With one eye on a $500 million state budget gap and the other on Washington, Gov. John Hickenlooper and a split Colorado Legislature enter the 2017 lawmaking session with little expectation of fiscal reform and plenty of uncertainty over transportation, the state’s Medicaid bills, affordable housing and illegal pot sales.

Last year, Hickenlooper and fellow Democrats tried and failed to loosen Colorado’s strict spending rules by declaring a $750 million hospital fund off-limits to tax rebates. They wanted the money for aging roads and underfunded schools.

The governor dropped that idea from his proposed $28.5 billion budget this year, as lawmakers prepare to face more tough spending choices during their four-month session that began Jan. 11.

As it stands, Hickenlooper’s budget requires $500 million in transfers, cuts or delayed spending on transit, health care and other programs. All of it must comply with the state’s Taxpayer’s Bill of Rights, which limits the revenues the state can take without voter approval.

The governor and new leaders in the Republican-controlled Senate and Democrat-led House are floating the idea of asking voters to approve a tax to update Colorado’s highways. The state’s to-do list for roads has an $8 billion and growing price tag to fund delayed road and bridge repairs and pay for envisioned new road projects. Legislators from both parties say they’re keenly aware that traffic gridlock is a top priority to voters.

“Obviously the need is something both sides are aware of — painfully aware of,’’ incoming Senate President Kevin Grantham, R-Canon City, told a group of business owners Jan. 5.

There are signs the parties could finally agree on a way to promote affordable condo and other housing construction — a pressing issue for the fast-growing state with rapidly rising housing costs. Colorado home values have gone up 10 percent over the past year, according to real estate data firm Zillow, which predicts they’ll rise another 4 percent over the next year.

In recent years, lawmakers have tried unsuccessfully to reform state laws that allow developers to be sued for construction defects. Both sides agree it’s too easy under state law for renters and homeowners to sue — and that has contributed to skyrocketing housing costs.

Leaders of the House and Senate say they are optimistic they can change those laws this session to promote housing construction.

Incoming House Speaker Crisanta Duran, a Denver Democrat, told the Denver Metro Chamber of Commerce that she’s optimistic lawmakers can hammer out a compromise on the long-debated developer-liability question.

But she added that developers shouldn’t expect a friendlier Democratic House under her leadership.

“I stand strong against taking away consumer rights,’’ Duran told the business leaders.

Plenty of attention will be paid to health care, and both Democrats and Republicans say they need to study how they can prepare for a possible repeal or other changes to the Affordable Care Act this session.

Colorado’s Medicaid insurance for the needy costs the state $6.4 billion annually. One in five residents is already on Medicaid, and nearly 1.5 million residents will depend on it this year.

Western Slope residents pay some of the highest premiums in the country under the health law — and they have only one provider. Lawmakers will be under pressure to help without clear guidance from Washington.

Hickenlooper also is asking legislators to crack down on the so-called “gray’’ — if not outright illegal — pot market. He cites liberal rules on the number of marijuana plants recreational users and caregiver can grow, and he contends drug cartels are taking advantage of those rules to export Colorado pot harvests to other states.

The governor wants more information from people who grow pot on behalf of sick people and a ban on recreational pot users putting together large communal grows.

Eyes also will be on both Congress and local environmental rules regarding enduring topics central to Coloradans: energy, protecting jobs for those who develop it, and the uncertain future of state and federal plans to keep it clean.

“We don’t know what dictates, or removal of dictates, from Washington, D.C., may do to us,’’ Grantham said.