Utah lawmakers got some good news on Thursday as their latest revenue estimates for the current legislative session were updated to show an additional $238 million in state coffers.
The new figures bring the state’s total surplus to $921 million, but the bulk of that money comes from income tax collections and is constitutionally walled off for spending only on public and higher education.
Hurricane Republican Rep. Brad Last presented the new numbers to his colleagues on the House floor, saying that the state’s economy continues to perform but that revenue coming from sales taxes — used to fund general government operations, from Medicaid to prisons — aren’t keeping up with needs.
“We have 10 times more [surplus] money in the Education Fund than we have in the General Fund,” Last, budget committee co-chairman, said.
Despite the nearly $1 billion overall surplus, the revenue estimates show the state running a $12 million deficit in one-time general fund revenue, suggesting that some portion of the $92 million in ongoing general fund money available to lawmakers will be needed to close that hole. That, or spending cuts.
Sen. Jerry Stevenson, co-chairman of the Legislature’s main budget committee, told his colleagues that basic funding requests for general fund dollars far exceed what’s available.
“The next three weeks will be longer than three weeks,” he predicted to reporters. “There will be a lot of asks that committees have listened to that will probably go by the wayside.”
Lawmakers began the 2020 session by repealing a controversial tax reform package that was intended to partially address the “structural imbalance” between the Education and General funds.
That legislation would have cut taxes overall by reducing the income tax rate and raising sales taxes, but led to significant pushback from the public.
The tax package, passed in special session in December, was expected to be followed this year by legislation amending the state Constitution to allow income tax spending on noneducation programs, as well as new proposals for how to ensure funding for the state’s schools. But four weeks into the Legislature’s work, those efforts have so far failed to materialize.
Still, the figures released Thursday reserve $80 million in education funds for any tax relief the Legislature decides to provide for the upcoming year. Senate leaders have been hesitant to support any piecemeal tax cuts and prefer a holistic look at tax reform, even if these comprehensive changes must wait for a future session.
Until then, Stevenson, R-Layton, said the lopsided revenue streams will continue to plague lawmakers during the budgeting process.
“We’re not in a crisis. We’ll be able to work through this,” he said. “But every year, this will continue to cause problems until we get to some kind of a tax reform package.”
But House Speaker Brad Wilson, R-Kaysville, has suggested he’s more supportive of short-term tax relief than his Senate counterparts. He said Thursday that it’s too early to say what could pass the Legislature, but that there is room on the income tax side to return money to taxpayers.
“Those conversations next week will be [about] what kind of tax cut, when will it occur, and how much will it be,” he said.
Meanwhile, on Thursday, a broad coalition of advocates gathered on the Capitol steps to discourage lawmakers from tax cuts and ask them to invest any available money in education, air quality, affordable housing and services for individuals with disabilities. The state’s overall tax burden is already at its lowest point in about 25 years, noted Matthew Weinstein of Voices for Utah Children, referencing a recent Utah Foundation report.
The 15 advocacy groups represented at the news conference sought to share a vision of the bright future that was possible for the state “if our leaders can resist the election-year temptation to cut taxes and if we can make the critically needed investments that’ll pay off many times over in the future,” Weinstein said.
On Tuesday, the Public Education Appropriations Committee adopted its budget recommendations, calling for roughly $450 million in new money for schools, including a 4 percent increase to per-student spending. That figure does not include new spending recommendations for higher education, which would also be derived from income tax collections, or money that would be reserved in the state’s rainy day fund.
Some lawmakers have suggested that in place of a tax cut, a greater portion of the state’s surplus could be held in reserve this year to protect against a potential economic downturn. And Wilson said spending constraints could be beneficial as lawmakers prioritize government programs and look ahead to a new round of tax reform negotiations next year.
“Us taking a year like this and spending less is not necessarily a bad thing,” Wilson said. “We can take a year and try to regroup and be very, very conservative.”
Heidi Matthews, president of the Utah Education Association, said the new revenue figures show there is an opportunity for a significant boost to public education. The UEA and other education groups have called for a 6% increase in per-student spending, which Matthews said would ensure schools have funding left over for new initiatives after covering inflationary costs.
“It’s time to build futures and not give tax cuts,” Matthews said. “Our students are really counting on us to make those necessary investments, and the time is right."