This is an archived article that was published on sltrib.com in 2012, and information in the article may be outdated. It is provided only for personal research purposes and may not be reprinted.

Balancing Utah's budget each year should involve carefully weighing all competing priorities for scarce resources. Unfortunately, this time-honored method of allocating state dollars among competing needs has been quietly undermined in recent years.

Each step in the process of moving state expenditures out from under the annual scrutiny of lawmakers may have seemed innocuous. But these steps have accumulated over time to the point that a substantial amount of state revenue escapes the deliberative process today.

This is a recipe for continued budget shortfalls. Recession-level funding will be the norm, regardless of how well the state's overall economy fares in the future, or how much population grows. As we demonstrate in our recent report — "What's Eating Utah's General Fund?" — nearly $1 billion in state resources escapes scrutiny each year thanks to exceptions written into the tax code for certain economic activities. This is part of the reason that the General Fund remains 9 percent below its 2007 level.

The technical term for these exceptions is "tax expenditures," because the decision to grant them is the fiscal equivalent of spending on a state program.

Some of these tax expenditures certainly are warranted. It would make little sense to collect sales tax on garage sales or school lunches. However, growing numbers of tax expenditures aim to promote economic development by reducing the taxes paid by private businesses.

Do these incentives work? We simply do not know. The state collects no evidence on the effectiveness of exemptions. In fact, the Legislature has reduced reporting requirements for companies that claim these exemptions. This means that no one truly knows how much revenue the state forgoes, let alone whether the benefits of doing so outweigh the cost.

Tax expenditures are just part of the problem. Restrictions on how state revenue may be used also have skyrocketed. These "earmarks" grew by 900 percent since 2005.

Like every tax expenditure, each earmark surely seemed like a good idea at the time. But taken together, earmarks represent a significant share of revenue that no longer is subject to the annual process of weighing priorities among competing uses.

Think of the state budget as a bucket that must be refilled each year from a pool of different revenue sources. Earmarks are holes in the bucket that drain away resources from programs. Tax expenditures divert revenue before it reaches the pool, making it harder to fill the bucket.

Our report identifies tax expenditures and earmarks equivalent to one-fifth of state revenue in 2013, and we don't even consider the impact of income tax credits. The true total is likely much higher, but that information is simply not available.

Other states around the country are becoming conscious of the need to identify both the "leaks" in the state revenue bucket and the diversions of revenue that never reaches the bucket. Annual tax expenditure reports, mandatory "sunset" dates for tax exemptions and earmarks, and systematic evaluation of the costs and benefits of existing legislation, are just some of the techniques used.

The objective is to ensure greater transparency, so that lawmakers have all the information required to weigh each tax expenditure and earmark against other pressing budget needs. These techniques also help voters hold lawmakers accountable for their decisions.

Utah has a long history of sustainable budgeting, thanks to the traditional annual budget appropriations process. Only in recent years have things changed. Today, lawmakers need to act so that a larger proportion of the state's money returns to the annual negotiating table.

Allison Rowland is director of research and budget at Voices for Utah Children. The report "What's Eating Utah's General Fund?" can be found at http://www.utahchildren.org.