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From fiscal cliff to fiscal bump, Utah avoids the worst
Budgets » State budget won’t suffer the calamity that had been feared before deal was cut in D.C.

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While state leaders had braced for a dire plunge off the fiscal cliff and economic turmoil for state budgets, the deal struck by Congress this week produces an outcome that Utahns believe will be significantly more manageable.

"My sense is it was more of a fiscal bump than a fiscal cliff," said Senate President-elect Wayne Niederhauser.

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Economists in the Legislative Fiscal Analysts’ office and Gov. Gary Herbert’s budget office are still digesting the full impact of the deal Congress struck and likely won’t have precise estimates for another week or two.

Niederhauser said he thinks there will be a small drop in the projected $300 million growth in ongoing state tax revenue, "but all indications are that it will be more of a bump."

Economists had warned that, if the United States went off the fiscal cliff, resulting in major tax increases and across-the-board spending cuts, it would push Utah’s economy back into recession and cost the state $548 million in revenues, turning the projected $300 million surplus into a $248 million deficit.

"I think we feel like we’re confident that we can manage the new situation," said Juliet Tennert, Herbert’s acting budget director.

"There still will be an increase in [federal] payroll taxes, there are some tax increases for certain segments of the population. That will have some effect," she said.

But if the economy continues to improve and the state’s unemployment rate keeps falling, "that could offset a considerable portion" of the revenue lost because of the federal tax hikes.

House Speaker Becky Lockhart, R-Provo, said the impact could still be significant.

Analysts had said that if taxes kicked in for couples making more than $250,000 — the initial proposal from the Obama administration — it would cost the state about $200 million in revenue.

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Lockhart said she expects that, with the package passed — which raises taxes on households making more than $450,000 a year and hikes payroll taxes on nearly all taxpayers — the dip in revenues will be somewhere between the $200 million and $548 million figures that economists had anticipated.

"We know that we’re not going to have the full $300 million in ongoing growth. What we don’t know is how much we will have," she said.

Lockhart is also concerned that Congress simply postponed for two months the automatic budget cuts that were due to take effect on Jan. 1. That sets the stage for another fiscal crisis in early March, at precisely the time legislators are finalizing state budgets.

And if the fiscal crisis has shown anything, she said, it’s that Congress won’t do anything until it absolutely must.

"It’s kind of frustrating to be in an unknown area, kind of in limbo, so reliant on what Congress is trying to do," she said. "They don’t have much sympathy on the effects they have on the states."

Given the uncertainty and $284 million in demands for things like enrollment growth in public schools, increases in state pension and health care costs, and a growing state prison population, Lockhart said she expects lawmakers will be careful with their budgeting.

"We’re going to be very cautious, we know that," she said. "We don’t want to set unrealistic expectations for the budget."


Twitter: @RobertGehrke

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