On the heels of a special session of Colorado’s lawmakers, called to address the $1 billion gap created by the federal tax and spending bill, there is one thing that’s clear: Coloradans should be ready for belt tightening in their state, county and local governments.
That is the message from a recent Colorado Health Institute webinar called “What’s Ahead for Colorado’s Health and Social Programs.”
Deep federal cuts, from the sweeping budget bill, called the One Big Beautiful Bill, and state budget cuts that followed, will have an impact in local government offices, efforts to feed hungry people and medical care and treatment, where people may see longer waits at doctor offices, health clinics and emergency rooms.
The changes will also be felt in places like the DMV, elections, jails and assessor's offices.
“We're gonna have to see some austerity in all of those offices across the board,” said Claire Levy, a Boulder County commissioner.
She spoke on a panel of policy experts during the institute’s webinar.
Coloradans should expect less government services and they’ll be more expensive, panelists said. And the pressures on state budgets aren’t likely to improve soon because revenues aren’t keeping up with spending and haven’t been for years.
“It’s all come home to roost,” said Mike Beasley, president of 5280 Strategies, a government and public affairs firm. “It's gonna suck to be the next governor.”
He predicts next year’s budget could be worse than this year. “I think the next couple of years are gonna be terrible, in health care and K-12 (education) and higher ed and road construction, et cetera.”
The state budget faces structural issues, where much spending is locked in, while it also faces limits due to factors like TABOR, which restricts government revenue and requires voters to approve tax increases and bonded debt.
“We're in a very long-term expansion of the economy with a variety of headwinds,” said Henry Sobanet, who served twice as director of the Office of State Planning and Budgeting and is now treasurer and senior adviser to the chancellor at Colorado State University. Those include “fiscal policy, the slowing economy, and potentially this uncertainty around the national economy.”
A Timeline
The Colorado Health Institute, prior to the panel discussion, gave a timeline that lays out what happened leading up to the special session and how health and social programs will be impacted by the GOP tax and spending bill, or H.R. 1, for years to come.
“The first thing to know about H.R. 1 is it blew more than a billion dollar hole in the state's current budget,” said Joe Hanel, CHI’s director of communications.
That wiped out a surplus in TABOR funds and left another $750 million to be cut. “This was the biggest reason the governor called a special session,” Hanel said.
By decoupling some state tax policies from federal law, the state was able to save about $150 million a year, on a permanent basis. It also dipped into a state reserve but that's a temporary change that can’t be repeated each year.
Finally, the governor announced $250 million in cuts to state programs for the current budget year, coming from affordable housing, Health Care Policy and Financing, which administers the state’s Medicaid program (called Health First Colorado), public health and colleges.
“Now, those cuts are gonna be painful for people who rely on that money or were counting on it, but they could have been a lot worse,” said Hanel, comparing the reductions to “massive cuts” to K-12 education during the Great Recession.
“In many ways, they (lawmakers) did the easy things,” said Bernie Buescher, a former Colorado Secretary of State, during the panel discussion. He predicts state leaders will have to manage another shortfall “north of a billion dollars” next year.
The federal budget bill forbade Medicaid funding for Planned Parenthood, a move being challenged in court. The change is estimated to impact 14,000 enrollees in Colorado. During the special session, lawmakers decided to spend $4.3 million of state money to shore up Planned Parenthood.
Next month, Colorado will start to see some other impacts from the federal cuts play out with cuts to SNAP (the Supplemental Nutrition Assistance Program), commonly known as food stamps.
Some legal immigrants will no longer qualify, including refugees and those granted asylum, and more strict work requirements will take effect, raising the exemption age to 65 from 55.
The law also ends exemptions for parents with children 14 or older, instead of all children up to 18, and for people who are homeless, veterans and under age 24 who’ve aged out of the foster system, Hanel said.
These changes could affect the eligibility for 79,000 Coloradans.
Also, a $6 million SNAP Education grant has been terminated; it was a big source of nutrition education in Colorado, and it directly served 30,000 people and many more indirectly, according to CHI. Lawmakers responded by dedicating some money from the Healthy School Meals for All program to SNAP, but that requires voter approval of a ballot measure.
