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Happy returns for Utah

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Deseret Morning News graphic

WASHINGTON — Maybe it pays to have a friend in the White House. And it couldn't hurt to have powerful friends on powerful congressional committees doling out federal spending.

What is clear is that Utah is pulling down at least its fair share of federal funding, according to a national study by the Tax Foundation, a nonpartisan Washington, D.C., think tank that looked at the federal expenditures in each state compared to the federal taxes paid.

Utah received $1.19 from the federal government in 2003 for every federal tax dollar sent to Washington — its best performance in the past 10 years included in the study.

Utah ranks 22nd in federal largesse, well behind New Mexico's leading $1.99 return on each federal tax dollar and well ahead of New Jersey, where the state saw a return of only 57 cents for every tax dollar paid to federal coffers.

Much of the federal money goes to state governments to pay for federal programs like health care for the poor and highways.

In total, Utah received $11.96 billion last year, while taxpayers paid $10.37 billion to the feds. Ten years ago, the state received $7.39 billion, while taxpayers sent $6.97 billion to the federal coffers.

Richard Ellis, director of the Governor's Office of Planning and Budget, said he has seen a steady increase in federal funding to the state in recent years, from $1.9 billion in fiscal year 2003 to $2.15 billion in the current fiscal year.

"Over three years, that's a $200 million increase," he said. "It has been a steady increase, and we expect to see it continue to grow."

Most of that increase was to pay for increased costs associated with health care for the poor. About half of the federal money going to state coffers now goes to pay for health care and Medicaid programs, Ellis said.

Another couple hundred million goes to highways, and the rest goes to other state departments in the form of grants and matching funds.

Overall, the state's dependence on federal tax dollars has been creeping up. Ten years ago, 23 percent of the budget was federal funds. In the current budget, it is 26 percent, according to the Legislative Fiscal Analyst.

Direct funding to the state is only part of the equation. Federal funding would also include the 35,500 federal employees in Utah, as well as funding for Hill Air Force Base, Dugway and other military institutions. Then add in the federal money going to Utah defense contractors and to pay for federal programs not managed by the state.

In all, 33 states get more back from the federal government than what their citizens and businesses pay in federal taxes.

Of course, that means taxpayers in 17 states paid more in federal taxes than they got in return for things like highways, Medicaid and defense spending.

The study found that federal spending on defense and other procurement items are often funneled to the states of powerful members of Congress. And Utah had two powerful senators in key positions to make things happen.

Some states have also learned how to leverage more federal tax dollars, pushing up their return on investment.

"However, demography may be more influential than politics," the study found. "States with more residents on Social Security, Medicare and other large federal entitlements are bound to rank fairly high."

Utah has been steadily improving its ratio of federal dollars received versus federal dollars returned to the state.

In 1996, the state was actually paying a penny more in federal taxes than it was getting back from the federal government, the study found. By 2003, the state's rate of return had climbed 20 percent.

Utah fared particularly well during the first three years of the Bush administration, especially compared to the last five years of the Clinton administration, when the state's ranking dipped as low as 31.

Other states have also done well. In fact, 17 states improved their returns more than Utah since 1994. (Alaska saw the most improvement, a 59 cent increase.)

And 16 states saw their returns actually decline over that 10-year period. (Colorado dropped the most, from $1 in 1994 to 80 cents in 2003.)

E-mail: spang@desnews.com