"The state's financial position is markedly improved," wrote the Democratic governor to the head of the Colorado Joint Budget Committee. "Our plan reflects cautious optimism for Colorado's economy and a prudent, sustainable approach to managing the state's budget."

The budget proposal relies on the premise that Colorado's revenues should finally exceed the pre-Great Recession peak. "Colorado's economy is outperforming other states. This gives us the ability to restore some cuts and modestly increase funding in critical areas of the state's budget," said Gov. Hickenlooper on Thursday. The FY 2013-14 budget would represent a 5.4 percent increase from the previous budget.

The continuing influx of Coloradans into the Medicaid rolls accounts for a substantial amount of the budget increase, but not all. State employees would see a 1.5 percent increase in pay under the proposal. Merit pay proposals could bump that number up to close to 3 percent.

K-12 education would see an increase of $214 million in state and local funds or a nearly 5 percent increase from the previous budget. "[Education] diminishes every other challenge that kids face," said Gov. Hickenlooper during an early afternoon news conference in his office. "We are eager to continue to play whatever role we can in making sure good teachers become great teachers and great teachers become incredible teachers."

The budget request also includes $250,000 for higher education tuition assistance for National Guard members and an additional $1 million for the state's film incentive rebate and loan guarantee program.

The entire letter from the Governor to the Joint Budget Committee can be found at