Amid another strong economic year — but also record inflation — the state’s final budget estimates show the Utah Legislature yet again has a big chunk of new money to spend.
As in over $2 billion more.
After new revenue estimates added an extra $432 million in one-time revenue and $384 million in ongoing funds than what was previously expected, the Utah Legislature this year has about $1.46 billion in one-time money and $570 million in ongoing new money to spend.
“I know it sounds like a lot of money. It is a lot of money,” House Budget Chairman Brad Last, R-Hurricane, told lawmakers on the House floor last week when the final budget projections were released. But he warned “it’s not nearly enough” to satiate budget requests that surpass $2.4 billion in one-time requests and over $1 billion in ongoing requests.
As lawmakers have worked to prioritize those requests — saying they plan to be cautious with spending, concerned about inflation’s impact on the economy — Utahns have weighed in on how they’d like to see the money spent.
As they have in years past, most Utahns want this year’s extra revenue to go toward education. Tax cuts are the next highest priority.
That’s according to a new Deseret News/Hinckley Institute of Politics poll, which asked Utahns how they’d prefer the Legislature to spend this year’s budget surplus. The largest chunk of residents — 43% — said they’d want that money to go to increased spending on education, while 25% want it to fund tax cuts.
A smaller number, 17%, said they’d want the money to fund infrastructure projects for transportation and roads, while 6% said it should be used to bolster Utah’s Rainy Day Fund. Nine percent said they didn’t know.
Dan Jones & Associates conducted the poll for the Deseret News and Hinckley Institute of Politics of 808 registered voters in Utah on Feb. 7-17. It has a margin of error of plus or minus 3.45 percentage points.
The poll results come as lawmakers enter the final week of the 2022 legislative session and are putting some of the final touches on the budget. On Friday, the Executive Appropriations Committee is expected to release a final appropriations list and set the budget.
What are lawmakers prioritizing?
Senate Budget Chairman Jerry Stevenson, R-Layton, told reporters on Thursday expect big wins for education in the budget.
“Education has been very well taken care of,” Stevenson said, noting both public and higher education will be “very well funded.” He said expect to see a significant increase to the weighted pupil unit — the funding formula for public schools — and dollars for a variety of programs.
But he also added there will likely be a good amount of money stashed away in savings.
“This economy is a little bit scary,” he said, noting that economists are wary of the impact federal stimulus money and inflation has had on the state’s budget.
“Hopefully our constituents will be very pleased with what we’ve done with education,” he said, “but this is not the year to spend it all because of the insecurity.”
House Speaker Brad Wilson, R-Kaysville, told the Deseret News in an interview Thursday that lawmakers will be making “additional and significant investment” in public and higher education this year. That’s in addition to big spending for infrastructure, especially investment in transportation and funding to help alleviate crowded state parks.
“I think both education systems are going to fare very well,” Wilson said, though he had the same warnings as Stevenson. “It’s tricky though. We recognize that there’s high inflation right now, and so we’re trying to take care of our teachers and other educators and also state employees and balance all of the interests across the state.”
Jason Perry, director of the University of Utah’s Hinckley Institute of Politics, said “all indications” so far this session that “the intentions of the Legislature are aligned with the desires of the Utah voters. I expect that we will see a large amount of that money put into education.”
It’s important to note a lot of the state’s money this year has already been set aside for priorities, especially ongoing funds.
In December, even before the legislative session began, the Executive Appropriations Committee set aside about $354 million (including $19 million in one-time funds) for public education enrollment growth and inflation and other public education needs.
As for tax cuts? Lawmakers have already budgeted $193 million for tax cuts, including $163 million for an across-the-board income tax rate cut for all Utahns, dropping Utah’s income tax rate from 4.95% to 4.85%. Lawmakers also approved a $15 million nonrefundable earned income tax credit targeted for lower-income Utahns and a $15 million expansion for the state’s Social Security tax credit.
Senate President Stuart Adams, R-Layton, said this year’s budget will be characterized by “tax cuts and record, if not near-record, spending for education.”
“When you can cut taxes and do significant funding at the same time, that means we’re doing something right,” Adams said, adding that the budget will also include a big boost in spending for state employees and infrastructure.
“The budget won’t be perfect, there’s no such thing,” Adams said. “But it’s going to be a dang good budget.”
What about the debate over constitutional education spending?
There’s a wrinkle that’s complicating the state’s relationship with education spending.
Under the Utah Constitution, the Legislature is required to spend income tax dollars on education — but legislative leaders are proposing a future constitutional amendment to effectively eliminate that earmark. They say a change is needed to give lawmakers more budget flexibility at a time when sales tax revenue is not growing at the same rate as income tax. It’s an issue lawmakers have been expressing concerns about for years now.
Of the state’s newly projected available ongoing revenue, about 70% comes from the education fund (fueled by income taxes), and 30% comes from the general fund (fueled by sales taxes), according to legislative and governor’s office fiscal analysts.
It would be up to voters to decide whether to amend the state constitution. In order to put the question on the ballot, a joint resolution would have to pass both legislative bodies by a two-thirds majority vote.
Such a resolution has not yet surfaced during the 2022 session. On Thursday, lawmakers involved in those discussions, the House speaker and Sen. Ann Millner, R-Ogden, said with only a week left it’s not likely they will move to push it through this year. It’s a conversation that will likely continue beyond this year’s session and into next year, they said.
“When we do this, we want it to be right,” Millner told reporters. “So we’ll go to work on it after the session ... In my mind I think we’re kind of putting this on hold.”
Adams said the state’s structural funding imbalance “is a problem, and whether it gets resolved this session or next we need to get those that don’t live, eat, drink, sleep this budget aware that this is a significant problem in the state. We’re not going to give up working on it.”
Wilson said these “big challenges usually take time, and we just wanted to make sure we were measuring twice on this one, and we didn’t feel like we had time to do that.”
So this year, nothing will change lawmakers’ constitutional constraints on income tax revenue — meaning lawmakers will be required to spend most of the surplus on education anyway.
In total, lawmakers have about $617 million in one-time and $429 million in ongoing money in the general fund, and an additional $1.68 billion one-time and $1.07 billion ongoing in the education fund to spend, according to fiscal analysts.
The debate over Utah’s constitutional requirements to spend income tax on education isn’t going away, though. The challenge for lawmakers moving forward will be pitching the constitutional amendment as a solution to fix the state’s structural funding imbalance while also sending a message to Utahns they still prioritize education.
“Their success will be tied to their ability to convince the public that education is still the priority of the Legislature as they make changes,” Perry said. “To the extent that they can make sure that balance is found and those assurances are received and believed will define how successful they are in making changes.”