There’s more cash for lawmakers to spend, according to new revenue projections announced Friday.
New one-time revenue estimates are up by $315 million and ongoing is up by $112 million. In total, there’s just under $1.4 billion in one-time money this year and $205 million in ongoing revenue to spend.
“We all should take a moment and be thankful we live in Utah,” said House Speaker Brad Wilson, R-Kaysville, shortly after the new estimates were made public.
“Utah is a very good place for people who would like to live here,” echoed Rep. Brad Last, R-Hurricane, co-chair of the Legislature’s top budget committee. “The state is doing very well and our economy is recovering.”
“I’m very optimistic, cautiously,” Gov. Spencer Cox told reporters Friday, after the projections became public. “There still could be some headwinds coming, but we feel really good about where Utah is right now and where we’re headed for the rest of the session.”
That’s a far cry from last spring and summer when nearly $1 billion was trimmed from the budget in anticipation of the economic impact of the pandemic. The only area that saw an increase was a modest 2% boost to public education spending.
Despite the glut of cash, there are many more spending requests than dollars available. Legislative leaders said they had more than $2 billion in spending requests this year, and not every request will be approved. Privately, legislative leaders admit they may have made a mistake prior to the session crowing about how well the state’s economy was performing in light of the pandemic. That optimism may have given lawmakers high expectations for spending this year. There’s also a lot of pent-up demand for spending those state dollars.
One big area of concern is the funding for Medicaid expansion because enrollment is outpacing revenues. Without adjustment, expenses will exceed funding by $8 million next year and $21 million in 2022. It will cost the state upwards of $55 million to fix that structural funding imbalance, but the extra revenue this year gives lawmakers the luxury of taking care of the problem all at once, which is the most likely solution.
Legislators made $377 million in funding requests for one-time cash and another $85 million in requests for ongoing funds. That’s outside of any money allocated in the hundreds of bills legislators will pass by the end of the session.
There are also about $500 million in requests for new state buildings, with the lion’s share coming from projects delayed by last year’s budget cuts. Most of the new construction this year is confined to state college and university campuses.
Of particular focus this year for lawmakers is taking a bite out of the list of long-delayed transit projects around the state, but they may turn to bonding to pay for them. Borrowing would allow the state to put more money into transportation this year, and it’s an attractive option because interest rates are so low. On the top of the list for bonding is $350 million to expand capacity for the FrontRunner commuter rail. Other borrowing would be used to pay for transit and transportation projects already in the pipeline.
There’s also a tax cut on the way.
Prior to the session, Senate President Stuart Adams, R-Layton, declared 2021 would be “the year of the tax cut” and has not backed away from that. Some $80 million set aside in 2019 for tax relief as part of the unsuccessful tax reform effort is still there, and legislators say the time is right to pull the trigger on tax reductions.
“We’re excited to talk about the tax relief that’s coming and how it’s going to help improve the lives of certain segments of our population, particularly our seniors and those that serve in the military,” said Wilson.
So far, expanding a state tax credit for retirees on Social Security, tax relief for military retirees and boosting the per-child tax credit are the most likely to pass. However, there are a few proposals for a straight reduction in the personal and corporate income tax rate, though there may not be enough support for such a move.
Despite the fierce jockeying sure to come, lawmakers already have taken care of most of the heavy lifts in the budget, including education.
Lawmakers have already allocated nearly $700 million to public education, which was approved in the base budgets passed in the early days of the session. In December before the session even started, legislative leaders committed $400 million to public education, including money to pay for expected growth in student enrollment and inflation. There was also $120 million in one-time cash to give teachers and school staffers one-time bonuses of up to $1,500. That spending also included a $140 million boost to per-student funding.
Additionally, lawmakers are mandating that $274 million in federal COVID relief funds go toward helping students impacted by remote learning during the pandemic catch up with their classwork. In fact, education funding ate up most all of the ongoing funding available to lawmakers this year.
“This year’s budget certainly treats education well,” said Sen. Jerry Stevenson, R-Layton. He added if the education budget were on the table at the end of the session, as it was in years past, some of those funding items might be negotiated down, most likely the per-student funding numbers.
Cox said he knows not all of his budget recommendations will end up in the Legislature’s final spending plan. But he told reporters that might be for the best in some cases, noting that he didn’t have much time to turn around a budget draft after his January inauguration.
“Some of my ideas were maybe a little half-baked, because I didn’t have time to fully bake them,” he said. “There are definitely going to be some things in my budget that don’t get through. There will be some that we fight for and fight with and that we will get through.”