In some kind of perverse way, as we see things kind of rattle around out there in the marketplace, Utah looks like the Rock of Gibraltar. We are built on a solid footing, a foundation of fiscal austerity. – Gov. Gary Herbert

After meeting with Utahns of all walks of life, Deseret News editors have identified five key issues that matter to Utah families. These issues, each interrelated with the others, will be addressed in the 2013 session of the Utah Legislature. Take a look at five issues that matter to Utah families.

SALT LAKE CITY — There are new worries that state revenues may end up falling far short of projections and stall action on issues key to Utah families, as lawmakers ready for the start of the 2013 Legislature on Monday.

“We could see this going south,” Senate President Wayne Niederhauser, R-Sandy, said. “We could have a deficit, so we have to cautiously, very cautiously, look at any expenditure increases.”

That caution could have big impacts on spending, including for initiatives aimed at helping Utah families prepare their children for school and careers, enjoy a stronger economy, access health care and deal with the lingering impacts of poverty.

While Niederhauser and other leaders of the GOP-dominated Legislature expressed frustration at the prospect of a lean budget year, they also made it clear they’d rather cut spending than raise taxes.

“That’s what families have to do when their income goes down,” House Speaker Becky Lockhart, R-Provo, said. “They don’t have the ability to tax or take it from other people. They live within their means.”

But Sen. Jim Dabakis, D-Salt Lake, who also serves as the state Democratic Party chairman, said it’s time for lawmakers to take a look at raising Utah’s income tax to fund education.

“What we don’t have is the political guts to look the parents and the taxpayers of the state in the eye and say, ‘You know what, it’s been generations since we have properly funded education.’″

The recently appointed senator said Utahns need to be told that caring about their children and being seen as a family-friendly state means “we’re going to have to pay a little more.”

Another Salt Lake Democrat, Rep. Brian King, said he’s making another run at raising income tax rates on the rich to benefit schools. His proposal, still being drafted, would boost the 5 percent flat rate set in 2007 to 6 percent on earnings over $250,000 and 7 percent on earnings over $1 million.

“I’m tired of what I think is just a lack of political will to do what we need to do to take care of our kids,” King said, acknowledging it may take several legislative sessions to rally support for a tax increase.

King said he wasn’t worried that higher marginal rates might discourage high-income taxpayers from living in Utah. That concern helped convince lawmakers to lower the then-top rate of 7 percent under former Gov. Jon Huntsman Jr.

“I guarantee you we’re going to get more jobs by having a higher quality education system than we’re going to lose by having high taxes,” he said.

House Minority Leader Jen Seelig, D-Salt Lake, agreed all options for funding schools need to be on the table, including raising taxes, especially in such an uncertain budget year.

“We are dealing with difficult times, we are dealing with challenging times,” Seelig said. “The people want a high quality of education. To continue to fund it at the levels are funding it at is embarrassing.”

The dilemma

Economic development officials sell the state on the strength of Utah's workforce, often pitched as among the nation's best-educated. But there are questions as to whether Utah students can keep up with the business world's changing needs, especially in technology.

King said it's the increased concern from the business community about the preparedness of Utah students that may finally spur action on taxes, rather than pressure from parents and educators.

Too many politicians put education at the top of their priority list then dismiss the call for more funding, King said. "I'm sick of having people talk ad nauseum about education," he said. "We have a lot of bluster. We don't have a lot of walking the walk."

GOP Gov. Gary Herbert said taxes should not be raised now — or maybe ever.

An increase in income taxes is "absolutely not inevitable," the governor said, even though Utah's high birthrate and large families mean public education needs will continue to climb.

Economic growth is the key to keeping up with the state's needs, Herbert has said again and again. "Tax policy does make a difference," he said. "I think we've found a pretty good, optimum place to be."

The governor said making sure Utah remains attractive to companies seeking to relocate or expand will keep government coffers filled. His budget contains no tax or fee increases.

"It's how you pay the bills. You pay your bills because you have a job. You need to create more jobs for others to pay their bills. As we create economic expansion and growth to produce additional dollars, there's more revenues to pay the government's bills," he said.

Herbert said it's economic growth, not a tax increase, that will provide more money for schools that can be targeted to better prepare students for work. A tax increase, the governor said, could slow the economy enough to actually produce less revenue.

The national mood

University of Utah political science professor Matthew Burbank said it's even harder for lawmakers to raise taxes at a time when conservatives around the country are pushing Washington for spending cuts.

