Utah’s $150,000 tax reform pitch isn’t convincing the public, lawmakers say

(Francisco Kjolseth | Tribune file photo) Darron Watson with the Salt Lake Board of Realtors brings up the topic of property transfer tax and the effect on home sales as he attends the Utah State Legislature Tax Restructuring and Equalization Task Force town hall meeting in Kearns on Thursday, June 27, 2019. The task force traveled throughout Utah pitching their desire to revamp the tax structure, which could mean expanding what is subject to the sales tax and how much people pay in income tax.

The Legislature pitched its recent series of town halls as a listening tour, a chance for everyday Utahns to weigh in on a potentially big shift in tax laws.

Yet, state records show only a fraction of the roughly $177,000 allotted to the summertime tour was for staging these eight events. Most of this money, up to $150,000, is going to a public relations firm hired to craft a clarion message that Utah’s tax system is crumbling and changes are needed now.

The action plan for the task force — which was charged with exploring generational changes to the state’s tax structure — was to gather public input and then decide whether Utah was facing a fiscal quandary.

Critics of the effort say officials made up their minds long before hopping in their cars.

“The listening tour was supposed to be for the task force to listen to the citizens,” said Dalane England, a small-business owner from Bountiful. “But after going to one of the meetings, I quickly realized the listening tour was for the citizens to listen to the task force.”

State officials acknowledge that they were convinced of Utah’s impending fiscal crisis before the road show began and that part of the tour’s purpose was to prove to the public that a problem existed.

That doesn’t mean task force members were closed off to dissenting perspectives, said Sen. Lyle Hillyard, who’s co-chairing the panel of 10 lawmakers. They absorbed pushback, asked legislative analysts to consider it and came away even more assured that action is necessary to pull the state’s finances away from the brink, the Logan Republican contends.

(Christopher Cherrington | The Salt Lake Tribune)

Still, he doubts the public is convinced that after years of surpluses, the state must change how it taxes people. England is among those suggesting that officials have manufactured a budgetary emergency to build momentum for tax reform, an accusation that Hillyard answers with an ominous biblical reference.

“I remember a story of a guy named Noah who was building an ark,” Hillyard said. “They thought how crazy he was. Then the floods came, and they were too late.”

Spreading the message

Weeks before the road show began, a public relations firm called Penna Powers drafted its action plan. The strategy, the company wrote in a proposed scope of work, would be to engage state residents, “starting with consistent messaging and public education about the need for tax reform.”

The company offered to develop a communication plan and spread the message through social media, “online influencers,” and a task force website called Stronger Futures. Penna Powers was also prepared to create the infographics, displays, handouts and presentations used during the meetings themselves.

They stripped the state’s complex tax policy argument to its core, illustrating the budget as a house that rests on four columns: The income tax, sales tax, property tax and gas tax. While some of those pillars are portrayed as strong, the sales tax column is shown as weak and cracking.

The state hired Penna Powers under an existing contract, with the work estimated to total $99,700 — skating beneath the state’s $100,000 cutoff for awarding a job without a competitive bidding process. Since then, the state and company have revised this cost estimate upward to $150,000 as it became clear the company was devoting more time to the job than initially anticipated.

The justification for exceeding the $100,000 threshold was that Penna Powers has “been involved in planning discussions, preparing materials, and attending the task force meetings that have already taken place,” giving the company experience that no other vendor could match, according to a revised agreement.

A spokeswoman for the Governor’s Office of Management and Budget said $150,000 is the maximum amount authorized for Penna Powers, and, so far, the state has paid only one invoice totaling $29,600.

The set-aside for messaging dwarfs other task force tour costs, which so far add up to about $27,000, according to records. That number includes the $6,000 paid to the town hall moderator, former state lawmaker Pat Jones, and roughly $3,000 for meals served at the meetings on top of $450 on cookies, soda and other snacks. The total spent on travel could increase as reimbursement requests trickle in.

Brett Hastings, tax reform skeptic and a founder of a group called Utah Legislative Watch, said he doesn’t have a problem with the task force’s travel costs.

"My objection has been the use of taxpayer money to create a propaganda campaign to try and convince Utah citizens that our tax system is broken and has to be fixed," he said.

What Hastings calls propaganda, House Majority Leader Francis Gibson calls critical background for the tax reform conversation.

“You don’t go and have a tour without explaining why you’re there,” said Gibson, a Mapleton Republican who co-chairs the task force with Hillyard.

Penna Powers CEO David Smith saw the tour as worthwhile.

“This is a complex issue of critical importance for our future, and we appreciate how our elected officials addressed it by traveling across the state to hear directly from Utahns,” he said. “We valued the opportunity to support the task force.”

There’s been general agreement among state budget officials, legislative analysts and academics at the University of Utah’s Kem C. Gardner Policy Institute that the state’s tax system is outmoded. They also concur that lawmakers are in danger of losing flexibility, particularly with so much of the budget earmarked for education. On the other hand, Hastings’ group, a number of small-business owners and even the chief economist at the State Auditor’s Office have questioned the existence of this fiscal emergency.

Abby Osborne, chief of staff for the Utah House, pointed to a recent state report predicting a roughly $40 million hole in the state’s general fund this year as evidence that officials aren’t just imagining a crisis.

