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Shortfalls crimping state budgets

Agencies trying to reduce their spending by 4%

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Utah's economy continues to limp along, causing Gov. Mike Leavitt and legislators to look at trimming state budgets for the first time in more than a decade.

As previously reported, Leavitt has asked his department directors to find ways to trim their budgets by 4 percent. Some of those "holdbacks" in funding are now taking place after the 2001-2002 $7.4 billion state budget took effect July 1, legislators were told Wednesday.

Doug Macdonald, Tax Commission chief economist, told one legislative committee that the last fiscal year, which ended June 30, will likely show a $58 million shortfall in the general and uniform school funds.

Those are the main state operating funds. But, Macdonald said, the state transportation fund is also short $10 million, mainly because a large fuel distributor apparently overpaid its fuel taxes by $8 million and wants a refund.

Macdonald tracks a number of economic indicators in making his revenue forecasts. He said Wednesday that he's become cautious on more areas of the economy.

For example, state leaders estimated job growth would average 2 percent in 2001. But in June it was only 1.5 percent. Consumer confidence is also down as are new car and truck sales. And nonresidential construction values are badly fluctuating, Macdonald said.

On the good side, he said, residential construction permits are up and the sales tax is doing well. Last fiscal year, the sales tax brought in $8.8 million more than estimated, but the personal income tax was off $55 million from estimates and the corporate income tax actually brought in $4 million less than it did the year before.

"So far this year, people are still spending," said Macdonald, who has been at the Tax Commission long enough to remember the recession days of the late 1980s when state government saw a severe downturn in revenues and then-Gov. Norm Bangerter pushed through the largest tax increase in the state's history in 1987.

A tax revolt followed. And while Bangerter and most legislators won re-election in 1988, the political pain suffered then is still remembered by many on Capitol Hill. The 1990s were record-setting years for state budget surpluses and state budget growth.

But those days have ended, Leavitt has said several times this spring. And legislators may well have to trim current-year budgets at mid-year when they meet in their January and February general session.


E-mail: bbjr@desnews.com