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FEATURE

What To Do With All That Money:
An Overview of Legislative Priorities
for the Utah House and Senate

It's now day four of the Utah Legislature's short, but intense 45 day session and both the House and Senate are outlining their priorities for how Utah’s massive surplus monies should be spent.

With projected revenues of $1.6 billion to manage, a spending cap on the state's "rainy day" surplus funds, and caps on non-education and non-transportation funding, the Legislature must either extend the limits, find creative ways to spend the money, or give it back to Utah citizens in the form of tax cuts.

While agreeing in principal on most of Governor Jon Huntsman Jr.’s budget proposal, the House and Senate leadership aren’t giving it a rubber stamp.

Senate President John Valentine says the Senate Republican Caucus will be meeting this Saturday morning to further debate and discuss the size of any tax cut, education funding, how much to bond or not bond, and how much ongoing and additional money to put into roads—“Those are the kinds of details we are still trying to determine.”

Valentine says everything is up for negotiation, but one thing is certain: “We want to see if we can get a decision very early in the process.” His counterpart in the House, Speaker Greg Curtis, says the House and Senate leadership have met to discuss Huntsman’s budget proposal. “We’ll come together and work it out—we have for a long, long time and I suspect it will happen again this legislative session.”

Curtis says the House Republican Caucus has two main priorities:
1. Significant funding for public education
2. Tax cuts

“Tax wise, the governor is proposing to spend more on some areas of government than we think is necessary.” Curtis says the House is in line with Gov. Huntsman’s budget in total dollars. “We will be close to or equal to what Gov. Huntsman is proposing.” However, the Legislature may not agree with every program the governor has requested. “The question is, should we start new programs or simply fund the ones that already exist?” Curtis asks.

“We need to do all that we can for education, but excess revenues belong to the tax payers,” Curtis says, so the House leadership wants to return a significant portion in the form of tax cuts. As for ongoing funds, he says about $750 million is available, of which the House would like to put $300 million into education and $300 million into tax cuts. “That leaves $150 million for the balance of the budgetary process.”

Since the budget is based upon projections, most of the excess hasn’t arrived yet. “We are saying if you lower the tax rate, less will arrive, so we would like to lower the tax rates going forward,” Curtis says. One option, which the governor has proposed, is to cut the single tax rate from 5.35 percent to 5.0 percent.

Cutting taxes is a big issue, but Valentine says the bigger issue is which taxes to cut, and how much to cut. The governor and the house have pegged their tax cut numbers. The Senate, on the other hand, has not yet decided.

Valentine says the Senate has numerous priorities to work through, like improving the Earned Income Credit to help Utah’s working poor and those in the lower middle income bracket, funding Utah’s infrastructure, and tax cuts. He says the Senate places a high priority on investment in Utah’s infrastructure: not only roads and buildings, but public and higher education. “The governor and House seem to be in line with us,” Valentine says. “The governor is proposing a fairly significant increase in education funding, which is important. However, we may differ somewhat in our priorities.”

Higher education took large cuts in the 2001, 2002, and 2003 budget years and Valentine says it is time to make some of that up. The Senate is also highly interested in improving teacher compensation, especially in subject areas where teachers are hard to find and difficult to retain, like math, science, and special education, and also in geographically challenged areas, where recruiting is difficult. Because school districts control teacher pay, Valentine expects some of the increased compensation for teachers would come as state incentive pay, but “we are still working on details.”

Regarding tax cuts, much has been said about cutting or removing the basic levy—the state’s portion of the property tax. Valentine says his caucus sees the property tax as one of the hardest taxes to pay. “There isn’t a clear relationship between one’s ability to pay and the size of the tax paid.” A property owner may not be poor, but they might not be able to afford their property taxes. Valentine says any reduction to the basic levy should be calculated to benefit small businesses and low income home owners.

Another taxing question revolves around the sales and use tax on food. Valentine says it has been proposed that the Legislature create a uniform rate. Presently the sales and use tax rate varies across the state, depending on the additional taxes cities have added to the state rate. “A single rate for the sales tax on food would remove all of the additional taxes added by the cities and counties. If we take those taxes off, do we replace the lost revenue to the cities and counties?” he asks. “That’s a policy decision that has yet to be worked through.”

Read next week's issue to learn more about economic development-specific legislation expected to come before the Legislature this session.

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CALENDAR

Feb. 8, 2007:

23rd Annual Investors Choice® Venture Capital Conference (Salt Lake City)
Learn the venture process, build a fundraising presentation and meet with venture, corporate and angel investors.  Submission deadline is October 30th. For more information visit: www.venturecapital.org/utah.

June 6-8, 2007:

The New West Summit, in Big Sky, Montana will bring together business leaders, entrepreneurs, politicians, journalists, academicians, and engaged citizens to talk about the future of the Rocky Mountain West.

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The EDCUTAH Economic Review is a weekly publication of the Economic Development Corporation of Utah.  It is distributed to EDCUTAH partners and selected other government and civic organizations interested in Utah's economic development. If you prefer not to receive this newsletter, please use the link below. Subscribe or Unsubscribe Your comments and suggestions regarding this newsletter are always welcome. Click here: Comments