Gov. Jared Polis (D-CO) announced $252 million in spending cuts to address Colorado’s $750 million budget gap caused by federal tax changes.
The cuts come just days after the Colorado legislature, in a special session, approved changes to the state’s business tax policy to reduce the size of the budget deficit by a third, generating $244 million in tax revenue.
The largest cut will affect the state’s Department of Health Care Policy and Financing, which administers Medicaid, as it will lose $79 million. Medicaid providers took the largest hit, with a $38 million reduction in reimbursement rates across the board. Dental provider rates saw $2.5 million in cuts, and rates for pediatric behavioral therapists saw $2.7 million in cuts.
Around $149 million in grant money was pulled from the state budget and transferred into the general fund. This money will affect several state programs, including CollegeInvest, Disability Support, and School and Child Care Clean Drinking Water.
Other notable cuts included $13 million from higher education and $2 million for the state’s two mental health hospitals.
Polis said when making the cuts, he aimed to spare Colorado’s K-12 education.
“The general philosophy here, and I just want to be clear, is holding K-12 and public safety harmless, and then minimizing the damage to the state by spreading the rest of the cuts across many different areas,” Polis said at a news conference.
“Our goal was to cause the least harm, the least damage,” he added.
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Polis also said the state would use no more than $300 million of its $2.4 billion reserve fund to balance the budget.
The deficit was caused by federal tax policy changes from the One Big Beautiful Bill Act, the Republican federal tax and spending measure signed into law by President Donald Trump last month. Because Colorado uses the federal tax code as its state tax code, the law left the state with a large drop in tax collections.