“Have we known that there’s a problem? Absolutely,” she said. “We had an obligation to go out and make sure we informed people of that problem.”

The end of the tour

Hillyard says the task force started its meetings in late June suffering from something of a deficit when it came to goodwill.

During its general session early this year, the Utah Legislature had attempted a massive sales tax expansion but ran into a buzz saw of criticism from lobbyists and business owners. Critics accused lawmakers of composing the package in secret and trying to ram it through the Legislature without sufficient input from the people it would affect.

(Rick Egan | Tribune file photo) Jim Ferrin speaks out against the sweeping tax overhaul bill during it's first public hearing in a committee meeting, Friday, March 1, 2019.

So House and Senate leaders dropped the bill in favor of a lengthier, more open process and formed a task force to lead it. But Hillyard says last session’s drama left people with a bad taste that lingered as his group got down to work.

"I did tell the [Senate] president, I did tell the [House] speaker when we first started ... we've got to dig out of a big hole right now," he said.

Calling in professional help from Penna Powers was part of repairing this damage, the senator said, and even with the firm’s aid, he’s not sure the task force has won public support. He wonders if the task force should have invested even more money in sounding the alarm.

Rep. Tim Quinn, who sponsored last session’s sales tax bill, says he wouldn’t necessarily blame his legislation for the task force’s struggles, but he does agree the group has run up against widespread misconceptions.

It was hard to convey that the task force was starting from scratch and not just recycling Quinn’s scrapped bill, which would have added the sales tax to a host of services from lawn care to Uber and Lyft rides. And Gibson often had to repeat that his panel’s goal is to deliver an overall tax cut, not to increase the tax burden. Though, with most tax changes, some might pay more and some might pay less.

Howard Stephenson, president of the Utah Taxpayers Association, said he’s confident that the task force’s plan will not raise the state’s overall tax collections and that when it is finally unveiled, critics like Hastings will “breathe a sigh of relief.”

But with only about 1,500 people attending the town halls — many of them lobbyists who followed the road show around — the vast majority of the state’s 3 million residents never heard the message carefully crafted by the state and Penna Powers.

“Was it worth it? Yes,” said Quinn, R-Heber City, who sits on the task force. “It was worth it that we gave the public an opportunity to come and hear what we feel the problems are and for us to hear from them. ... Now whether that was effective, that’s a different question.”

(Rick Egan | Tribune file photo) Rep. Tim Quinn introduces the new sweeping tax overhaul bill during it's first public hearing in a committee meeting, Friday, March 1, 2019.

Whose voices were heard?

The state spent thousands of taxpayer dollars so the task force could visit communities across the state, hearing from a couple of hundred speakers and collecting scores of comment cards along the way. But until the group releases a plan, it’s hard to know whether lawmakers took the feedback to heart, says Rep. Joel Briscoe of Salt Lake City.

“The proof is in the pudding, and the pudding is not set, and we don’t know the flavor,” said Briscoe, one of two Democratic lawmakers on the task force.

That’s a perspective shared by Matthew Weinstein of Voices for Utah Children. He argues the state’s tax system has shifted over time to benefit businesses and wealthy households. His organization would like to see the state enact an earned income tax credit, get rid of the sales tax on food and raise the income tax rate.

Stephenson’s group, on the other hand, supports fully taxing food and removing the constitutional earmark that dedicates income tax revenues to public schools and higher education. A thoughtful sales tax expansion that avoids harming businesses would be acceptable, he said, as long as it’s offset by a significant income tax rate cut — a change he believes would give the state’s economy a shot in the arm.

His association was represented at all but one of the open houses, and Stephenson, a former state senator, said he was impressed by the tour.

“I have to tell you, I was a little skeptical at first,” he said. “But the way it was handled was the best I’ve ever seen as far as public input and openness.”

Hastings, however, said he’s concerned that as these critical discussions unfold, powerful businesspeople have unfair access to decision-makers.

(Leah Hogsten | Tribune file photo) Brett Hastings, center with Utah Legislative Watch calls for a cut to the state budget, Tuesday at the Capitol. Utah Legislative Watch held a press conference, May 21, 2019 to formally announce the creation of Utah Legislative Watch.

Utah Legislative Watch believes state records add credence to this hypothesis; Correspondence obtained by his group and The Salt Lake Tribune through public records requests show that a representative from the Larry H. Miller Group of Cos. was copied on a number of emails about Penna Powers and the state’s messaging plan.

“Why in the world is someone from the Larry H. Miller Group being given insider information about tax reform?” Hastings asked.

Amanda Covington, the Larry H. Miller Group representative looped into the conversation, said state officials included her because she’d handled communications for former Gov. Olene Walker, who led a major tax reform push in 2003 and 2004. Covington said she also participated in community engagement efforts when she worked for the Utah Department of Transportation.

“I volunteered input on the open house process to help the task force ensure that Utahns were aware of the meetings and had multiple options to submit feedback and ideas,” Covington wrote in an email.

With the listening tour behind it, the task force is working on analyzing options before coming up with recommendations. The group could have a proposal ready for a special session this year, or it might wait until later to present a plan.

“If that’s in October, it’s in October. If it’s in November, it’s in November,” Gibson said. “I’m not going to be held to an artificial deadline. When we have the right answer that we’re ready to propose, we’ll do it.”