Colorado will spend nearly $500 million on transportation under a $28.9 billion budget signed into law by Gov. John Hickenlooper, but voters must decide whether to leverage that funding with short-term debt.

The budget also provides $225 million to reduce underfunding for the Colorado Public Employees Retirement Association pension fund that covers teachers and state employees.

John Hickenlooper, governor of Colorado, reacts during a Bloomberg Television interview at the Milken Institute Global Conference in Beverly Hills, California, U.S., on Tuesday, May 2, 2017
“Our better-than-expected state forecast allows us to strengthen key areas of the budget including K-12 education and higher education,” said Colorado Gov. John Hickenlooper. Bloomberg News

The Long Appropriation Act, also known as the long bill, sets the state budget for the fiscal year that begins July 1 and provides virtually no increase in spending compared to the current budget.

“Our better-than-expected state forecast allows us to strengthen key areas of the budget including K-12 education and higher education,” Hickenlooper said in a signing statement Monday.

With Republicans in control of the Senate and Democrats controlling the House, Hickenlooper, a Democrat in the final year of his second term, praised “the spirit of collaboration and compromise" among the members of the General Assembly.

“The current economic vibrancy we are experiencing allows us to allocate new resources to several important priorities and initiatives,” Hickenlooper said.

Still under consideration is Senate Bill 1, which would ask for voter approval for tax revenue anticipation notes to be backed by the $500 million transferred from the general fund to the state highway fund and by $250 million per year after that. SB 1, approved unanimously in the Senate, will be heard by the House Transportation and Energy Committee as both houses near a May 10 deadline for legislative action.

As lawmakers consider the debt issuance, a coalition of business groups is preparing a ballot initiative calling for an increase in sales tax to support $3.5 billion in highway TRANs.

In addition to the allocation of $495 million for transportation through July 30, 2019, lawmakers plan to ask voters in 2019 to approve a package that dedicates $250 million annually to cover $3.5 billion in revenue-backed debt.

A state that has no general obligation debt, Colorado has issuer credit ratings of Aa1 by Moody’s Investors Service and AA by S&P Global Ratings. Moody's assigns a stable outlook, and S&P a negative outlook.

Under a 2009 funding mechanism, a five-year block of funding is transferred to roads when the state’s personal income growth reaches 5%. In the current fiscal year, that comes to about $200 million.

However, future budget year forecasts indicate those transfers will shrink or disappear because the transfers are reduced when Colorado taxpayers are due refunds under the Taxpayer Bill of Rights. TABOR mandates tax refunds when state revenue exceeds the rate of inflation and population growth. Refunds on 2015 tax returns were estimated at $157 million.

More than 60% of Colorado Department of Transportation revenue comes from state and federal gas taxes. Colorado’s 22-cent-per-gallon tax on fuel has not changed since 1992. Colorado’s gas tax falls below 34 other states, including neighbors Nebraska, Utah and Wyoming, which have raised their gas taxes in more recent years.

CDOT has an annual budget of approximately $1.4 billion for highways, bridges, statewide transit and aviation.

About 70% of CDOT’s capital budget comes from the federal government.

Under CDOT’s 2040 Statewide Transportation Plan, officials have $21 billion in revenue and a need to fund projects worth $46 billion. That leaves an unfunded gap of $25 billion over the next 25 years.

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Corrected May 1, 2018 at 5:52PM: S&P Global Ratings assigns Colorado a negative outlook. The outlook was incorrect in the earlier version of the story.