"It doesn't encourage state legislators to want to say, 'Here's a way we can get more resources for the problems of the state' because in part I think what they're doing is looking at this national debate and saying, 'We're coming down heavily on the keep taxes low and cut spending side of this,'″ Burbank said.

But a new survey by the University of Utah’s Center for Public Policy and Administration found that 55 percent of the state’s voters would favor an income tax hike “knowing the moneys are devoted to public education.”

The center’s director, Jennifer Robinson, said Utahns see the link between paying more in taxes and making more money available to schools.

“Utahns are always supportive of education. There’s nothing new there. What's new is the connection,” Robinson said. “Now there’s a willingness to increase taxes.”

Sen. Daniel Thatcher, R-West Valley, said he’s drafting a bill to give those Utahns who say they’re willing to pay more in income taxes for schools the opportunity, through including a contribution with their tax returns.

“My bill will let them prove it,” Thatcher said. “I’m not going to force people to pay more, but if they want to, they’re welcome to. I don’t know how successful it will be. I don’t know how many people will volunteer to pay more.”

He said many taxpayers are still struggling in the current economy and “to turn around and make it harder for them to put food on the table, even for education, is not something I’m willing to do.”

Food and gas

The University of Utah survey found less support for two other tax measures that reach directly into the home and which are expected to be raised during the upcoming session: restoring the state sales tax on food and indexing the gas tax so rates will keep pace with inflation.

Sen. John Valentine, R-Orem, has said his proposed food tax hike would be revenue neutral because lower-income Utahns would be eligible for tax credits to offset their increased expense.

Valentine said he's trying to stabilize the state's sales tax base, but critics fear restoring the sales tax on food would hurt already financially strapped families every time they go to the grocery store; many might not file for the tax credit.

The motor fuel tax change would result in higher prices at the pump. But that would bring money from out-of-state motorists traveling in and out of Utah, as well as from Utahns themselves.

The Salt Lake Chamber has supported an increase in the gas tax since 2006, because the current 24.5-cent rate set in 1997 hasn't kept up with inflation. The chamber estimates the actual buying power of the tax is less than 15 cents a gallon.

The talk of tax increases comes as lawmakers face an as-yet unknown drop in anticipated revenue.

Both the governor and legislative leaders agreed late last year that revenue would grow by $300 million in the budget year beginning July 1, a projection the governor used to build his $12.8 billion budget.

That, however, was before Congress passed last-minute legislation on New Year’s Day restoring a tax cut to most Americans but raising rates on those earning more than $400,000 as individuals or $450,000 as a family.

Lawmakers had been warned that no action by Congress to avoid the so-called “fiscal cliff” of tax increases and spending cuts set to take effect in 2013 would have meant Utah would face a $250 million shortfall in the upcoming year.

Still, the federal tax increase approved as part of the deal, combined with Congress’ decision to let what was described as a “payroll tax holiday” lapse, is now expected to slash revenue estimates as more money goes to Washington rather than state coffers.

The money question

An earlier estimate by legislative fiscal analysts suggested the $300 million in new growth could plummet to just more than $100 million, a number based on more taxpayers seeing an increase.

“That leaves us really kind of in a limbo,” Senate Budget Chairman Lyle Hillyard, R-Logan, said. Spending will have to be limited to last year’s levels, he said, until the revenue estimates are updated in mid-February.

That means lawmakers won’t know until toward the end of the 45-day session whether they’ll be able to fund key budget items like the estimated $137 million needed to cover expected enrollment increases in public schools.

Juliette Tennart, deputy director of the Governor's Office of Management and Budget, said the tax increases passed by Congress represent "funds that might have gone to going out to eat on a Friday night" and other discretionary spending for many Utahns.

Still, Tennart said she was confident that even though the budget situation is more challenging, it can be managed. She said she was more concerned about the ongoing impact of other budget issues pending in Washington, including looming spending cuts.

The governor said he's "cautiously optimistic" the state will still hit the $300 million mark for new revenue because the gridlock in Washington is making Utah more appealing to businesses.

"In some kind of perverse way, as we see things kind of rattle around out there in the marketplace, Utah looks like the Rock of Gibraltar. We are built on a solid footing, a foundation of fiscal austerity," Herbert said. "We live within our means."

As part of the Deseret News' coverage of the Legislature, we're taking an in-depth look at each of the five issues during the coming week.

Monday: Early childhood education

Tuesday: College and career readiness

Wednesday: Economic development

Thursday: Health care

Friday: Intergenerational poverty

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