Gov. Olene Walker's proposed $8 billion budget, unveiled Monday, was greeted by the expected jeers and cheers. And another thing was clearly evident: She's going to gore some political interests, including fellow GOP leaders, who have opposed many of her initiatives.

By recommending cuts in roads and water and banking on a rebounding economy, Walker expects to round up $140.7 million in new revenue for public and higher education, $30.8 million more for programs for the needy and $101.7 million for other state programs. That all adds up to a 3.4 percent overall increase in the state budget, which includes a 2 percent pay increase for state employees.

And she does it without a general tax increase or a hike in the gas tax.

"This is the best budget under current revenue projections we can put together," she insisted.

It is an ambitious first budget for Walker and one that puts her at odds with legislative leaders of her own party.

"I haven't sensed any change in the legislative will to maintain roads and water projects," said Senate Majority Whip John Valentine, R-Orem. "There are areas (of Walker's budget) legislators will have extreme difficulty with."

But Walker wasn't surprised by the GOP leadership response. "They had problems with lots of it," she said.

How does she expect to spend more money and not raise taxes? Walker's fiscal analysts say the economy will grow next year by about $104 million, still far short of the $273 million she needs to pay for everything she wants. However, the latest report by the Utah Tax Commission shows a $23 million surplus in the current budget cycle — an encouraging sign, Walker said, that the economy is rebounding faster than her initial projections. But current projections aren't that rosy, and Walker's plan to come up with $273 million to pay for everything she wants involves shifting money around. In addition to the $104 million in new revenue, she plans to:

Eliminate a sales tax diversion for water projects, which would divert $14 million to other state needs.

Eliminate a sales tax diversion for so-called local B and C roads, diverting $18 million.

Take $65 million in annual tax revenue now going to highway projects ($15 million would go back to highways next year, but without any guarantee it would continue after next year).

Require small-business owners to file their taxes quarterly, which would raise $30 million the first year.

Walker swept together more revenue with a proposed bed tax on nursing homes, a proposal that cities and counties pay the retirement premiums for their own firefighters, unhooking the state inheritance tax from the federal system and hiring more Tax Commission employees to collect millions of dollars in delinquent taxes.

Her plan also calls for the state to borrow $102 million for highway projects, $50 million for Capitol renovation and $11.2 million to buy the Oxbow jail and convert it into a women's prison.

Republican leaders are biting their tongues and politely promising to review her budget proposal in detail.

Valentine said the debate between Walker and GOP leaders was spirited, but "there were some areas of agreement, too. We agree the highest priority should be her reading initiative. And we agree state employees need to have a raise. You can't go three years in a row without a raise."

Republicans are already on record as opposing the elimination of the state sales tax subsidy for water and B and C roads, and they are opposed to draining the Centennial Highway Fund. There were plenty of other points tucked away in the finer print of Walker's budget that the GOP-controlled Legislature has already voted against.

"Our big concern is . . . there are some provisions in her budget that really don't address long-term needs," Valentine said. For example, taking all of the Centennial Highway Fund would leave the state with a 2006 highway bond payment of $143.2 million but only $96.6 million in revenue to pay for it.

There are some sources of revenue the governor didn't tap — and are still on the table.

In addition to a $23 million surplus, Utah will also get its yearly payment in the tobacco lawsuit settlement — about $30 million. Those monies could replace Walker's plan to take water-development and county road monies, for example.

Legislative Democrats like Walker's budget priorities, causing some to quip Walker's budget could be one a Democratic governor might have proposed. "That was my first reaction," said Senate Minority Whip Ron Allen, D-Stansbury Park, after his Monday budget briefing.

"We like her emphasis on education. We like her putting more money into the Rainy Day Fund — something we suggested several times," said House Minority Whip Brad King, D-Price. "We like the fact she has a cost-of-living raise for educators and state workers."

Democrats disagreed on two points, however. They want to remove the current dependent deduction on state income taxes for children. "And we're worried about (Walker's) bed tax for rest home patients."

There is a sense among some that Walker's budget hits cities and counties particularly hard with the elimination of B and C road money and water funds. And those are things that have to be funded, meaning the cost will have to be passed on to local residents through tax increases or cuts to government services.

"County budgets are as bad off as the state, said Brent Gardner, director of the Utah Association of Counties, "and shifting the burden to the counties is not going to solve the problem."

The Utah Taxpayers Association warned that Walker's proposed spending plan sets up her successor for a huge tax increase in 2005 and would cause local governments to increase their taxes and fees, an association press release said.

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Walker agrees she has taken on some politically sensitive issues but said the crisis of the day is education funding. She had hoped to find funding for expanding the drug court program, remodeling the Marriott Library and vision and dental care for Medicaid recipients, but the money just wasn't there.

"This is a make-due budget in tough economic times," said King, adding the budget "does nothing for the future. It does not solve our education problems. With the huge number of children coming into the system over the next decade . . . well, that need is not reflected in this budget at all."

Walker shrugs off the critics, saying she believes her budget is fair. It comes in, she said, "Somewhere between the Grinch and Santa Claus."


E-MAIL: spang@desnews.com; bbjr@desnews.com

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