year’s budget after the state experienced one of the most devastating wildfire seasons in its history. Partially filling this void is a proposed additional $2.7 million in funding to go toward two new Colorado Bureau of Investigation forensic labs and a 1.0 percent increase for state community corrections program providers. Funding proposed for the Department of Public Health and Environment is 28 percent lower largely due to the absence of appropriations made last year to help communities recover from widespread flooding that occurred in September 2013. General Fund spending for the Department of Revenue is slated for reduction with the loss of a one-time appropriation of $6.2 million in the prior year’s budget to help the department modernize its operations. These anomalies explain most of the larger cuts in General Fund spending. The budget preserves the status quo in most areas with a few targeted increases.In 2012, when nearly 55 percent of Colorado voters cast ballots in favor of legalizing recreational marijuana use by adults over the age of 21 the state’s counties were nearly evenly divided on the issue. Thirty-three of the 64 counties had a majority voting in favor of legalization, while 31 counties were had more no voters. One of many reasons for the ultimate success of the measure was that localities were given the option to prohibit marijuana business.”5 A year-end analysis in The Denver Post noted that 23 Colorado counties currently permit marijuana cul-tivation, sales, or both . Within these counties, 53 cities or towns permit recreational marijuana sale. As of March 2015, the state had licensed a total of 341 retail stores to sell marijuana. Including those authorized to sell medicinal marijuana, the number of outlets is over 500 .6 A study by the Marijuana Policy Group found that the demand for marijuana in the state likely far exceeds prior estimates, although the total amount of tax revenue generated by the first year of legal recreational sales fell short of expectations .