A bit of extra money is coming in from H.R. 1 via the Rural Provider Relief Fund. “This was meant to cushion the blow of Medicaid funding cuts on rural clinics,” said Hanel.
Half the fund is going to be split evenly among the states and the Centers for Medicare and Medicaid Services is going to decide how to distribute the other half. “Colorado should be able to expect about a hundred million dollars from this fund,” he said.
Looking ahead
The impact of the new law brings new tough changes starting next year.
To help Americans get through the pandemic, Congress increased subsidies on the individual insurance market. They’re set to expire at the end of this year, and federal lawmakers decided not to extend them in the budget law.
As a result, health insurance premiums on the individual market were predicted to soar, an average of 28 percent in Colorado. The state’s insurance division said when combined with the loss of the tax credits, people who get a subsidy will see out-of-pocket costs double. The agency estimated about 110,000 residents will decide they can’t afford to pay and will drop out of the individual market.
And that will have a powerful ripple effect throughout Colorado’s health system.
“This could bring an increase in uncompensated care for hospitals and clinics, and that could end up affecting health care prices for everybody,” Hanel said.
State lawmakers during the special session approved $100 million to replace some of the lost federal subsidies and provide some funding for Colorado’s reinsurance program.
The state’s reinsurance program works by paying a portion of high-cost claims. That allows insurance companies to lower the premiums for individual health insurance plans.
But that’s just a band aid, a one-time fix, Hanel said. "It's not gonna be enough to make up for the lost federal funding,” he said.
Medicaid cuts
Medicaid is a $880 billion-a-year state-federal program. It's a key foundation of America’s health care system, providing health coverage to millions, a broad variety of people. That includes seniors, people with disabilities, low-income Americans, pregnant women, adults, and children.
Cuts to Medicaid will hit in October of 2026 for refugees and some other legal classes of immigrants will no longer be eligible. In Colorado, that’s about 7,000 people.
That same month more funding cuts for SNAP roll out. Right now, states and the federal government equally share the administrative cost of the program. The new budget law whittles down the federal share to 25 percent. “That means the state and its counties will be on the hook for another $50 million to fund the SNAP program,” Hanel said.
Even deeper Medicaid cuts start to hit Americans in January of 2027. That’s especially true for people who qualified for Medicaid under the Affordable Care Act, also called Obamacare. This group is also known as the expansion population, who were able to qualify for the program when Medicaid was expanded under Obamacare.
The change will affect some 377,000 Coloradans, as work requirements for the expansion population start.
Eligibility for enrollees will now have to be confirmed twice a year, rather than once, for this group. Also, retroactive coverage for new members will now be reduced from three months to one.
Local governments will bear the burden of administering those changes.
“County employees do that work. So we know there’s going to be more work,” said Levy, who noted county governments are limited in their ability to raise money from other sources to pay for it. “We're gonna have to make some of these really hard choices,” she said.
Changes into 2027
Another big change in 2027 is the sharp decrease in a major source of funding for Medicaid: the state’s hospital provider fee. “Unless anything changes. Those cuts will add up to perhaps two and a half billion dollars a year by 2031,” Hanel said.
Also, in 2027, Congress will now require states to start paying some of the benefits of SNAP. “Currently, the federal government pays for all the groceries the program supplies, and the state's costs are only for running the program itself. That changes in two years,” he said.
The exact amount states are going to have to pay will depend on the accuracy of their current payments. With the state’s current rate, Colorado would probably pay about 10 percent of the cost of providing food through SNAP.
Another big question mark is the next federal budget for 2025-26. The president’s budget proposes some significant cuts to education, health care and social assistance. It’s supposed to be in effect by Oct. 1, but Congress currently seems unlikely to make that deadline.
The bottom line? Be ready for stormy seas ahead.
“It looks like we'll be entering a period of maybe years when the state budget will be very tight, might not be able to address the needs of all Coloradans,” Hanel said. “We don't have an exact precedent for how to deal with this, but we do have recent experience with tight budgets from the 2008 financial crisis and the Great Recession that followed.”
