Utah House, Senate announce agreement to fully fund state budget — with a trigger mechanism to ensure action on tax reform

(Rick Egan | The Salt Lake Tribune) Speaker of the House Brad Wilson and Senate President Stuart Adams discuss the State budget in a news conference, at the Capitol, Tuesday, March 12, 2019.

Utah House and Senate Republican leadership announced Tuesday that they’ve struck an agreement to fully fund the state budget, ending a stalemate triggered by the implosion of their previous tax-reform plan to address the state’s looming revenue dilemma.

But there’s a catch: About $300 million of the spending will be designated as one-time, meaning there’s no guarantee it will be renewed yearly.

That trigger mechanism will create pressure for lawmakers to return without delay and deal with a revenue imbalance that is getting worse by the year, legislative leaders said.

“If we don’t fix this problem, next year that [one-time] money might not be there,” Senate President Stuart Adams, R-Layton, told reporters during a joint news conference with House Speaker Brad Wilson.

Shortly after the news conference, House lawmakers unanimously passed the compromise budget bills and sent them to the Senate, which also signed off on them.

Lawmakers had tried to address the state’s lagging sales tax this session by advancing a broad tax reform package, but the effort fell apart last week amid pushback from the service-oriented businesses that were in line for new taxes. State leaders committed to study the issue over the interim and possibly return for a special session to revisit tax reform.

Now, Wilson and Adams said, other options are also up for consideration, including increasing the sales tax on food.

Wilson said the agreed-upon budget would set aside $75 million for a potential tax cut later this year. It also invests in air-quality projects, public education and economic development, but in many cases does so on a one-time basis rather than providing the year-to-year funding initially included in the Legislature’s budget plans.

Guaranteeing recurring funding for those items is unwise while the state’s budgetary future still rests on shaky ground, the House speaker said.

"We're not going to make a commitment to those things that we don't know right now that we've got an ability to sustain," Wilson said.

Adams said lawmakers gave careful thought to which spending items are slated to receive one-time funding; for example, they refrained from putting salaries in that category so state employees don’t have to suffer if the funding isn’t renewed next year.

A $110 million infusion of cash to construct a new state prison was moved into the one-time category during the negotiations. About $66 million in funding for government building replacement and $40 million for new capital projects met the same fate, as did more than $32 million allocated to reimburse local jails for holding state prisoners.

Legislators could convert the one-time funding to ongoing appropriations if they return for a special session to address the state’s revenue challenges, Adams said.

Broad consensus exists that the state needs to address the widening gap between its booming income tax revenues and lackluster sales tax proceeds. State leaders entered the session hoping to accomplish that by broadening the sales tax base to cover a wide array of previously untaxed services and accompanying these sweeping changes with a $225 million tax cut.

But those plans crumbled last week, and House and Senate leaders couldn’t immediately agree on what to do next.

In the waning days of the session, House members have suggested passing a bare-bones “skinny” budget as a temporary solution to the funding imbalance. The Senate, meanwhile, has continued to favor a fully funded budget but passed a bill to loosen restrictions on spending the state’s income tax money, which are earmarked exclusively for public education.

The compromise budget struck a balance between the two chambers, Adams and Wilson said, while buying lawmakers time to chart a path forward.

During House debate over the budget bills, Rep. Patrice Arent, D-Millcreek, attempted to remove a $1.5 million appropriation for the planned Orrin G. Hatch Center. The effort was defeated on the House floor with House Budget Chairman Brad Last, R-Hurricane, defending the expenditure by recounting how he started his political career as an intern in the now-retired senator’s office.

The budget plan would increase the state’s per-student spending formula by $128 million overall or 4 percent, slightly more than what Gov. Gary Herbert had suggested but about $50 million shy of what the Utah Board of Education has requested.

Under a bill put forward by Rep. Mike Schultz, R-Hooper, and quickly passed by unanimous votes of the House and Senate, a task force made up of five House representatives and five senators will consider different methods for adapting the state’s outmoded tax structure to the modern economy. Wilson, a Kaysville Republican, said the task force will be charged with presenting findings to the Legislature by August.