Voices for Utah Children

HB 210 (Nielson) would require the deposit of 100% of all severance tax revenues from oil, gas and mining into the permanent state trust fund. The rationale is that future generations deserve to benefit from Utah’s natural wealth.

The Legislative Fiscal Analyst estimates that the continuation of this credit will reduce revenues deposited into the Education Fund by $2.1 million. The true cost to the Education Fund may be much greater, but there is no way to know because the Tax Commission does not track this credit.

During the 2011 legislative session, a bill was introduced that aimed to sharply limit growth in the annual state budget through an amendment to the state constitution.1 This bill, known as HJR37, would allow expenditures to increase only by an amount equal to the sum of the previous year’s inflation plus the rate of population growth. The proposal is likely to be revived for the 2012 session.

Supporters tout this bill as a way to limit what they describe as an “alarming” increase in Utah’s spending.2 They overlook the fact that the only state ever to adopt a similar bill, Colorado in 1992, suffered devastating reductions in the services that drive both family well-being and economic development. Colorado business leaders and citizens banded together and successfully campaigned to suspend their constitutional budget limit, known as “TABOR,” in 2006. They also permanently changed some of its most damaging features. Still, in most areas Colorado still has not regained the services and quality of life it lost while TABOR was in effect.

The Earned Income Tax Credit (EITC) promotes self-sufficiency by providing a refundable tax credit to low-wage workers. This credit helps offset the impact of regressive taxes like the federal payroll tax and makes work pay for more Americans.

The Water Issues Task Force proposal to fund Utah’s future water projects would take revenue from the sales and use tax, which is the major source of Utah’s General Fund. But the General Fund is already stretched to its limit (Figure 1). In spite of projected sales tax growth in FY12, unrestricted revenue remains 7% lower than FY05 levels. Meanwhile, the need for state services only has increased.

In the 2011 Legislative Session, Representative Carl Wimmer introduced a bill, HJR 37, which purported to limit the growth of Utah’s budget through a constitutional amendment that would replace legislative deliberations with a rigid formula. The bill passed the House Government Operations Committee by the narrowest possible margin, but was never heard on the floor. Still, twenty of his colleagues signed on as co-sponsors, and Rep. Wimmer recently announced that he will continue his efforts to get the bill passed in the 2012 session.

Tuesday, April 26, 2011

SB229 would earmark $60 million per year for transfer from the General Fund to the Transportation budget beginning in FY13. This amount would augment the generous appropriations for FY12, which totaled over one billion dollars, including existing transportation earmarks of $295 million from the General Fund. Like other transportation earmarks, SB229 also is designed to expand over time, growing from $60 million to $250 million by FY18. Governor Gary Herbert recognized that earmarking additional funds for transportation is a bad idea and vetoed the bill. The Legislature still has time to see that this bill is not worth resuscitation.

Monday, April 18, 2011

The national economic downturn that began in December, 2007, had dramatically different impacts on different Utah families. For those with workers who enjoyed steady employment, the recession meant some sacrifice and concern, but no immediate crisis. In contrast, for many families that faced a layoff or an involuntary reduction in working hours, the recession has been catastrophic, plunging them into financial distress that affects adults and children alike, and whose impact will be felt for many years to come. This report reviews U.S. Census data to explore and understand which workers suffered the greatest damage from the recession. It also suggests how state policy could help these families recover, while at the same time strengthening the overall Utah economy that emerges as economic growth resumes.

Utah’s lawmakers and agency leaders have faced the ongoing budget crisis with a mix of program cuts, use of one-time reserves, and small revenue increases. They have shown flexibility and resourcefulness in these difficult times, and proven the value of the state’s careful approach to budgeting.

But we are not out of the woods yet. Underlying structural limitations to Utah’s revenues, due in large part to the narrowing of tax bases during the recent economic boom, guarantee that shortfalls will persist regardless of when economic growth resumes. Over the longer run, population growth will continue to exert pressure on all facets of state government.