‘Tough time’ predicted for Utah lawmakers’ funding plan for schools in tax reform package
UEA leader labels plan to make it easier to raise property taxes ‘wrong for Utah’
SALT LAKE CITY — A new school funding plan being quietly negotiated by state lawmakers that largely relies on local property taxes is struggling to find support in time to be considered in a special session of the Utah Legislature and already has some educators gearing up for a fight.
“The overall tax proposal, plus the education piece, cuts hundreds of millions of dollars from our schools. That’s not good for kids. It’s wrong for our teachers. It’s wrong for our schools. It’s wrong for our students and it’s wrong for Utah,” Utah Education Association President Heidi Matthews said Thursday.
She said teachers are planning a show of force at the Legislature’s next Tax Restructuring and Equalization Task Force meeting on Monday, where members are set to consider the latest draft of the plan to lower state income taxes that go to education while raising sales taxes on food, gas and some services.
GOP legislative leaders want that plan to go to a special session in early December, so the income tax cut is in place at the start of the new year. But the rest of the tax reform package — removing the restriction from the Utah Constitution on how income taxes are spent and coming up with a new funding plan for schools — may have to wait.
“I think it’s having a tough time,” Senate President Stuart Adams, R-Layton, said of the school funding plan. He said the goal is to identify new revenues for schools acceptable to educators and “in return, to try to find support for removing the constitutional amendment” that must be approved by voters.
“Right now, we’re still in the negotiating process. It’s been, I think, a very positive and worthwhile discussion. But I think we’re a ways away from finding common ground,” the Senate president said. “It appears we may not make it for the special session.”
Billed as a “proposal to replace the constitutional restriction on the use of income tax revenue with new public education funding policies,” what Adams called a “negotiating document” proposes exempting some local property tax increases from the state’s truth-in-taxation requirements that include holding public hearings.
Members of the tax reform task force have grumbled about local school districts not pulling their weight because there remains some $1 billion in unused taxing authority. House Majority Leader Francis Gibson, the task force’s co-chairman, compared state and local officials to a pair of horses yoked to the same wagon.
“We’re not shifting who’s responsible for what. We’re just saying, are both horses pulling equally,” Gibson said. “I contend there are tough decisions that have to be made at every level, both at the statehouse and the local level. Local school boards are elected just as we are, and there are decisions they have to make.”
The three-page plan calls for an estimated $98 million to be raised annually in local property taxes within five years, while the state would add to those funds to help equalize spending increases among districts, continue to cover new enrollment and provide an inflationary adjustment to state spending levels estimated at $84 million.
It would also fund the Education Fund Rainy Day Account to ensure those commitments could be met in an economic downturn. The plan, which was discussed by the Park City School Board this week, is labeled a draft and notes that “details and required constitutional or statutory changes are still in discussion.”
Todd Hauber, business administrator for the Park City School District, said the plan “didn’t have a positive reception” from school board. He said the board “doesn’t feel comfortable that so much is leaning on the property tax” and that money collected from Park City residents could end up elsewhere in the state.
Hauber said the board has tasked him with determining if that raises constitutional issues. He said all of the state’s 41 school boards are reviewing the plan in anticipation of dealing with the school funding issue during the 2020 Legislature, which begins meeting in late January.
“We’re not going to rush it if we don’t need to. We want to be contemplative,” Hauber said, describing the plan as “taking a complex concept already and making it a little more challenging. All I can say is I would not want to be a bill drafter.”
Matthews, who was in Florida Thursday for an education association meeting, said teachers are already raising their own concerns about the plan.
“My email is blowing up on an hourly basis,” she said
The funding in the plan is “very insufficient,” Matthews said, in terms of making up for the estimated $651 million cut in income taxes being proposed from dropping the state income tax rate from 4.95% to 4.56% and adding new exemptions and credits aimed at helping families along with the poor and elderly.
“It does not grow the investment in public education. While it does lay a baseline foundation for growth and inflation, it is simply not sufficient to address the needs of our students,” she said, warning those guarantees “would all but solidify our position as the lowest funded schools” in the nation per pupil.
A special session on tax reform, especially if it does not include an education funding plan, is premature, Matthews said.
“This has been such a confusing message from the beginning,” she said of the tax reform effort that started with a failed bill last session. The proposal then would have added sales taxes to many services to deal with a structural imbalance in the budget caused by lagging growth in sales taxes as consumer spending shifts from goods to services.
“Now we’ve gone from taxing services to gutting the fund that is constitutionally designated for public education. It’s complicated. It feels very rushed,” Matthews said. “Our members within the Utah Education Association are having such a hard time tracking this ... they want to know, ‘How is this going to affect my classroom?”
Teachers “absolutely” will campaign against amending the Utah Constitution to remove the restriction on spending income taxes only for schools, she said. Asked if their opposition could result in teacher walkouts or similar actions, Matthews said, “anything is possible. We care deeply.”
The latest version of the tax reform bill dealing with the income tax cut and sales tax increases, including restoring the full sales tax on food and adding sales tax to gas, is set to be released Friday. The overall tax cut for Utahns in the most recent version is $80 million.
That figure appears on a mailer supporting tax reform from the Utah Association of Realtors that looks like a check stamped “Tax Cut” made out to “Utah’s Working Families” and signed by the Utah Legislature. On the flip side, it says the proposed plan will pay for “vital programs while decreasing the tax burden on the middle class.”
When it comes to funding schools, the mailer says “the state’s hands are tied by a weakening state sales tax” and promises that tax reform will give lawmakers “the flexibility needed to fully fund education regardless of outside economic forces.”
Because the state seal appears on the mailer, without permission, State Elections Director Justin Lee sent a cease and desist letter to the realtors Thursday telling them not to use the seal on any future mailers. The seal appears on the check side of the mailer, which has already been received by voters throughout the state this week.
Mike Ostermiller, attorney and lobbyist for the Utah Association of Realtors, called the question of use of the state seal “a red herring.”
”I think all that is is a way for people who are against tax reform and against the tax cut proposal, it’s just a way of them finding an argument to distract people from the real issue, which is a tax cut,” he said.
However, Ostermiller said the association will comply with the cease and desist order.
Adams said while it might be ideal to consider all of the tax reform pieces at once, not having the school funding plan ready won’t stop a special session from being called if there’s agreement on the bill already before the task force.
“We kind of think having a strong general fund helps offset any tax cut because we think the stronger growth in sales tax will again be a better insurance policy for education funding,” he said, referring to the fund fueled by sales taxes that covers much of the cost of everything other than education in the state budget.
“But that’s hard to get people to grasp,” the Senate president said. “As you see in the document, there’s a significant commitment to education. We’re trying to make a real, significant commitment. It’s just unclear ... how well-received it is by the education community.”
Contributing: Mark Jackson