According to the old adage "possession is nine-tenths of the law," Utah's public schools can claim all the income tax revenue in the state's Uniform School Fund.
But the state constitution is actually unclear on exactly who should get the money, despite its traditional allocation only to public schools. The 1996 Legislature decided to let voters clear up the question of whether Utah's colleges and universities should share in the funds.The constitutional amendment to make it clear that state income tax revenue can go to public and higher education will be on the Nov. 5 ballot as Proposition No. 6. It is important that voters approve it for several reasons:
First, approval of Proposition 6 will not mean less money for public schools. In the past, teachers and their unions have opposed ending the earmarking of income tax for public schools because it could mean a shortfall for them.
But legislators this year attached a provision that, if Proposition 6 is passed, any deficits in public education appropriations be covered by cutting other budgets or giving public schools up to 25 percent of the state's "rainy day" fund or a combination of both.
State law prohibits the transfer of funds from the Uniform School Fund to the general fund, though public education can use money from the general fund.
With those safeguards in place, the Utah Education Association has not opposed the change, and the Utah State Board of Education, which oversees public education in the state, has supported it. In fact, State Superintendent Scott Bean said he would like to see all earmarking of funds eliminated and believes Proposition 6 is positive for public schools.
Second, lawmakers did more than propose the constitutional clarification. They actually allocated $35.4 million to higher education from the Uniform School Fund, contingent on voters approving Proposition 6 on Nov. 5.
That means if the proposition is defeated, the state's colleges and universities will be scrambling to make up the loss. The Legislature's action has meant that the institutions will have been operating with uncertain funding for half the budget year.
The lawmakers included the Uniform School Fund in budget juggling because it accounts for most of the available revenue growth and surplus. Taking those funds for higher-education needs freed up money from the general fund for other critical state needs.
Third, there is broad support for the clarification and precedent for using Uniform School Fund monies for higher education.
Gov. Mike Leavitt has said he supports spending income tax money on higher education. In fact, he designated money from those funds as part of his budget proposal for higher education.
Legislators and others who want to remove the sales tax from food are supporting ending this and other earmarkings of revenue from specific taxes, so that the money can be distributed more fairly.
Current wording in the constitution can be and has been interpreted to mean income tax revenues can be used to benefit higher education as well as public education. Uniform School Fund monies have been used for the EdNet electronic teaching program that is sponsored by both higher and public education.
The historical reasons for earmarking taxes for specific purposes are no longer valid in today's economic reality. When Utah adopted the income tax in the 1930s, lawmakers purposely dedicated the revenues to public schools so residents would be more accepting of the intrusive tax.
But over time, earmarking of taxes has become a problem as revenues have shifted. The lack of flexibility makes it more difficult for government to distribute the funds efficiently.
State government, which funds higher education, receives revenue primarily from sales taxes and income taxes, with sales tax going into the general fund and income tax into the Uniform School Fund. Of the two, the income tax has been growing faster in recent years.
The Uniform School Fund for years lacked the funds necessary to pay for public education, and money was transferred from the general fund to pay school expenses. Now the opposite is true, and the Uniform School Fund has a surplus.
The problem lies in a reference in the constitution to the Legislature deciding exactly how the funds can be used for education.
A opinion issued by the attorney general for Utah in 1991 concluded that "revenue received from taxes on income may be used for both the public education system and the higher education system as defined in the constitution or authorized by the Legislature." But other legal experts disagree.
Proposition 6 would clarify that revenue from income taxes may be used for higher education in addition to public education. The amendment is needed to ensure a consistent source of funding for higher education and to remove uncertainties about funds allocated to run colleges and universities this year.