During the special session, the legislature passed a bill ceding the responsibility of cutting the budget to the governor’s office

Gov. Jared Polis said Thursday he will reverse the state’s plans to increase reimbursement rates for health care providers who see Medicaid recipients to help address a roughly $750 million hole in the state budget caused by the Republican federal tax and spending bill.

That will save the state about $38 million by forgoing a planned 1.6% rate hike. That’s the single biggest cut made by the governor.

Polis also said he will slash spending on higher education (by some $12 million) and grants (like $2 million to tackle health disparities) as part of $252 million in total cuts and redirected spending to help balance the budget this fiscal year, which began July 1. The governor said he is making changes to about 20 budget line items.

“My two commitments in managing these cuts — we’ve kept them both,” he said. “We are not cutting our public schools one dime. K-12 funding is held harmless. We also have zero cuts to public safety.”

The governor told reporters of his budget-cut plans Thursday morning and is set to present to the legislature’s Joint Budget Committee later in the day. Lawmakers wrapped up a special legislative session Tuesday to partially close the hole by increasing the taxes paid by businesses and business owners.

The General Assembly also passed a bill letting the state sell tax credits to raise $100 million to offset the deficit. The credits, which will effectively let the companies that buy them prepay their taxes through 2033 at a discount, will be sold at least 80 cents on the dollar.

The governor’s office also told the JBC on Thursday that the budget situation is even worse than they previously thought because of higher than expected Medicaid enrollment. As a result, Polis plans to tap about $325 million of the state’s budget reserves to make up the difference.

“We will have a reserve north of 13% after all these actions are done,” Polis said, “and that is more than twice the reserve than when I took office.”

During the special session, the legislature passed a bill ceding the responsibility of cutting the budget to the governor’s office, saying the executive branch was best positioned to slash spending quickly. But the move also had the political benefit of handing a hot financial potato off a lame-duck governor in Polis, who is term-limited and leaves office in early 2027.

The legislation requires the governor to notify the JBC of his spending cuts, but it gives him unilateral authority to slash the budget. The cuts start to take effect Monday.