After getting a whiff of the $201 million in new money the state expects to capture in the next 18 months, conservative Republican lawmakers began howling Wednesday for tax relief.
"The public feels taxes should be temporary, but the quote is that government can never give up the taxes it imposes. Now's an opportunity to do that," said Rep. Michael G. Waddoups, R-Salt Lake, during the GOP House caucus.As Republican legislators discussed whether to set aside $43 million of the new money for one-time expenditures - like an "electronic highway" communications system that Gov. Mike Leavitt desires - several supported using it to implement some kind of income or property tax relief.
"We owe it to the people," added Rep. Jordan Tanner, R-Provo.
But GOP leaders don't believe the timing is right for a tax cut and agree with Leavitt, also a Republican, that they should wait and see if the economic conditions continue for another year or two before cutting taxes.
"Time will tell whether that occurs, but we have got to consider (a tax cut as) part of the equation," Leavitt told a joint Senate-House gathering late Wednesday following the caucus debate.
His presentation was delayed several hours because of a disasterous fire earlier in the day that caused heavy damage to the historic Governor's Mansion.
"Sorry about the delay," he said jokingly. "I had a little problem this morning and had to amend the capital facilities budget."
Leavitt characterized the state's economy as "stunning," with job growth at 5.1 percent and personal income growth up 7.3 percent, all contributing to a 12 percent increase in sales tax compared to a year ago.
His budget planners anticipate a $56 million surplus in revenue for the current fiscal year, which ends June 30, 1994, and $145 million in natural tax revenue growth, spurred on by Utah's good economy, in the next fiscal year.
But the prosperity is precarious, Leavitt warned, and calls for some prudent management. He said the economic upswing is being driven by a construction boom, which local economists say is fueled by low interest rates and an influx of people moving to Utah from other states. Sales-tax growth outstripping personal-income growth also indicates people are spending more than they earn.
The growth could slow considerably with a sudden jump in interest rates. And the trend could reverse itself if the federal government decides to close Hill Air Force Base, which Leavitt warned could happen. Preventing the closure is a top priority.
So in the $4.5 billion spending package he submitted to the Legislature, Leavitt has separated $73 million of the projected surplus, an amount he believes is subject to an economic downturn, into a "boom buffer." The money would be spent on "one-time" projects that would not require future funding if the economy started slowing.
Under Leavitt's plan, $30 million of the "boom buffer" would replenish the state's rainy day fund, which was depleted to settle a lawsuit between the state and federal retirees. The University of Utah would receive $1 million to defray costs of an antitrust case, and $3 million would go toward the Central Utah Project. Public education would receive $17.5 million of the one-time funding and $11.1 million would go to higher education.
Before even seeing Leavitt's budget proposal, the GOP House caucus unanimously accepted the administration's plan to set aside $73 million for one-time expenditures. There was no debate over putting $30 million of it into the rainy day fund, which state law requires must be restored.
But the remaining $43 million is up for grabs, and it could go toward tax relief. Some lawmakers warned against it because a reverse in economic conditions would mean the Legislature would have to take the money back again.
The caucus also accepted Leavitt's offer of $4 million to fund its own proposals. Each year, lawmakers struggle to find money to pay for their own legislative bills.
That leaves $124 million for the Executive Appropriations committee to use for ongoing programs. The committee plans to meet Jan. 6 to divy up the money among the various state departments and budgets.