JBC staff propose using severance-tax reserves and targeted cuts after revenue forecast drops

Mark Ferrendino, SPV director, told the Joint Budget Committee that the state’s severance-tax forecast has fallen sharply since the last projection and that staff are proposing a package of reserve draws, transfers and targeted general‑fund spending to keep programs running.

"We are in a place ... significantly less severance tax than what we had forecasted," Ferrendino said, adding the proposal would use reserves and some general fund to bridge funding gaps for programs that depend on severance tax.

Ferrendino said staff propose using the Department of Natural Resources (DNR) operational account reserve — drawing the reserve from 200% down to 100% — to continue funding operations the department considers core. He urged the committee not to carry out an earlier-authorized sweep of $15,600,000 of this year’s revenue, saying that doing so combined with reserve draws would leave the operational account near a 50% reserve.

The staff package includes roughly a $90,000,000 request to balance competing needs and an overall balancing target of about $55,800,000, Ferrendino said. Key elements described to the committee included:

- Water projects: staff asked for a general-fund appropriation of $37.5 million combined with expected severance tax receipts to reach about $40 million for water project funding (described as a historical average). - Energy Impact Fund: staff reported a projected $55.7 million but proposed requesting roughly half in general fund ($25 million) plus expected severance tax to reach approximately $28.2 million for programs. - DOLA transfer: staff asked to take only $10 million of a previously discussed two‑year $20 million transfer from the Department of Local Affairs (DOLA) (i.e., $10 million this year only), saying the second $10 million would not be available. - DTRS: the committee was told current funding plans for the state’s digital trunked radio/related position(s) that the committee has discussed are financed from severance tax and may not be available next year under the new forecast, creating a separate funding question. - Decarbonization tax‑credit administration: staff estimated about $2.8 million in administrative costs tied to a prior transfer and asked for that amount to cover Department of Revenue and related expenses.

Ferrendino stressed these recommendations were intended to preserve core programs while recognizing limited resources and noted staff would present supporting materials to members and agency staff.

Comebacks and program-level adjustments

Committee members then reviewed a packet of "comebacks" — individual decision adjustments and followups from agency briefings and recent forecast changes. Staff highlighted several program-level changes being recommended to free available dollars for higher priorities:

- Nursing and competency programs: staff said a roughly $12.7 million staff incentive appropriation (previously used to recruit and retain nurses at state facilities) was deprioritized in part so funding could be redirected to preserve nurse staffing at prisons and state health facilities. The Department of Human Services proposed several reductions, including a reduction to jail‑based competency programs, a cut staff characterized as roughly 24 percent to that set of services.

Perry May, Deputy Executive Director with the Department of Human Services (Health Facilities), said the jail‑based program provides interim mental‑health contacts in about 10 county jails and that, given budget pressures, the department considered the reduction less impactful than cutting staffing incentives for nurses. "This is...a 24% reduction in funding," May said of the jail‑based competency line.

- RISE and competency tradeoffs: Senator (surname) Mable pressed whether cutting jail‑based competency funding would harm programs such as the RISE program in Arapahoe County; Perry May and others told the committee the RISE program had a more significant short‑term effect on reducing the competency wait list but that it did not provide longer‑term treatment of underlying illness.

- FAFSA outreach coordinators: staff asked the committee to continue funding two existing FAFSA outreach positions that had been expected to shift to indirect cost recovery. Ferrendino and "Dr. Piccione" (identified in the transcript only by surname and title "executive director") said the statewide FAFSA effort had helped thousands complete federal applications and argued the positions produced a return greater than their cost. The committee was told the positions are existing FTEs, not new staff, and that recent changes limited the use of indirect cost recoveries from institutions.

- License‑plate cash fund: Department of Revenue staff recommended against sweeping the fund this year as initially proposed for larger balancing; instead staff described a proposal to transfer about $3.4 million to the general fund and $3.4 million to a drivers' cash fund while leaving about $1.7 million in the plate fund to preserve operations. The committee discussed alternative structural changes, including moving certain specialty plate revenue to a nonprofit vehicle, but staff said that would be a significant policy change requiring stakeholder work.

- Marijuana Tax Cash Fund (MTCF): staff outlined one governor's‑office proposal staff had included in the packet (described in the document as tied to "Proposition 130" in the packet text) and described options including using emergency reserves and significant line‑item reductions. One illustrative option would reduce the distribution to local governments from 10% of marijuana revenue to 5% (a budgetary change the packet said would produce about a $9 million reduction to local distributions). Staff said the committee could consider phasing such changes over multiple years.

- AHEC/enterprise accounting: staff renewed an option to change the enterprise accounting for the Area Health Education Centers (AHEC), which staff said currently results in roughly $30 million of counted TABOR revenue; changing the accounting treatment could create room in the general‑fund budget but would be a policy decision with institutional stakeholders.

Staff framing and next steps

Director Craig Harper and other JBC staff said many of these issues remain unresolved and that the committee would receive a more complete overview the next morning reflecting additional decisions. Harper said several items required more time to reconcile with the Office of State Planning and Budgeting and that some complex funds — notably the marijuana tax cash fund — likely would need a later‑day or next‑session discussion to finalize.

Why it matters: severance tax supports water, energy‑impact and natural‑resource programs across the state. Committee choices about reserves, transfers and general‑fund backstops will determine which projects and positions receive funding this fiscal year and which will face reductions or delays.

The committee did not take a final vote on the severance‑tax proposal at this meeting and directed staff and agencies to return with additional detail and recommendations for upcoming sessions.