Federal rescue funds show Colorado what an adequate budget looks like

A massive, one-time influx of federal dollars has given Coloradans a glimpse of what a robustly funded state government looks like.

The federal American Rescue Plan Act, passed in the spring of 2021, brought billions of dollars to Colorado, enabling policymakers over the past two years to simultaneously fund long-recognized priorities like housing, the caring economy, behavioral health programs, education, and environmental protection.

But one-time funding is just that: one-time. Rescue funds are an impermanent funding stream that must be expended within the next few years. While these dollars have proven valuable in providing an infusion of needed support, their temporary nature precludes them from solving Colorado’s long-term structural deficit or adequately funding any number of statewide priorities into the future.

If we want real, permanent change, we must prioritize sustainable funding streams and a fairer tax code.

A conceptual image of a crumbling government building with federal funding flowing out, implying financial decay or loss.

How Much did Colorado Receive from ARPA

More than $9 billion. Nearly $6 billion was specifically earmarked by federal lawmakers for pre-established purposes such as education, services for older adults, public health, child care, and behavioral health. However, over one-third of the funds, approximately $3.83 billion, was left to the discretion of state policymakers and has relatively few restrictions. The money simply has to be appropriated by 2024, expended by 2026, and fall within one of several broad funding categories.

It’s worth noting just how significant a boost these funds are to Colorado’s budget. In fiscal year 2019-2020, the state’s general fund totaled $12 billion. Total federal Rescue Act funds equate to more than three-quarters of that year’s general fund; the less restricted portion of that represents nearly one-third of that discretionary budget.

During the past two years, state lawmakers have disbursed much of the above-mentioned $3.83 billion. Here’s a breakdown of how this money has been allocated:

Yellow briefcase icon representing ARPA federal funding on a black textured background within a circle.

Workforce development: $200 million

Recognizing COVID’s role in accelerating changes in our workforce, the legislature invested significant funds into workforce development. Portions of these dollars were allocated in 2021 to directly support workforce centers and grow the availability of retraining and upskilling opportunities. As we detailed in an earlier blog, additional funds in 2022 were put toward creating stackable credentials, career pathways, and a stronger talent pipeline.

Yellow virus icon on a black dotted circular background with ARPA funding.

COVID response: $300 million

These dollars were appropriated to the Governor’s office and were spent on COVID-related public health services such as vaccinations, testing, and public health messages.

Yellow bus icon on a black circular background with an arpa funding textured pattern.

Transportation and infrastructure: $380 million

Legislators put approximately $380 million of state ARPA funds toward the State Highway Fund, Highway Users Tax Fund, and the Multimodal Transportation and Mitigation Options Fund. However, it should also be noted ARPA sent another $380 million directly to local transit districts in Colorado, and the state is expected to receive at least $3.5 billion in infrastructure funding as a result of the federal Infrastructure Investment Jobs Act.

Icon representing a home, set against a black circular background with an ARPA funds textured pattern.

Affordable housing and homeownership: $550 million

The rising cost of housing prompted policymakers to invest substantial dollars over the past two years into efforts which increase housing affordability. You can read more about the ARPA dollars allocated in 2022, much of which came from the Affordable Housing Transformation Task Force recommendations, here. An additional $165 million however, was also allocated during the 2021 legislative session to provide eviction defense, services for those experiencing homelessness, and incentives to increase housing creation within local communities.

Mental and behavioral health: $550 million

COVID exposed deep, problematic gaps within our mental and behavioral health systems. Using recommendations from a robust task force process, lawmakers funded a range of mental and behavioral health services in 2022. This includes funding for youth behavioral health services, the creation of new facilities, investments in the workforce, and new residential behavioral health beds. This latest round of funding is in addition to nearly $100 million of ARPA money spent on mental and behavioral health services in 2021.

Hand holding a coin with a dollar sign, symbolizing Federal Funding.

Economic recovery and relief: $850 million

Relying upon another task force, the state set aside approximately $850 million for the broad purpose of economic recovery and relief. With these dollars, policymakers funded a range of priorities in 2022, including supports for those experiencing homelessness; childcare; growing the health care workforce, particularly in rural areas; the work of community-based non-profits; food access; educator loan forgiveness; and wildfire prevention.

A stylized graphic of a building with a central dome and a snake-like shape in an ARPA triangle at the entrance.

Restoring lost revenue due to COVID: $1 billion

Finally, federal regulation allows for the use of ARPA funds to backfill state revenue lost as a result of COVID. Backfilled dollars can in-turn be used to pay for normally provided state services. In 2021, Colorado lawmakers set aside $1 billion for this purpose. While not all of this money has been appropriated, a sizable amount, $600 million, was spent to paydown part of the Unemployment Insurance Trust Fund debt this past legislative session.

An Impermanent Solution to a Long-Term Problem

During the past two years, Colorado has made sizable investments in many important areas. However, it’s not state money that has made these investments possible—it’s one-time federal dollars that eventually will run their course within the next several years. Once federal dollars are gone, we’ll be back in the same pre-Rescue Fund position, where vital issues—like child care, environmental protection, K-12, health care, disaster preparedness, and more—are routinely pitted against one another for tiny, and always inadequate, scraps of state funding.

While federal money won’t solve our long-term funding problems, it has shown us what a more adequately resourced Colorado looks like. It’s shown us, with enough funds, it’s possible to simultaneously invest in multiple priorities and proactively address rising issues in need of attention. Importantly, we have the ability to create this type of Colorado.

To do so, we must enact a smarter, fairer tax code where everyone pays their fair share. By adequately funding our state’s infrastructure we’ll be creating the healthier, more resilient state we all deserve.

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