Caught between state and federal budget cuts, Colorado’s local government programs are at risk

Two months before the news broke that the Trump administration might try to end federal support for the Head Start preschool program, Boulder County got a letter denying its annual request for federal funding.

Like many counties across the state, Boulder was already struggling to pay for early childhood programs like preschool and child care. And the state of Colorado — facing a budget crunch of its own — was in no position to come to the rescue.

This month, the Boulder County Commission stepped in to keep Head Start afloat, approving $2 million in stop-gap funding to run the program for at least one more year. But local officials say they aren’t sure how they’re going to keep it going beyond that if the federal government doesn’t reverse course.

“We can’t just expect local governments to be able to pay for all the services that the state and federal government were paying for,” Commissioner Ashley Stolzmann told The Colorado Sun in an interview.

Local officials across Colorado — already grappling with the loss of pandemic stimulus funds — say state and federal budget cuts are threatening a number of programs administered at the local level.

State budget cuts alone will cost local governments nearly $140 million, according to Kevin Bommer, the executive director of the Colorado Municipal League — a callback to the 2010s when state budget writers repeatedly leaned on local governments to solve the state’s financial woes.

“I’ve seen it before,” Bommer said. “It doesn’t matter if it’s a recession, it doesn’t matter if it’s times of prosperity. When the state needs money to backfill the budget, they will drain funds that local governments use for prosperity in their own cities and towns and counties.”

The state spending plan for the 2025-26 fiscal year, which starts July 1, redirects millions in severance and marijuana tax dollars away from local governments to fund state programs. It also cuts a key revenue stream for roads and pulls back funding promised to cities and counties for things like transit projects and bike lanes. A popular grant program aimed at revitalizing downtowns was eliminated entirely.

Even deeper cuts may still be yet to come, as Republicans in Congress consider cutting federal assistance for low-income families such as food stamps, homelessness grants, utility bill subsidies and Medicaid — all programs that fall on local governments to administer.

“There’s more need than there was before, because people are becoming jobless, people are becoming homeless, and so the need is going up at the same time that we’re cutting services,” Stolzmann said.

The budget pressure has some local governments considering going to the ballot to increase taxes locally. More than a dozen local officials testified in favor of a bill this session allowing counties to increase lodging taxes with voter approval.

The state legislature passed the measure, House Bill 1247, earlier this month, sending it to the governor’s desk where it can be signed into law. In addition to increasing the existing cap on lodging taxes, it also would allow local officials to spend the proceeds on a wider variety of services, including transportation and public safety.

Summit County commissioners told lawmakers that without additional funding, they may have to delay major repairs to Swan Mountain Road, a key thoroughfare that wraps around the Dillon Reservoir.

Officials in other counties said they were already facing budget shortfalls next year — even before the full extent of state and federal funding cuts is known.

A political shift

While not unprecedented, the state-level cuts represent a shift in the political dynamics of the past few years, when local governments had a near-constant seat at the negotiating table — even if they didn’t always get their way.

This time around, Bommer said, “there was no effort to help local governments. I can’t point to anything in any of those cuts and say there was any kind of discussion about ‘we know this is going to hurt, but we really feel bad’ — nothing. None of those discussions happened.”

The shift was already underway in the 2024 legislative session.

A number of state lawmakers by then had soured on the idea of reimbursing local governments for the cost of statewide property tax cuts. Increasingly, lawmakers began adopting a viewpoint shared by many Colorado homeowners, who saw the historic property tax bump as a windfall — the likes of which the state, which is limited by the Taxpayer’s Bill of Rights revenue cap, could only dream of.

Unlike the state, most local governments have “debruced” from under TABOR, meaning they don’t have to issue taxpayer refunds when collections rise faster than the combined rate of population and inflation. (The term is an homage to Douglas Bruce, the former Republican state lawmaker who wrote the TABOR amendment.)

After the Proposition HH property tax cuts failed at the ballot box in 2023, state lawmakers began to bristle at the idea of helping any but the most vulnerable local agencies, such as fire and hospital districts. Then, when the state’s budget problems worsened, the Joint Budget Committee sought opportunities to scale back the state’s involvement in local affairs, including a property tax relief program, various transportation and economic development grants, and promised assistance to help counties hire district attorneys and improve their pay.

“We’re in a situation where we need to stop taking on local government responsibilities, and saying they’re ours somehow,” Republican Sen. Barbara Kirkmeyer, a JBC member from Brighton, said at one hearing earlier this year — a sentiment shared by most of her colleagues.

But local governments face revenue problems of their own.

Home values aren’t rising as fast as they were in recent years, and commercial properties face a potential downturn. In the state’s slowest growing areas, local officials didn’t experience the jump in property values as a windfall, but as a lifeline after the decade of budget tightening that followed the Great Recession.

To make matters worse, recession alarm bells are going off due to President Donald Trump’s tariff policies, even as state and federal cuts threaten to take a toll on local agencies that administer many of the safety net programs people rely on during an economic downturn.

Bommer said he doesn’t blame the JBC, which faced a difficult task in closing a $1.2 billion shortfall.

In fact, when the rest of the legislature got its hands on the JBC’s proposal, lawmakers looked to take even more from local governments in order to avoid deeper cuts to state services. The House voted to cut the local share of the state’s marijuana sales tax from 10% to 3.5% — down from the 5% the JBC had suggested.