SALT LAKE CITY — Gov. Gary Herbert and other backers of the changes to education funding passed by the 2020 Legislature that still need to be approved by voters in November are quick to say it’s not a substitute for long-term tax reform.
But state leaders also acknowledge the plan being billed as “stabilizing education funding” ends the urgency to come up with a fix for a structural imbalance in tax revenues.
“The good news is, the pressure is off,” Herbert told reporters during the final hours of the 45-day session that ended Thursday. “We’re buying time. We’ve got approximately eight years bought with this change. So there won’t be the pressure that we had kind of this last year, to do it now, do it now, do it now.”
The governor said the need for long-term tax reform isn’t going away, but “we’ve kind of put a Band-Aid on it, which has been a good Band-Aid, a big Band-Aid, a big change for education in a positive way, but we still have some issues that need to be addressed around the general fund” that depends on sales taxes. Officials have long cited lagging growth in sales tax revenues that continue to fall behind income tax collections as consumer spending shifts from goods to services.
House Majority Leader Francis Gibson, R-Mapleton, said he believes the new education funding plan could put off future tax reform for a “solid 10” years and maybe even longer.
“I don’t know if it removes the discussion,” Gibson said. “It does give us some flexibility and some time. Now all of a sudden we don’t need to do a major tax reform. It’s not as pressing. It gives us more time to look at it over the next few years ... as opposed to immediately.”
Senate Budget Chairman Jerry Stevenson, R-Layton, said the new plan is expected to “satisfy what we would need to do to run a very healthy budget in the state of Utah for probably eight years, 10 years.” But he said the tax reform package repealed at the start of the session would have been a more permanent solution.
“I really think we really did a very poor job of marketing the tax bill. I think it probably was our best chance at fixing this long term. However, you know you can’t cry over spilt milk,” Stevenson said “This will hold. This will fix it for quite a while.”
This is the Legislature’s third stab at tax reform. In the 2019 session, a bill to extend sales taxes to services ranging from haircuts to legal advice while reducing income taxes was scrapped amid an outcry from the business community and a task force was created to find an alternative.
The task force’s recommendation to cut income taxes and offer new breaks to families as well as low-income and elderly Utahns while raising sales taxes on food, gas and a limited list of services was approved last December in a special legislative session, then repealed in January after citizens rallied to undo the new law themselves.
The latest plan calls for amending the Utah Constitution to allow income taxes now earmarked exclusively for education to also be spent on children and people with disabilities, while providing statutory guarantees public schools will get money every year to cover student growth and inflation.
Voters have the final say on constitutional amendments and the companion legislation spelling out the funding guarantees is set to take effect only if the proposed amendment on the income tax earmark passes in the upcoming general election.
What could have been a major obstacle to winning vote approval in November was set aside last week when the governor and legislative leaders announced the Utah Education Association had joined other education groups in endorsing the new funding plan.
The teachers association, which has the resources to fight the ballot question on the constitutional amendment, ended up getting last-minute concessions for its support, including another 1% increase in per-pupil funding on top of the 5% already in the budget.
But the referendum that stopped the previous tax reform effort was driven by citizen volunteers who organized the drive to gather the more than 116,000 voter signatures from around the state needed to put repeal on the ballot through a Facebook page.
One of those volunteers, Kris Campbell, testified at a legislative committee hearing on the proposed constitutional amendment that once again, voters are going to feel that they’ve been left out of the process because the education funding plan didn’t surface until late in the session, after being negotiated behind closed doors.
“I feel like there’s voices missing at the table when these decisions are happening. Then when it comes to a vote of the people, the people are upset because they weren’t included in those discussions,” Campbell, who lives in Park City, told lawmakers. “We need to take the time to get it right.”
Even if the education funding plan is put in place by voters, some lawmakers don’t want to wait to take action on taxes.
Rep. Walt Brooks, R-St. George, said he’ll bring back his state income tax break on Social Security benefits for Utahns over 65 earning less than $45,000 that passed the House but stalled in the Senate over concerns about the economic impact of the new coronavirus pandemic.
“These people definitely could use the help,” Brooks said, especially if there’s a financial downturn. “I’ve already talked to leadership and they know that I’m not going to give up on this.”
Rep. Tim Quinn, R-Heber City, who sponsored the 2019 tax reform bill and served on the task force, said there’s still work to be done on taxes, including increasing the dependent exemption to counter the effects of federal tax changes on Utah families, an issue he was unable to advance this session.
Quinn, first elected in 2016, said he’s decided not to seek reelection.
“The process has been disappointing,” he said. “I thought an individual representative or an individual legislator could make a difference and I just don’t believe that anymore.”