Utah lawmakers started the 2020 legislative session in a conundrum — worried that fiscal cliffs were ahead of them yet provoking public outrage with every attempt to steer clear of the brink.
Now, 45 days later, they’re asking that very same public to help solve the state’s financial bind.
As the session came to a close Thursday, lawmakers had assembled a plan that they say could buy them another decade of budget flexibility, while creating a stable funding framework for the state’s public schools. They just need voters to sign off on the deal.
“And if that doesn’t happen, it will be interesting,” House Majority Leader Francis Gibson, R-Mapleton, said Thursday.
Nothing is for sure, he said. After all, two major pushes to rebalance the state’s revenue streams have already gone up in flames over the past year — the first amid pushback from Utah businesses and the other because of mounting pressure from an underdog citizen referendum.
But this new proposal may be starting from a stronger position, having won support from major education groups that have resisted past efforts. Even the influential Utah Education Association, the state’s largest teachers union, endorsed the compromise over fundamentally altering the way Utah funds its public school system.
If all goes according to plan, officials say, Utah voters in November will grant lawmakers the constitutional authority to spend income tax dollars — currently reserved for public and higher education — on services for children and individuals with disabilities. And schools will be able to bank on consistent annual funding increases, in good times and bad.
“The voters will have the opportunity to look at the pros and cons and make a final decision,” said former state lawmaker Fred Cox, a vociferous opponent of the previous tax reform push. “And that’s not a bad thing.”
Converting past opponents
When it came to the tax reform package passed in December’s special session, no critic was fiercer than Cox.
The fiscal conservative helped launch an upstart referendum aimed at overturning the proposal, welcomed a diverse mix of political perspectives into the effort and gathered more than 117,000 signatures in a matter of weeks. Feeling the pressure, the Legislature repealed the tax bill — which would’ve hiked the state’s sales tax on food while cutting income taxes — as a first order of business in the 2020 session.
Cox says he hasn’t decided whether he’ll support the proposed constitutional amendment. But he argues, in contrast to the special session bill, at least lawmakers are giving the state’s residents a say.
“Voters may or may not like this solution,” he said, “but it’s a lot more transparent."
The Legislature’s previous tax reform plan was also opposed by Utahns Against Hunger, an anti-poverty advocacy group that objected to increased taxes on groceries.
Gina Cornia, Utahns Against Hunger’s executive director, said the Legislature learned some hard lessons this session. But she added that the state still hasn’t come “full circle” on tax reform, and she hopes the remaining issues can be addressed without harming vulnerable residents.
“[Lawmakers] learned about the importance of collaboration and compromise,” Cornia said. “Policy is best crafted when all stakeholders are at the table, even more so when they feel heard.”
Utah Education Association president Heidi Matthews said the union faced the prospect of being the lone voice of opposition to a proposal that increases funding for children and the disabled. But she credited legislative leaders for engaging in talks, and believes both sides began to understand each other better.
“We share the commitment to kids,” Matthews said. “When we know that the bottom line of our collaboration is that the students in our state, our educators and our schools are going to be better off, we’re willing to put aside a lot of differences.”
Even inside the Legislature, the new proposal seemed more popular than the beleaguered bill that lawmakers passed in the special session. For instance, Rep. Tim Quinn, who opposed the December tax overhaul plan, said the current education funding changes will give the Legislature some room to breathe without harming taxpayers or businesses.
“Even though we don’t have tax reform, we don’t have bad tax reform,” the Heber City Republican said. “Had we not done this, we would be in serious trouble. Now, we’re not going to be financially in trouble and we don’t have bad policy.”
This broad base of support for the new plan bodes well for its chances in November, House leaders said Thursday.
“It said a lot that we had everybody up front, locked arms over this,” said Rep. Mike Schultz, R-Hooper.
Gov. Gary Herbert on Thursday described the education compromise as a “phoenix rising out of the ashes” and perhaps the greatest display of consensus on school policy that he had seen during his administration.
“It’s really nothing short of a miracle,” he told reporters.
Still, Matthews said she prefers to refer to the proposal as a “step forward” rather than a “deal." And she suggested negotiations could continue on the language of the proposed constitutional amendment.
“People trust teachers,” Matthews said. “'And as an organization, we want to be the voice that is for something, not against something.”
Advocates for children and individuals with disabilities agree wholeheartedly with lawmakers’ claims that programs in these areas are in desperate need of more funding. Still, they’ve expressing mixed feelings about letting lawmakers pull money out of education and funnel it toward these social services.
“I think we can say that existing state funding available for many disability issues is not sufficient,” Nate Crippes, a staff attorney for the Disability Law Center, wrote in an email Thursday. “However, I think we can also say that state funding for education, including special education, is not sufficient.”
The proposed change to the state’s constitutional earmark on income tax revenue would punch an enormous hole in the state’s education fund, something educators have traditionally resisted. Now, lawmakers would have the explicit legal authority to shift income tax funding away from schools and toward health care, social services and other initiatives.
On the upside for the education community, state law will require minimum funding increases for public education each year tied to enrollment growth and inflation. And surplus funding will be set aside in a new budget account in order to pay for those annual increases during dips in the economy.
Lawmakers have also agreed to bump up per-student funding this year by 6%, the hike requested by the state’s teachers and a negotiated concession that was critical to earning the UEA’s support.
Matthew Weinstein, who helps lead Voices for Utah Children, applauds this year-over-year increase in money for the classroom. His organization was more cautious in its praise of the proposed public school funding package, with Weinstein saying it has “the potential to move Utah in a positive direction and ensure greater investment in Utah’s future.”
The changes passed by lawmakers demonstrate their commitment to K-12 education, he said.
“Now we need to continue to make the case for similar commitments in other critical areas such as pre-K, health care, poverty prevention, and closing majority-minority gaps,” Weinstein wrote in an email.
Crippes said he’s not yet sure if he supports the proposed education funding framework, pointing to a number of blanks that remain to be filled in. If the constitutional change succeeds at the ballot box, he doesn’t know when funding for disability issues would be available or how much state lawmakers would provide.
The plan’s definition of disability is also unclear, so Crippes said he’s not sure what programs would be eligible for income tax money.
“As of now, it seems the proposal is light on details, and I think members of the disability community, as well as advocates for children, should have been included in these discussions,” he said.
Future of tax reform
Lawmakers stressed that the decisions they made this session aren’t synonymous with tax reform — although they do address the same complaints about lopsided revenue streams that have led to large surpluses in the education fund and limited resources in the general fund.
The constitutional changes would open up a doorway between the two funds, permitting lawmakers to free up what they say would be roughly $600 million or $700 million for the strapped general account.
That flexibility, absent any other reforms, would buy lawmakers another 10 years or so before they would once again have to consider relaxing the constraints around income tax dollars or expanding other, less restricted revenue streams.
“The true fix for our imbalance is to shore up the general fund,” said Senate President Stuart Adams, R-Layton.
Quinn estimated that lawmakers will have less time, maybe five years, to rebalance their revenue streams. He led the charge in the 2019 session to beef up the sales tax by applying it to a range of new service transactions, such as hiring a lawyer or an accountant. The bill, opposed by a host of business interests, collapsed in the final days before the Legislature adjourned.
With his decision to retire from the House after his term ends, Quinn said he won’t be around for the next generation of tax reform debates, but he hopes someone will pick up the torch.
“Eventually, something’s going to have to be done,” he said. “I just hope someone has the backbone to fix it.”