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A $187 million pay package for state workers and teachers approved by the Legislature's main budget committee Tuesday was met with disappointment by teachers and state employees who wanted a bigger piece of the state's $1 billion surplus.

Under the proposal, teachers would see a 5 percent increase in the basic school-finance formula (weighted pupil unit) that sets their base compensation.

"We want 8 percent," said Utah Education Association President Pat Rusk. "We had 4.5 percent last year, with a lot less money" in state revenues.

Meanwhile, state workers would see a 2.5 percent pay hike along with health benefit and retirement increases - which just keeps pace with inflation, says Utah Public Employees Association Director Audry Wood.

"In the bad, hard days, public employees went without," Wood said. "We felt with a billion dollar surplus, it would be catch-up time."

Utah has the lowest per-pupil spending in the nation. And a recent Salt Lake Tribune/KUER/KUED poll indicates the public agrees with Gov. Jon Huntsman Jr. that education should be the first place to spend excess money, even before tax cuts.

"Every poll has said public education is the priority," Rusk said.

Huntsman has called for a 5.5 percent raise in the per-student spending, including teacher raises. A budget proposed by the Legislature's minority Democrats, using the same numbers as Republicans, offers twice as much to teachers.

"The Democrats found a way to do 10 percent, we are only asking for 8 percent," Rusk said. "We have not heard a number we are happy with yet."

The pay package was approved in committee and moved to the House, which Tuesday approved the state worker part. The Senate should get the proposal today(Wednesday).

House leaders said they hoped to increase education funding in ways beyond teacher pay. A part of the surplus money, they say, could be used for one-shot expenditures, such as textbooks, computers, buildings and teacher bonuses.

In floor debate, Rep. Ralph Becker, D-Salt Lake City, said state employees' morale is down and this package "will only further diminish the commitment they have made to public service."

House Budget Chairman Ron Bigelow, R-West Valley City, responded, "If, in fact, this is the only judge, the only measure, by which employees determine that they are valued or not, then I think they lack information. Many of us profoundly appreciate what our state employees do."

An attempt by Rep. Wayne Harper, R-West Jordan, to increase state workers' raise from 2.5 percent to 3 percent, using money from existing budgets, failed.

The House and Senate remain deadlocked on how to divide the more than $1 billion surplus. In the joint appropriations committee, the two chambers agreed to reserve $300 million of the surplus for tax cuts, highways and water projects.

The House would like to see up to $230 million of it going to a tax cut, much of that through the elimination of the sales tax on groceries.

The Senate wants to give back $100 million in tax cuts, including $18 million in cuts to businesses.

The $300 million agreement heightened the tension between two camps of low-income advocates: those favoring removal of the sales tax on food and those who fear it would jeopardize essential health program funding and services for disabled.

"Yes, the economy is improving, but it has not improved to the point where we can fully remove the food sales tax," said Judi Hilman at Voices for Utah Children. "For as long as we drag out [debate over grocery tax elimination], we're not having a thoughtful discussion on other funding priorities."