The proposal, which covers fiscal year 2027-28 and is about $579 million larger than the current budget, includes $18.9 billion in general fund dollars — the most discretionary of the state's three funding sources — an increase of $479 million. It marks the third consecutive year Colorado has confronted a deficit exceeding $1 billion.

Polis, who has fewer than 60 days left in office, told lawmakers that unchecked Medicaid costs represent the single greatest threat to the state's fiscal stability. The program's growth is outpacing overall budget growth, he said, and could consume the entire $2 billion in new annual revenue generated by Amendment 87 — a voter-approved measure that replaces Colorado's flat 4.4% income tax with a tiered system — within just a few years.

"Without changes, Medicaid costs really threaten the rest of the budget," Polis said. "There's no money left for education or roads or anything else."

The warning echoes testimony Polis gave to the committee a day earlier, when he said Medicaid would absorb all Amendment 87 funds by 2030 if left unaddressed. His proposed budget seeks to increase the general fund reserve from 7.25% to 13.05% to buffer the state against economic downturns.

The budget process grew more complicated after five ballot measures passed on Nov. 3, the day after the administration's initial budget request was submitted. Amendment 87 is projected to boost the general fund by more than 9% in its first year. Proposition 137 would redirect about $137 million in sales tax revenue from sporting goods purchases to wildfire prevention, conservation and outdoor recreation. Proposition NN allows the state to retain revenue above its Taxpayer's Bill of Rights (TABOR) limit, with funds initially directed to education.

Two other measures — Propositions 132 and 133, which increase penalties for fentanyl and child sex trafficking crimes, respectively — have raised concerns among some Democrats about mandatory spending and the need for additional prison beds.

"The Department of Corrections budget has been strained for a number of years," Sen. Mike Weissman, D-Aurora, told Colorado Politics. "The average prison bed costs $60,000 a year. The cost for some inmates that are older and have medical conditions, that the state is legally required to pay for, can be six digits."

An analysis by the Common Sense Institute attributed much of Medicaid's growth to expansive policy choices rather than enrollment or medical inflation, estimating that more than 180 health care bills enacted since 2019 account for about $858 million in annual costs.

Craig Harper, the legislature's chief budget and policy analyst, cautioned the committee that revenue from Proposition NN could be unpredictable and create fiscal risks if earmarked for ongoing expenses. The measure also faces lingering questions from a recent state audit of TABOR revenue accounting, which found the state comptroller could not produce sufficient evidence to verify the accuracy of the 2026 TABOR report or confirm it followed applicable laws. The comptroller reported revenue $275.1 billion below the TABOR cap, meaning no fiscal 2026 refund is expected under that calculation.

By Nov. 16, the controller must recalculate fiscal year 2025 TABOR revenue to reflect the known impacts of federal tax policy changes and designate all or part of the fiscal year 2025 refund obligation as an over-refund.

Polis is expected to release an updated budget proposal — likely with significant changes — on Jan. 2, 2027, along with a final decision on how to address the shortfall. The Joint Budget Committee will begin a months-long review, and legislators will ultimately negotiate state spending with the incoming administration of Gov.-elect Phil Weiser.

For Colorado communities, the stakes are concrete: the shape of the final budget will determine funding levels for public schools, road maintenance, health care for low-income residents and the state's response to wildfires — all while the state tries to stabilize its finances without cutting services that residents rely on.