It's not just teachers, school administrators and schoolchildren who are at risk in Wednesday's special legislative session called to deal with financing overcrowded classrooms.
A number of Utah industries who, over the years, have enjoyed special tax exemptions are also at risk. For Gov. Mike Leavitt says he's going to look to some of these exemptions to find upwards of $15 million a year to build schools - thus avoiding a property-tax increase on all Utahns.Leavitt wanted no tax exemptions taken away Wednesday. Rather, over the next four years, Leavitt and legislators will study a certain number of exemptions each year and repeal or modify those that "no longer serve the public interest," the governor says.
However, at least one senator wanted to take away a Geneva Steel exemption and Democrats wanted to firm up by Oct. 1 which exemptions would be taken away (see accompanying story on A2).
Leavitt needs no tax-exemption money in fiscal 1994 - the budget that runs from July 1 of this year to June 30, 1994. But he needs $5 million in fiscal 1995, with up to $14 million in the following years.
And there's the rub. Where is he going to get it? Leavitt won't say now which tax exemptions catch his eye (see chart). No one wants to give up his exemptions, and some carry big political sticks - like a lot of Utah voters.
But it is safe to say, his aides add, that the exemptions found on this year's and next year's lists are prime targets. After all, if he needs $5 million next year, it makes no sense to put a likely source for it on fiscal 1996. It does him no good that far away.
One of the items on this year's study list is $9.7 million given to manufacturers who don't pay the 61/4 percent sales tax on the purchase of equipment that expands their work capacity. Also on this year's list is a $5.4 million exemption in coin-operated laundry and car washes.
On next year's study list are three big agricultural exemptions - insecticide sprays, farm equipment and seasonal (roadside) agricultural sales.
Larry Bunkall, president of the Utah Manufacturers Association, says the new equipment exemption was started in 1985 to entice Kimberly Clark into an Ogden industrial park to manufacture diapers. In 1991 the State Tax Commission reviewed the exemption and found that it made good economic-development sense, says Bunkall. The 1991 Legislature allowed the exemption to stand.
"Thirty states give complete sales-tax exemptions to new manufacturing equipment. Many others give partial exemptions. It's economic development. We have to compete with other states," Bunkall says. His association represents manufacturers who employ 84,000 Utahns - a considerable citizen voting bloc.
The coin-operated laundry industry has fought this battle in the Legislature before, according to Joan Evans Karren, a managing partner in Evans Commercial Laundry Sales, one of the state's largest such companies.
"Every time this comes up, we go up there and we ask the same question, `How do you collect it?' It's a major problem, and it's directed at the people who can least afford it," Karren says.
"We really are putting a burden on lower income people," she says. "It won't be the people sitting in their nice beautiful homes with their nice shiny washers and dryers who are carrying that burden."
Most of the area's coin-operated washers and dryers - well over 11,000 - are in apartment complexes rather than laundromats. Each is equipped to accept quarters only, typically three for washing and two for drying.
"You could go up to $1, but that's a pretty heavy tax. People already are complaining about prices," Karren said. "There's really no way to collect dimes, nickels or pennies, whatever the tax may be." Tens of thousands of Utahns use coin-operated laundries, a significant constituent group.
Farmers also aren't interested in losing their sales-tax exemptions two years from now, says Tom Bingham, vice president for public policy, Utah Farm Bureau Federation.
Insecticides, farm machinery, seed and fertilizers all are exempt from sales tax. And it makes no sense to tax them, Bingham says. "They are all basic input items to agriculture. We don't place sales tax on other wholesale items, we tax them at retail. We are doing and should continue doing the same thing for agriculture - tax the product, be it beef, tomatoes or milk, at the retail level."
Placing the 6 1/4 percent sales tax on farm machinery and fertilizers "would mean an immediate 6 1/4 (percent) increase in costs." But, Bingham says, farmers don't set the price of their products, as many other producers do. "The market sets it. And the market is immediate. You can't hold your tomatoes, like you could a refrigerator, to sell later when prices get better. You sell at the price or your product perishes."
Taxing producer sales at roadside seasonal markets, like when a farmer sells his apples, strawberries or corn, also makes no sense. More trouble than it would be worth, he adds. Farm families make up 65,000 voters, says Bingham, another large voting bloc.
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(Additional information)
Contention may slow lawmakers
Legislators hoped Wednesday morning to finish their special session in less than one day, but several different items popped up that may lead to some controversy.
While most lawmakers agree with Gov. Mike Leavitt's proposal to fund critical school buildings, Democrats planned to attempt an amendment to the main funding bill that would require that specific tax exemptions - a major part of Leavitt's funding plan - be detailed by Oct. 1.
Leavitt has said for several weeks that he wants to study tax exemptions - a certain group each year - over the next four years. But educators, especially the teachers unions, say that is not firm enough and they want a more solid funding commitment.
In the Senate, meanwhile, Sen. John Holmgren, R-Bear River, planned to introduce a separate bill repealing a sales-tax exemption earmarked for Geneva Steel. The Geneva exemption is currently in place and doesn't run out until June 1994. But the 1993 Legislature extended that to 1996. Holmgren argues it makes no sense to extend that when it has a year left, time to study whether the exemption, which costs the state an estimated $1.8 million a year, is worthwhile.
Lawmakers also were going into party caucuses to discuss whether to override any of Leavitt's six vetoes of bills passed just a month ago. Leavitt doesn't want any of them overridden and there are serious questions about whether supporters of those vetoed bills can get the two-thirds votes needed to override in both chambers.
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(Chart)
Sales-tax exemptions
Exemption Review - 1993
*Figures rounded to nearest thousand
Exemption Revenue gained from elimination exemption - FY 1994
Vending machine sales less than one dollar 778,000
Film and radio 37,000
Coin-op laundry & car wash 5,443,000
Pollution control equipment 6,000,000
New & expanding manufacturing equipment 9,735,000
Intrastate freight, express & railway fares 2,587,000
Containers, labels & casings 12,839,000
Steel mill replacement equipment 1,800,000
Subtotal 39,218,000
Exemption Review - 1994
Revenue gained from elimination exemption - FY 1995
Airline food 607,000
Airline equipment 207,000
Aerospace tools 2,385,000
Newspapers 2,900,000
Commercial sprays & insecticides 1,727,000
Farm equipment 5,000,000
Seasonal agricultural sales by producer 1,528,000
Utah manufactured aircraft 0
Out-of-state long distance telephone calls 10,000,000
Subtotal 24,354,000
Revenue gained from elimination
exemption - FY96
Motor & special fuels 42,037,000
State & Local government purchases 52,568,000
Religious and charitable organizations 12,989,000
Sales exempt from taxation by federal law 25,577,000
Sales of meals at schools, churches, etc. 1,051,000
Food purchases with Food Stamps 2,472,000
Utility sales to industrial users unknown
Food purchases through WIC 675,000
Subtotal 137,369,000
Revenue gained from elimination
exemption - FY97
Non-resident motor vehicle purchases 1,325,000
Medicine 6,718,000
Occasional sales unknown
Personalty trade-ins unknown
Property stored for resale 314,488,000
Non-resident property used in Utah but unknown
purchased elsewhere
Property purchased for resale unknown
Sales subject to another state's tax unknown
Nonresident boat purchases 150,000,000
Construction materials used out of state 250,000,000
Subtotal 322,931,000
Total revenue gained 523,871,000
Source: Utah Tax Commission