Big Utah school funding changes clear first legislative hurdles

(Francisco Kjolseth | The Salt Lake Tribune) Sen. Daniel McCay, R-Riverton, has his first hearing on SJR9, a proposed amendment that would end the requirement that all Utah income tax revenue be spent on public education. The proposal passed out of committee on Thursday, March 5, 2020, with a 6-2 vole along party lines at the Utah Capitol.

Lawmakers on Thursday took the first steps toward asking Utahns to vote later this year on a major shift in the way Utah funds its public school system.

Members of the House and Senate committees on revenue and taxation voted along party lines for SJR9 and HB357, which together would amend the state’s constitution to allow income tax spending on noneducation programs and establish a “stabilization fund” to protect school budgets against an economic downturn.

“We don’t have a backstop today, at all,” said Ogden Republican Sen. Ann Millner. “This starts to build us a backstop that can keep public education on a trajectory of predictable funding.”

Legislative leaders say that existing restrictions on income tax spending deprive lawmakers of flexibility to meet the state’s budgetary needs. With SJR9, those restrictions would be loosened to allow, in addition to funding public education, spending "to support children and to support individuals with a disability.”

Such a change requires a two-thirds vote of both the House and Senate, followed by ratification by the state’s voters in November.

The bill’s sponsor, Riverton Republican Sen. Dan McCay, said that existing constitutional language allows lawmakers to broaden the definition of “education” and achieve the same goal as an amendment, but without a public vote. But doing so, McCay said, could invite criticism that lawmakers are disinterested in the public opinion.

“The question is, in that situation, would we as legislators be including the public in the process?” McCay said. “And some would complain and say no.”

While lawmakers have occasionally discussed stretching the definition of public education to make use of income tax dollars, that approach is largely untested and would likely invite court challenges.

Brad Bartels, executive director of the Utah Education Association, spoke against the proposed amendment. He said a change of that nature deserves a lengthier debate and suggested lawmakers hold a special session later in the year to discuss it and other changes to the state’s taxing structure.

“We are concerned that a generational change in education funding, which is what this resolution really presents, is being decided with one week left in the session,” Bartels said.

But the suggestion of a special session frustrated Sen. Curt Bramble, R-Provo, who pressed Bartels on the UEA’s opposition to an earlier tax reform effort being decided outside of the Legislature’s regular calendar.

“When in the world would you think we ought to address this problem?” Bramble said.

SJR9 was approved in committee on a 6-2 party line vote and will now move to the full Senate for consideration, where a similar proposal was approved in the final days of the 2019 session but failed to be considered by the House.

But the new amendment proposal is tethered to a House bill, HB357, which would only take effect if Utah voters approve SJR9. The companion bill in the House seeks to broker a deal with education interests by easing restrictions on the use of local school district property taxes, setting minimum annual funding goals tied to inflation and enrollment growth, and creating a new reserve account for use in the event of an economic downturn.

Millner said the current thinking is to start with $100 million in the reserve account, with surplus funds added over time until capping out at roughly $400 million.

“We need to build that fund over time,” Millner said. “I wish we had started this five or six years ago.”

On Thursday the Utah Board of Education voted to support both SJR9 and HB357, while the UEA — the state’s largest teachers union — complimented the work done on HB357 while withholding its support while negotiations continue.

The debate on both bills follows the dramatic collapse of a tax reform effort approved by lawmakers in December but subsequently repealed in January under threat of a public referendum vote. That effort was intended to boost the state’s sales tax and General Fund by cutting the income tax rate and increasing the taxes on food sales and service-based businesses.

Income tax collections have outpaced the sales tax in recent years, leading to what legislative leaders call a “structural imbalance” as the bulk of available funding is walled off behind the constitution’s restrictions for education spending.

Gov. Gary Herbert told reporters Thursday that most state officials are united in their desire for more flexibility with education money. But he also expressed a wait-and-see attitude toward the particulars of the constitutional amendment proposal.

“This is probably a way to keep the earmark in place with a small modification,” Herbert said. “We’ll have to see how that plays as it goes through the Legislature. And clearly we need to see how it plays with the education stakeholders.”

As far as removing the earmark entirely, Herbert said his support would depend on whether state leaders find an adequate alternative that protects education funding.

“What I do believe is the people of Utah will not support a change in the constitutional earmark unless everybody — meaning the Legislature and the stakeholders of education — come together and say let’s hold hands and sing ‘kumbaya,’ ” Herbert said.

A January poll by The Salt Lake Tribune and Suffolk University found that 52% of Utah residents opposed to lifting the income tax earmark for education, compared with 32% who supported such a change.

Following the committee vote on SJR9, the left-leaning Alliance for a Better Utah released a statement acknowledging the budgetary concerns faced by lawmakers but questioning the timing of the proposed changes so late in the 2020 session.

“The elephant in the room when it comes to education funding is that Utah already has the ability to put more money toward education, but they continue to choose not to,” ABU policy director Lauren Simpson said. “Allowing the income tax fund to be used for things besides education will inevitably result in less funding for education.”

House Speaker Brad Wilson, R-Kaysville, who along with other members of leadership does not attend committee meetings, was present at the hearing for HB357. He said that during the Great Recession, it was appropriate that government programs like park and road maintenance were deferred, but that the Legislature should have done more to maintain funding levels for public schools.

Under the new framework, he said, the state would have tools in place to weather a fiscal crisis.

“We get one shot at educating these kids,” he said.

And Rep. Norm Thurston, R-Provo, said the proposal “plants our flag where it needs to be planted,” by setting education money aside in good times for use when times turn bad.

“This is genius,” Thurston said. “This is exactly the right policy.”

Members of the House Revenue and Taxation Committee voted 12-1 for HB357, with Salt Lake City Democratic Rep. Joel Briscoe casting the sole opposing vote. The committee’s other two Democratic representative joined their Republican counterparts in supporting the legislation, which will now move to the full House for its consideration.

Tribune reporter Bethany Rodgers contributed to this story.