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Should income taxes only go toward education?

Utah Legislature’s tax reform task force considering removing earmark

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Even before removing the state constitutional earmark on income tax collections for education came up at Thursday’s legislative tax reform task force meeting, there was plenty of grumbling about school spending.
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SALT LAKE CITY — Even before removing the state constitutional earmark on income tax collections for education came up at Thursday’s legislative tax reform task force meeting, there was plenty of grumbling about school spending.

Much of the concern expressed centered around the more than $1 billion in funding still available to school districts through property tax increases at the local level, as well as money being spent on what one lawmaker described as “Taj Mahals.”

“We always hear that the state is the lowest per-pupil funded,” said House Majority Leader Francis Gibson, R-Mapleton, the co-chairman of the Tax Restructuring and Equalization Task Force. “It illustrates the locals aren’t doing as much as they could, either.”

Gibson also pointed out that the $1.4 billion in new money lawmakers have allocated to education over the past five years, more than a 25% increase in spending, demonstrates “there’s not a lack of desire to fund education by the Legislature.”

He also pointed out several times during the three-hour meeting that when times were tough, other portions of the state budget were cut to fund education, including social service programs. Now, Gibson said, lawmakers need flexibility to spend income tax revenues.

Several task force members were clearly frustrated by information presented showing that more than 80% of local school district’s capital expenditures go towards buildings, compared to a nationwide average of about 60%.

House Majority Whip Mike Schultz, R-Hooper, blamed the difference on overspending for the construction of junior and senior high school “Taj Mahals,” using money that could be used to increase teacher salaries, and said it’s an issue that needs to be addressed by lawmakers.

But Senate Minority Leader Karen Mayne, D-West Valley City, said more children mean more schools need to be built.

“Have you ever been to Herriman? We’ve got a lot of kids out there. We can teach them in the playgrounds, I guess, but I think we need to house them,” Mayne said. She said the schools she’s seen in the area, including a new high school, are not mansions.

No action was taken and no public comment was accepted at the meeting, the second of at least four scheduled for the task force through October. Recommendations are expected to be made later this year, after the Republican supermajorities in the House and Senate weigh in, likely at closed-door caucuses.

The task force, launched after legislation imposing new sales taxes on services failed to pass the 2019 Legislature amid protests from the business community, is tasked with finding a fix to the state’s budget imbalance, with growth in income tax collections outpacing sales tax revenues.

While members of the task force are expected to take another look at taxing services at an upcoming meeting, their focus seems to be on finding a way to tap income tax collections for the rest of the state’s needs that largely are paid for with sales tax revenues.

Although 44 states collect income taxes, only nine earmark any of the revenue for education. Utah is the only state that requires all state income tax collections to go to schools, through a 1946 amendment to the Utah Constitution that was changed in 1996 to add higher education.

Amending the Utah Constitution to remove the earmark would give lawmakers the most budget flexibility, but is expected to meet strong opposition from the education community. An amendment has to be supported by two-thirds of the Legislature and approved by voters.

Several alternatives for shifting education funds into the general fund now largely reliant on sales taxes were presented, such as adding a fee to income tax filings similar to the $10 charged in Idaho that would be offset by a credit and replacing the basic levy with a statewide property tax.

Using income tax revenues for various programs such as prison education and rehabilitation services now paid for out of the general fund is another option that adds up to $470 million, not including $55 million from state liquor store sales that goes into the school lunch program.

But Rep. Tim Quinn, R-Heber City, balked at what he called playing “shell games” with the budget.

“Let’s just be honest,” Quinn said, calling the constitutional earmark “no guarantee to the education community because we don’t need to change the constitution to change the income tax rate from 4.95% to zero, if we wanted to. There’ is no monetary guarantee. ... It handcuffs us.”

Sen. Kirk Cullimore, R-Sandy, said despite the “dysfunctional relationship” between the education community and the Legislature, a way can be found to do away with the earmark while still assuring there will be money for schools.

“Our goal is to find the best tax policy for the state of Utah. It seems like it’s very difficult to do that with one arm tied behind your back,” Cullimore said of the earmark, suggesting it could be replaced by guaranteeing baseline funding, “ensuring that education is taken care of at least at the same level it is now.”

Rep. Joel Briscoe, D-Salt Lake City, a former educator, questioned whether the constitutional earmark “provides indirect protection for public ed funding, a positive psychological effect.” Briscoe said he was also concerned there could be unintended consequences to removing the earmark.