Gov. Mike Leavitt, under pressure from investors, will veto a bill that would have, eventually, removed the state tax exemption on income from municipal bonds issued by non-Utah entities.
But the veto has the sponsor and other GOP legislative leaders puzzled, because the governor says he'll put the vetoed bill on a summer special session agenda and if the Legislature passes it again, he'll sign it.
"Hey, we've already passed it once," said House Majority Assistant Whip Greg Curtis, sponsor of HB158. "The governor wouldn't tell me a policy reason for vetoing the bill. So I guess it is just politics. And I'm frustrated."
Lawmakers passed 426 bills during their 45-day session that ended Feb. 28. Leavitt has until midnight Tuesday to act on the bills. The governor says he'll veto only three: SB222, HB168 and HB158, the bond tax break bill that is the highest-profile measure.
Politics, personal and public, seem to be at play, legislative leaders said Tuesday, as the governor rushes in the always-hectic final hours to sign, veto or allow bills to become law without his signature as the law requires.
In addition to vetoing HB158, Leavitt on Monday canceled a public signing of HB179, the very controversial bill that will keep governments and school districts from taking union political action committee dues out of employee and teacher paychecks.
The new law will hamper political fund raising by the Utah Education Association, the largest teacher union in the state, and the Utah Public Employees Association, the main state government union.
"I hadn't heard a word about" why Leavitt canceled the public signing of HB179, UEA President Phyllis Sorensen said. "I have no idea why he would cancel it. I also have no idea why he would want to have a ceremony on such a touchy subject."
Apparently, the governor didn't want to publicly rub the UEA's and UPEA's face in their political defeat. Both groups vow to challenge the new law in court.
House Speaker Marty Stephens, R-Farr West, and Curtis, R-Sandy, both said after being briefed by Leavitt on the bills he'll veto that — with the promise to put HB158 on a summer special session — they see no need for a veto override session this year.
"The other bills don't rise to the magnitude of an override session," Stephens said Tuesday.
HB158 was, admittedly, a sleeper.
Opposition to the bill by investors calling Leavitt's office only surfaced after lawmakers adjourned and newspaper stories pointed out the controversy — which included that only Zions First National Bank had a fund in which only Utah municipal bonds were held, and could possibly benefit from the law, and that Leavitt's father, Dixie Leavitt, sits on the bank's board and holds considerable shares in the bank. Zions First National Bank last week announced it was getting out of the Utah-only municipal bond fund.
"I guess I'm being punished by the governor because the opponents to this bill were asleep at the switch and didn't complain" about it during the 45-day general session that ended 20 days ago, he said. Only Utah and Indiana give tax breaks for bonds outside their states, and it makes no sense to encourage Utahns to buy out-of-state bonds when they should be buying bonds of local governments, Curtis says.
"The bill had hearings in both the House and Senate. I never misrepresented what the bill does, and I have the minutes to prove it," Curtis said Tuesday.
However, Curtis said he hasn't yet decided if he'll ask Leavitt to put the bill on the special session call. "I want to talk to my colleagues, carefully explain that no one is harmed by this law," he said, noting those who own a bond from a municipality outside Utah keep the tax exemption until the bond matures.
"This (veto) is a wonderful thing," said Bob Earl, first vice president in the Salt Lake office of Prudential Securities.
"It allows our municipal bond clients to retain the diversity of their portfolios that can only be had through investing in bonds issued by many states, not just one."
Earl said the state, itself, is not allowed to place all of its eggs in one basket, and Utah investors should not be required to do so, either.
Speaking to the press Tuesday morning, Leavitt said he vetoed HB158 because it did not get enough discussion during the session. "More fundamental and deeper issues were not fully discussed," he said. Removing a current tax break is really "a new tax" and should be done carefully, Leavitt said.
Leavitt didn't veto any spending line items in the $7.3-billion 2000-2001 state budget lawmakers adopted. But he said he's putting a "hold" on $40 million worth of one-time spending in the current budget until at least May, when he will have a better idea of state revenues for this year. That freeze includes a number of new building projects at state universities, including the Dixie fine arts building, University of Utah engineering building, Snow performing arts building and $10 million of state park repairs.
Leavitt agreed at the end of the general session to call a special session this spring on governance of the state's applied technology centers. Now that special session has been pushed back until June, Stephens said, to give time "for public hearings on this very important matter."
The ATC bill — pushed in the final hours of Feb. 28 but ultimately not passed — "is being rewritten, we've had half a dozen meetings and we'll have a lot more" with Leavitt, lawmakers and interested parties, Stephens said.
As is usually the case after each session, the governor signed the major pieces of legislation passed by the Legislature.
Leavitt signed a series of bills that will amount to a $25 million tax cut, five times what he recommended before the Legislature convened in January.
The main one — $18 million — expands current state income tax brackets, which haven't been adjusted for inflation since 1973.
The change means a $32 tax cut for nearly all Utah couples, less for singles.
Companies shipping low-level radioactive waste to Utah will, for the first time, be faced with a tax as Leavitt signed a bill placing a new tax on the waste.
HB370 imposes a tax ranging from 5 percent to 12 percent on companies that use Envirocare of Utah's landfill in remote Tooele County. It also imposes a tax on "alternate feed" materials — wastes with trace amounts of uranium - being recycled at International Uranium Corp., a uranium processing plant in San Juan County.
It is estimated to raise about $3 million for the state over the next two years.
But that's much less than the original proposal.
Envirocare had been looking at a $34 million tax burden but executives hammered out an agreement with the bill's sponsor, Rep. Jeff Alexander, R-Orem, for a reduced tax. The law also calls for Envirocare to pay a flat fee of $400,000, money that would be used to manage the facility should Envirocare fold.
It does not affect class B and C waste — wastes thousands of time more radioactive than they are currently licensed to accept. Envirocare will try to get permission in 2002 from the Legislature and governor to store those "hotter" waste.
By agreeing to the tax this year, lawmakers may be more willing to grant Envirocare's license next year. And Leavitt signed the new tax bill even though one of his political fund raisers and a national political consultant he often uses both hold contracts with Envirocare.
Leavitt has until midnight Tuesday — 20 days after the adjournment of the general session — to sign bills, veto bills or allow bills to become law without his signature.
The governor was scheduled to leave Tuesday afternoon for a high-tech-courting visit to California. He was working to take final action on all the bills so he doesn't have to lug some of them on his trip.
The other two bills vetoed by Leavitt are HB168, which establishes notification and treatment requirements of students who are injured or become ill at school and SB222, which requires a peace officer, case worker or school to inform a custodial and noncustodial parent when a minor is taken into custody, suspended or expelled from school.
Contributing: Max Knudson and Donna Kemp Spangler.
E-MAIL: bbjr@desnews.com ; romboy@desnews.com