Colorado’s 2026 budget crisis absorbed by poor and working class

Colorado entered the 2026 legislative session facing a budget shortfall that ultimately climbed to nearly $1.5 billion. 

By the end of the session, lawmakers had passed a FY 2026-27 budget that closed the gap through cuts, transfers, delayed spending, reserve reductions, reimbursement freezes, and fund sweeps — many of them centered on programs tied to healthcare, housing, childcare and poverty stabilization. 

This large deficit did not appear overnight.

Colorado’s 2026 budget deficit was driven in large part by the expiration of temporary federal pandemic-era funding combined with rising healthcare and housing costs and Colorado’s constitutional spending restrictions under TABOR. Congress ultimately passed federal healthcare cuts through the 2025 budget reconciliation law that reduced projected federal Medicaid and CHIP spending by approximately $990 billion to $1.03 trillion over ten years.

During and after COVID-19, the federal government sent billions of dollars to states through enhanced Medicaid matching funds, childcare stabilization grants, ARPA funding, housing supports, public health investments, and emergency food assistance programs for SNAP and food banks. Colorado used much of this funding to stabilize Medicaid systems, childcare providers, behavioral health programs, housing services and local governments — but many of these federal investments were temporary and began expiring by 2025. 

Colorado was forced to absorb significantly higher healthcare costs with even less federal dollars, which exposed how dependent many of Colorado’s healthcare, childcare and poverty-response systems had become on temporary federal support. In fact, Colorado is more dependent on the federal government than states like California, Massachusetts, Minnesota, Vermont, Washington, Oregon, New York, New Jersey, Connecticut, Illinois and Hawaii — all of which have historically maintained broader state-level commitments to healthcare access, childcare support, paid leave systems, and anti-poverty investments.

House Speaker Julie McCluskie described the state’s fiscal structure as “outdated,” arguing that the 30-year-old TABOR formula no longer reflects the actual cost of operating government systems in Colorado. Academic research and policy organizations have long argued that TABOR creates structural instability by limiting government flexibility during periods of rising need. 

By 2026, Medicaid spending alone was reportedly growing at nearly 9% annually, while TABOR allowed state budget growth of only about 3.2%. The legislature ultimately balanced the budget by pulling money from multiple systems connected to poor and working-class families: 

Medicaid Cuts and Reductions

The largest reductions came from Medicaid. The final budget package, HB26-1410, reduced Medicaid reimbursement rates and healthcare spending by approximately $270 million. Approximately 24,500 Medicaid enrollees would lose coverage (Colorado spends roughly $11,000 to $11,300 per Medicaid enrollee per year). Earlier in the session, lawmakers had already cut another $90 million from Medicaid-related spending.

The Joint Budget Committee also imposed a 2% provider reimbursement cut expected to save roughly $95 million, capped enrollment for Cover All Coloradans (meaning low-income immigrants — particularly undocumented children and pregnant people — will no longer automatically receive healthcare coverage even if they qualify financially), expanded developmental disability waitlists, and limited reimbursements for family caregivers to 56 hours per week beginning in 2027.

Housing Money Shifted Into Budget Stabilization

During the budget-balancing negotiations, lawmakers considered shifting approximately $130 million from affordable housing funds in order to stabilize the state budget. At the same time, lawmakers rejected $1.7 million for housing support for state employees, multiple housing expansion requests, and broader new affordable housing appropriations due to the deficit environment.

Money Moved Between Social Programs

One of the clearest examples of reallocating money to and from social programming budgeting occurred when lawmakers cut $10 million from Colorado’s tobacco cessation program and redirected those funds to preserve universal preschool access. 

Public health funding was reduced to stabilize preschool funding. Housing funds were considered for transfer into budget balancing. Healthcare reimbursements were reduced to preserve core enrollment systems. Colorado redistributed scarcity. 

Despite the scale of cuts, lawmakers and advocates did fight to preserve major social programs throughout the session. Here are some bills that did just that: 

HB26-1410 – FY 2026-27 (The Long Bill or the Budget Bill)

The central state budget bill, HB26-1410, ultimately preserved Medicaid enrollment eligibility, universal preschool access, K-12 education increases, free school meals funding tied to Proposition MM, and some core healthcare services.

SB26-135 – K-12 Funding and TABOR Reform Proposal

SB26-135 proposed sending a measure to voters that would exempt K-12 education spending from TABOR limits to create more flexibility for social and educational investments. Colorado’s public education system has faced chronic underfunding for decades, consistently ranking below the national average in per-pupil spending.

Medicaid Access and Health Equity Bills

Several healthcare-related bills attempted to preserve access even within the budget-strict environment, including HB26-1096 (Colorado Medicaid Access to Primary Care Services), HB26-1044 (Measures to Improve Black Maternal Health Equity), and funding protections for pediatric autism and maternal health providers during Medicaid reimbursement reductions.

Universal Preschool and School Meals Protection

Lawmakers preserved $14 million for free preschool continuation and approximately $38 million connected to the implementation of voter-approved school meals funding. These investments became central defensive victories during a session otherwise dominated by cuts. It is a good reminder, however, that right now we have freezes in Child Care Assistance (a program serving poorer families), and that universal pre-k serves all incomes, from the most affluent to the poor.

The Real Story of the 2026 Session

The 2026 legislative session was not about whether Colorado fundamentally values healthcare, housing, childcare or food access. Still, single parents absorbed the cuts through childcare instability. Disabled residents absorbed them through longer waitlists and reduced services. Families absorbed them through housing pressure and food insecurity. And communities absorbed them through the long-term erosion of systems designed to stabilize poverty before it becomes a crisis.

Colorado’s 2026 legislative session revealed something deeper than a budget problem. It revealed what happens when constitutional fiscal limits become more politically protected than the social systems keeping families alive.

If you are ready to address TABOR, protect our future is the campaign to join. 

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