Utah spending plan would tap reserves to avoid slashing money for schools, social services

(Leah Hogsten | Tribune file photo) In this April 16, 2020, file photo, Senate President Stuart Adams, R-Layton, and Senate workers conduct business during the Utah Legislature's first-ever digital special session at the Capitol.

A new state proposal for absorbing the economic shockwaves from COVID-19 would slash spending across Utah government but spare public education and social services from the most dramatic cuts.

Protecting funding for students and Utahns in need will mean drawing deeply from the state’s reserve funds, as many local advocates have urged. But this likely won’t be the first round of state spending adjustments, lawmakers said Wednesday — especially if a fall wave of COVID-19 infections forces more economic closures.

“I do believe that we’re going to have reason to come back together and look at these budgets a few more times before we get into our general session,” said Sen. Jerry Stevenson, R-Layton, who co-chairs the main legislative appropriations committee.

The proposal approved for consideration in Thursday’s special session largely wipes out new spending authorized by lawmakers earlier this year, before the coronavirus wreaked havoc on the economy. Then, it goes further by reducing the state’s ongoing base budget by about 1.7%, or $141 million.

However, the legislative leaders who drafted the plan say the news could’ve been much worse, especially for public schools, affordable housing and homelessness programs and mental health services.

“We are meticulously making short- and long-term decisions that will sustain the state today while we deal with the uncertainties of tomorrow,” Senate President Stuart Adams, R-Layton, said in a prepared statement. “The goal is to preserve social services programs and keep our commitment to the education community.”

Under the current proposal, social service programs would still see a 5.4% funding increase compared to last year, according to a state news release.

The plan also leaves intact a $50 million funding bump for enrollment growth and preserves a 1.8% increase to per-student spending. That’s still a far cry from the 6% per-pupil hike that lawmakers approved earlier this year, but Heidi Matthews, president of the Utah Education Association, said her union is grateful that the state is prioritizing schools amid the pandemic.

Matthews said her organization will continue to push for a 6% increase in per-student funding but recognizes it might take longer than advocates had hoped.

“Because, clearly, we’re in a different circumstances now,” Matthews said. “But we still have the same lens of wanting to ensure ongoing and growing education funding.”

To prevent deeper cuts in social services and education, the proposal calls for tapping into the cash reserves the state has built over the past decade, depleting the state’s long-term and working rainy day funds by nearly a third, according to a news release.

Last week, 18 Utah nonprofit organizations that work with children in poverty, people experiencing homelessness, refugees and people with disabilities urged lawmakers to dip into the state’s rainy day reserves rather than implement budget cuts that would disproportionately impact the people they serve.

One of those advocates, Matthew Weinstein of Voices for Utah Children, said he believes state leaders are headed in the right direction with their latest spending plan but would like them to use reserves to cover their entire revenue shortfall.

“Because each $100 million of cuts equals between 1,000 and 3,000 jobs lost in the economy, deepens the recession, slows the recovery and inevitably harms vulnerable populations disproportionately,” he said.

Speaking to fellow lawmakers on Wednesday, House Minority Leader Brian King said he appreciated that legislative leaders did their best to soften the impact of the budget cuts to the state’s public schools and social services. But he offered up an alternative that would also add $5 million for affordable housing, restore funding for air quality programs and increase per-student funding.

“I think those are important things,” King, D-Salt Lake City, said. “I think those are the priorities of Utahns.”

He also suggested eliminating some economic development spending and funding for Banjo, the Utah-based surveillance technology company that had landed contracts with the University of Utah and Utah Attorney General’s Office.

After news emerged that Banjo’s then-CEO was a past member of a white supremacist group, the university canceled its agreement with the company and the state suspended all of its other contracts pending the completion of an audit.

King’s committee colleagues rejected most of his suggested changes to the budget plan but agreed with him to strip out any funding for Banjo.

Andrea Wilco, an economist with the Office of the Legislative Fiscal Analyst, told lawmakers in Wednesday’s interim Tax and Revenue Committee hearing that analysts expect general fund revenue to be down $26 million in 2020 over projections and the education fund to be down by $67 million.

”This is actually a little bit better than we reported in our range forecast last month, which we said could be as much as $600 million,” she said.

For fiscal 2021, they expect the general fund to be down by about $106 million and the education fund to fall short by about $651 million, for a total of $757 million. Among the factors driving those projections include a “sharp drop of unemployment,” which is expected to dip slightly below 4% for 2021.

Wilco projected that income tax collections would remain low during 2021 due to a slow economic recovery. But federal injection of cash into the economy and unemployment payments have helped to sustain retail sales, Wilco said. And sales tax collections were stronger for 2020 than analysts had originally forecasted.

Legislative analysts say they’re not sure what will happen to state revenues when that federal stimulus money peters out later this year.

The other unknown is whether businesses will have to close down again if coronavirus cases spike in the fall, Wilco told the Executive Appropriations Committee. Her current revenue projections assume that the economy continues to recover from here on out, she said.

“So that’s probably the biggest risk in the forecast,” she told lawmakers.

Reporter Taylor Stevens contributed to this report.