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Under The Dome
The Joint Budget Committee started this week with a $2 billion hole to fill, down from their starting point of a $3.4 billion deficit.  The JBC closed the Long Bill late Friday afternoon, with the final decision to set the General Fund Reserve.  The Committee set the reserve for FY2020-21 at $468.9 million or 3.84%, down from the current statutory reserve of 7.25%.  Throughout the week, the Committee chipped away at the bottom line slowly throughout the week and still had $802 million to go on Thursday.  A series of large decisions made up the majority of the budget cuts.  Higher education institutions took a 58% reduction to base state funding, totaling a $493 million cut.   The federal funds Governor Polis allocated to higher education institutions will provide some cushion, but these funds have restrictions related to COVID-19.  These additional funds also don’t offset the uncertainty institutions face over enrollment numbers for the fall.  Another $163 million cut came from suspending the Senior Homestead Exemption.  In the past recession, the state suspended the property tax exemptions for seniors and disabled veterans for multiple years.  The JBC also reduced funding for state employee salaries and benefits by a total of 5%.  Initially the JBC had reduced personal services by only 2.5%. In setting out to make the budget reductions, K-12 education was one area the JBC had agreed to protect as much as possible.  On Thursday, the JBC reduced the state support for K-12 school funding by $448 million.  Sen. Moreno said in his motion that while they tried to hold this area harmless as much as possible, balancing the budget was impossible without reducing the department that makes up 40% of the General Fund appropriations.  This reduction in funding could be accomplished through a higher budget stabilization factor, which reduces per pupil funding by a percentage for all districts that receive state funds, or through changes to the school finance formula.   This lead to a total cut of $724 million to K-12 education with other reductions included, such as cuts from the Building Excellent Schools Today Program.   
The Colorado Department of Labor and Employment announced Friday that the state unemployment rate rose to 11.3% in April.  That figure is up from a historic low of 2.5% in February.  More than 476,000 people have filed for unemployment since early March.  New weekly applications have slowed recently, but benefits paid out remain elevated.  Colorado unemployment insurance paid out a high of $96 million for the second week of May, with weekly benefits ranging from $80 million to $90 million over the past 4 weeks.  Under current projections, the Unemployment Insurance Trust Fund will run out of money by July 2020.  The state will borrow from the federal government at 0% interest to continue paying benefits, but this debt will ultimately need to be repaid.  Employers will ultimately bear the burden of repaying the debt through a surcharge added onto their unemployment insurance premiums.  The UITF has been insolvent before, during the last economic recession in 2010, and it took until 2017 to repay the federal loans.  This solvency surcharge to employers could kick in as soon as January 2021 and could last for 8 to 10 years. 
Looking ahead to next week, the General Assembly is set to return to finish up the 2020 legislative session.  Session is expected to last 3 weeks with the goal of passing critical bills such as the budget, school finance, and bills related to COVID-19 response. Next week the House will hold committee hearings for all normal committees of reference with priority bills moving forward and all others being postponed indefinitely.  After the first week, House committees will condense down to State, Veterans and Military Affairs; Finance; and Appropriations.  The House will work through next weekend on passing the budget.  
COVID-19 Update

  • 23,487 cases
  • 4,082 hospitalized
  • 60 counties
  • 142,667 people tested
  • 1,324 deaths
Governor Polis signed several new executive orders since last Friday, including 076 to extend the disaster emergency declaration for another 30 days from today.  Over the weekend, Governor Polis signed Executive Order 065 to allow groups trying to place an initiative on the 2020 ballot to gather signatures through email and mail in petitions.  The Secretary of State will set the rules for how petitioners will use these remote signature gathering options.  Typically, signatures are gathered in person, but the stay at home orders during April shut this down and still present social distancing and public health challenges as the state opens up.  Following the announcement, Colorado Concern and Due Too Late filed separate lawsuits against Governor Polis over the executive order. Colorado Concern is a business group and Due Too Late is a campaign seeking to place a measure on the ballot to prohibit late term abortions.  The requirement that petition gathering occur in person is located in the state constitution.  Colorado Concern argues that the Governor does not have the power to alter the constitution, even in times of emergency.  Another business coalition submitted an amicus brief in support of Colorado Concern’s position.  The Order does not apply to Due Too Late, which is seeking to cure an insufficient number of signatures by gathering an additional 10,000 signatures.  Initiatives not yet on the ballot are up against an August 3 deadline to gather over 124,000 signatures.   Initiatives still working to gain a spot on the ballot include the creation of a paid family leave program, one to allow gaming communities to decide whether to increase current bet limits, a graduated income tax, a tobacco and nicotine products tax increase to fund a preschool program, a requirement of voters to approve fee-based enterprises, and a reduction of the state income tax.
Other executive orders from this week haven’t resulted in lawsuits, but one executive order to allocate CARES Act funding did cause consternation from members of the Joint Budget Committee.  While the Governor is able to allocate these federal funds, it did not appear that he consulted the Joint Budget Committee, the legislative committee in charge of setting the annual state budget, before making the decisions.  Executive Order 070 outlined the allocation of funds sent to the state through the federal CARES Act.   These federal funds cannot be used to backfill pieces in the budget to make up for lost revenue.  It is meant to be used for the unexpected costs incurred by responding to the coronavirus pandemic.  The Order allocates $547 million to the Department of Education to address the increased number of at risk students as a result of the recession and facilitate distance learning and other changes to instruction, $450 million to the Department of Higher Education, $275 million to local governments, $70 million to the General Fund, $10 million to the Department of Local Affairs for rent and mortgage assistance.  Higher education institutions that take the CARES funding from the executive order cannot raise resident tuition over 3% unless they receive a waiver.
Governor Polis also signed executive orders 067 to extend the requirement that employees in critical businesses and government offices wear masks when working with members of the public, 068 to ensure more people will remain covered by Medicaid and CHP+, 069 further extending income tax filing deadlines, and 071 to create two alternate care sites for people recovering from COVID-19.  With summer just around the corner, the risk of wildfire across state is increasing.  Governor Polis signed several additional executive orders to provide resources for wildfire response.  Executive Order 072 transfers $763,000 to the Wildfire Emergency Response Fund and earmarks $2 million for aerial wildfire fighting.  Executive Order 073 provides $7 million for recovery efforts from the 2016 Junkins Fire in Pueblo and Custer Counties.  An additional $8.5 million were encumbered in the Disaster Emergency Fund for recovery and mitigation efforts from the Junkins Fire.  The suspension of in person instruction at K-12 school through the end of the school year was extended for another 40 days through Executive Order 074.  Governor Polis eliminated copays for COVID-19 testing for Medicaid enrollees through Executive Order 077
Governor Polis is expected to make an announcement early in the week transitioning to a partial reopening before the Safer at Home order expires on May 27.  The guidance is expected to address partial opening of restaurants, and of ski resorts. This week draft guidelines for restaurants were released that would require greater spacing between tables indoors, requirements for servers to wear masks and gloves, that bar areas remain closed, and for restaurants to use single use menus.

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