How Utah’s new tax cut will affect education funding

The nearly $200 million in tax relief comes from Utah’s education fund.

(Francisco Kjolseth | The Salt Lake Tribune) The sun sets on the Utah Capitol on Wednesday, Feb. 9, 2022.

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Utah legislative leaders gleefully declared 2022 as “The year of the tax cut” before the start of the general session. They made good on that claim on Thursday, quickly moving a tax relief package through the House and Senate worth nearly $200 million. Gov. Spencer Cox signed the bill into law the following day.

Utah’s constitution mandates income taxes can only be spent on public and higher education as well as a handful of programs for disabled Utahns. Any income tax cut comes out of that funding stream, reducing future revenue for those programs.

SB59 gives the average Utah family earning $72,000 a year about $8 a month in reduced taxes, according to the fiscal note for the bill, with the package estimated to give $194 yearly to low-income Utahns. Social Security recipients, on average, will receive benefits of around $210 annually.

And those tax cuts have to be paid for somehow.

Since it’s income tax, the money comes out of Utah’s education fund. The bill reduces the amount of money flowing into that account by $192 million next year.

If those millions were to remain in the education fund, they could boost Utah’s per-pupil funding by 5 percent next year. Utah is near the bottom of all 50 states for per-pupil spending, with only Idaho spending less.

Before the 2022 session, legislative leaders put aside $72 million to increase the weighted pupil unit (WPU) — the fundamental element of public education funding — by just over 2 percent. The Public Education Appropriations Committee prioritized an additional $86 million to bring the total increase for next year to 5 percent. In theory, the revenue to pay for the tax cuts could increase total per-pupil funding by 10 percent next year.

Even with the $192 million going to tax cuts, lawmakers have prioritized several funding items for next year’s budget.

In total, lawmakers prioritized nearly $137 million in ongoing funding for public education. That’s in addition to the $335 million legislative leaders set aside prior to the session. With the $192 million tax cut, lawmakers have accounted for more than $660 million in education funds this year.

Aside from the already passed tax cut, those numbers aren’t set in stone until legislative leaders unveil the budget in the final weeks of the session. Lawmakers should receive updated revenue projections sometime this week, which they’ll use to set next year’s budget.