Next week starts an intense two-week period as legislators make moves on setting Utah’s final budget for the next fiscal year, which begins July 1.
First up are the consensus revenue estimates that should be available toward the middle to end of the week. Coming into the session, there was an expectation that there would be a blockbuster amount of extra cash to spend, mostly because lawmakers cut $1 billion out of this year’s budget last spring out of fears the COVID-19 pandemic could crater the state’s economy.
That didn’t happen. Utah’s unemployment rate is currently fifth-lowest in the nation, meaning income tax revenues did not take as large of a hit as expected. Sales tax collections, too, are outdoing what fiscal analysts believed would happen due to the pandemic.
But, there are indications the economic outlook is going to be even rosier when those revenue numbers are made public next week. Privately, legislative leaders say the economy could be growing twice as fast as those projections, and they are convinced the amount of extra revenue available to spend will be significantly higher than previously thought.
That’s not necessarily good news for legislative budgeters as the demands for spending this year are outpacing even the most optimistic of forecasts.
“This is my ninth year in leadership doing budget negotiations, and I’ve never seen a year with this many big requests for spending,” said House Speaker Brad Wilson, R-Kaysville.
After the revenue numbers are released, the four House and Senate chairs and co-chairs of the Executive Appropriations Committee will essentially lock themselves in a room to hammer out most of the budget. Legislative leaders will join those negotiations later to move the final pieces into place.
One of the big pieces of the budget that is mostly decided is education funding. Usually, there’s a big push toward the end of the session for money to pay for projected student growth plus a bump in the weighted pupil unit (WPU), the basic unit of education funding in Utah. That was already allocated before the session. Leaders voted to include $400 million in new money in the base budget, which included $122 million to pay for cash bonuses to public school teachers and staffers.
That shift is the result of Utah voters approving Amendment G in November, which opened up the constitutional earmark reserving income tax collections for public and higher education to also include programs for children and services for disabled people. In the 2020 session, Utah lawmakers agreed to automatically include increases for enrollment growth and inflation in the budget as part of a deal to win support for the constitutional amendment from the education community. The practical result is most of the big pieces of the education budget are already in place before lawmakers begin setting the overall spending plan during the session.
There’s another big chunk of money, about $274 million, from the federal government that’s part of the COVID relief package passed last year. Legislative leaders want to make sure those dollars go toward helping students who are lagging behind because of remote learning. To that end, legislators added language to the base budget making it clear that if those COVID relief dollars go toward another purpose, then their annual allocation from the State Board of Education will be reduced by an equal amount.
That’s not to say there won’t be more spending on public education this year. The final funding priority list from the Public Education Appropriations Subcommittee equals more than half of all the funding currently available to the state in its entire budget. Legislative leaders believe they’ll be able to fund a big chunk of those requests, but not all of them.
One unexpected pressure point in this year’s budget is Medicaid expansion, specifically keeping up with growing enrollment. As it stands, there’s a funding imbalance due to enrollment growth. According to projections, ongoing expenses will exceed revenues by $8 million in next year’s budget and $21 million in 2022. In order to fix that budget hole, the state will have to spend more than $55 million this year to fix that imbalance. But this is more than just a one-time problem.
“Spending on social services is about to outstrip education as the most expensive item on our state budget,” according to Rep. Robert Spendlove, R-Sandy, who says if it weren’t for federal funds to bolster the program, Utah’s budget would really be in trouble.
“It’s not an issue of wanting to help people or take care of people,” he says. “It’s an issue of deciding what our priorities are. Do we want to be funding education or do we want to be funding health care coverage?”
Spendlove says it’s not as simple as a binary choice, but there are only two solutions.
“As far as Medicaid and other social programs growing as a share of the budget, there are only two choices. You can cut the other budgets to pay for this, or you can increase taxes. There’s really nothing else you can do when you have these programs people rely on,” he said.
On top of that, budgeters have to decide what infrastructure projects they want to tackle next year. There are about $500 million in funding requests for buildings, which includes more than $300 million in construction that was defunded last year due to budget cuts as part of the pandemic response.
There’s also a desire to tackle hundreds of long-delayed maintenance projects at state parks, as well as adding an extra track on parts of the FrontRunner commuter rail. Budget leaders say they may use bonding to pay for some transportation projects, which will allow them to shift the expected revenue surplus elsewhere.