Taking advantage of extraordinary economic growth expected to last into 1995, Gov. Mike Leavitt was to unveil a generous $4.5 billion budget recommendation Wed-nes-day to lawmakers.
It is Leavitt's first budget as governor, and he plans to spend 9.8 percent, or $201 million, more in state tax dollars during fiscal 1994-95 than the state will spend in the current fiscal year, which ends June 30, 1994. The increase does not include spending of federal funds or an additional $73 million in additional spending this year.Leavitt balances his budget without a tax increase. He credits Utah's healthy economy, resulting in more tax dollars pouring into state coffers, for enabling the increased spending.
"We must take advantage of this growth by bolstering those areas where additional funding today will save multiple dollars tomorrow," he wrote in a cover letter to the 184-page document.
But in a foreword, Leavitt said he has been cautious in his recommendations. "Despite today's bright economic picture, we cannot assume that the underlying forces will be maintained at the current level," he said. "Some of the `boom' money must be used for limited-time expenditures so in the event of economic softening, the state is not locked in to ongoing program expenditures."
Leavitt recommends spending $73 million on one-time programs this year that his aides said will reap long-term gains. Among those one-time expenditures is $29 million in developing an electronic technology network for Utah's schools and universities and $30 million to replenish the state's "rainy day" fund.
His budget also includes $128 million in additional funding to ongoing programs. Among the "enhancements" are pay raises for teachers, judges and state employees; more than $14 million to the courts and Corrections to combat crime and violence; and $9.7 million for higher education enrollment growth.
House Speaker Rob Bishop, R-Brigham City, shares Leavitt's concerns about the uncertainty of how long the good times will last. But Bishop added, "If things are goingthat greatly, we may want to look at some tax reductions as well."
While Leavitt proudly notes no tax increases, his budget doesn't mention the possibility of a tax cut, giving back some of the 12 percent growth in tax revenue coming into the state.
Leavitt's chief of staff Charlie Johnson said an uncertain economic future also nixes the idea of a tax cut as well as runaway spending. "But if the (growth) trend continues, you can't out rule a tax decrease," Johnson added.
Economists predict the upswing will continue at least through fiscal 1995. "We don't find any economic rain clouds out there," said Doug MacDonald, head economist with the State Tax Commission. "It's possible we could get bad weather but nothing to slow Utah's economy down during the forecasted period."
Most economists point to a construction boom when asked for evidence of growth. New construction has a significant impact on the economy because it enlists the help of so many other industries, said Austin Sargent, researcher with the University of Utah's Bureau of Economic and Business Research.
Construction is being fueled by low mortgage rates and more people moving to Utah, Sargent said. Many of immigrants are coming from California, where the economic slide isn't expected to hit bottom for another two years.
MacDonald said his tax revenue projections take into account an anticipated slowdown in defense spending. So the only factor that could quickly reverse the economic outlook is a sudden jump in mortgage rates, which would slow construction. And with inflation at just 4 percent and producer prices dropping, that isn't likely to happen soon, he said.
Another event that could send Utah's economy into a tailspin is the possible closure of Hill Air Force Base, one of Utah's top employers, Leavitt said. The Pentagon is expected to close two of the Air Force's five depots in the next round of base closures in 1996.
"Anyone who tells you that we are not seriously imperiled just does not understand the process," he said.
The governor has recommended bonding for $9.5 million to purchase land around Hill to prohibit private development near the base, which would hurt the base's chances of surviving the next round.
Leavitt has increased all but three budgets in state government. The three facing cuts are Community and Economic Development, elected officials and Natural Resources. Areas receiving the largest increases are Environmental Quality, Corrections (the state prison system) and higher education.
As in past years, public education chews up most of the budget with additional funding for children-at-risk programs, class-size reduction, eliminating textbook fees and expanding his Centennial Schools program.
To reward "exceptional employees working in state government and education," Leavitt is recommending 4 percent pay raises to teachers, public employees, higher education employees, judges and statewide elected officials. Leavitt also wants salary increases for the lieutenant governor and state auditor.
Medicaid spending, a health-care assistance program for the poor, slowed during the past year. But its share of tax revenue - 13 percent - remains significant as Leavitt has asked for a $32 million increase in Medicaid spending. But he said he will announce in the near future a "bold" health-care reform package that will control the rise in the health-care expenditures while providing the uninsured better access to medical care.
Leavitt has recommended the state issue $89 million in bonds to finance construction and remodeling of state buildings, including adult and juvenile prison facilities. The bond would continue the trend of financing transportation projects - $10 million for I-15 interchange improvements. The state would also issue a $9.5 million bond to purchase land around Hill Air Force Base, which would prohibit private encroachment to the base and increase its chances of surviving the next round of base closures.
And Leavitt breaks new ground in recommending a $3 million bond to build low-income housing.
According to recent history, Leavitt should have no problems getting what he wants from the Legislature and possibly more. Still, the governor left $4 million on the table for lawmakers to use.
House Speaker Bishop said that was a considerate gesture and he anticipates lawmakers will be relieved not to have to work under the pressure of dwindling revenues. But that won't make the upcoming session any easier. It may make it more difficult as lawmakers fight over the additional money.
"When we don't have money, it's difficult. But when we have lots of money it's hell," Bishop said.
We don't find any economic rain clouds out there. It's possible we could get bad weather but nothing to slow Utah's economy down during the forecasted period.
Doug MacDonald
chief economist
State Tax Commission
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(Chart)
Governor's 1995 budget
Where the money will come from.
1. General Fund 25.6%
2. Local Property Tax 7.5%
3. Restricted and Trust 3.5%
4. Transportation Fund 5.9%
5. Dedicated Credits 5.7%
6. Federal Funds 24.0%
7. Mineral Lease 0.6%
8. Uniform School Fund 24.5%
9. Other 2.7%
Where it will be spent.
1. Higher Education 12.2%
2. Transportation 8.9%
3. Public Education 35.8%
4. Courts 1.3%
5. Health/Human Services 25.2%
6. Corrections/P. Safety 4.3%
7. All Other 12.3%
*****
(Chart)
The governor's recommended budget
Current budget Recommendations
(FY 1994) for FY 1995
%change
Business, Labor, Agriculture 77,284,900. 82,310,200 6.5
Community & Economic Devel. 70,895,400. 66,939,100. -5.6
Development
Corrections 122,250,500. 135,846,600. 11.1
Elected officials 33,514,300. 32,653,100. -2.6
Environmental Quality 54,716,800. 62,774,200. 14.7
Government Operations 93,320,100. 95,442,600. 2.3
Health 644,219,400. 678,231,600. 5.3
Higher Education 506,829,400. 549,073,800. 8.3
Human Services 430,644,900. 454,959,200. 5.6
Legislature 9,296,800. 9,703,700. 4.4
National Guard 6,901,200. 7,347,500. 6.5
Natural Resources 69,752,900. 67,998,500. -2.5
Public Education 1,488,670,900. 1,589,025,600 6.7
Public Safety 52,420,200. 55,862,300. 6.6
Transportation 155,379,900. 163,292,100. 5.1
Capital budget 301,494,900 302,509,500. 0.3
Debt service 73,775,600 81,071,200. 9.9
Other 3,170,000 4,000,000 26.2
Total 4,251,649,300.
4,498,997,700 5.8