SALT LAKE CITY — House and Senate Republicans are at an impasse over whether to give Utahns a tax cut this year from the $80 million already set aside, but pushed ahead with a $20 billion budget Friday that includes an unexpectedly large increase in education funding.
The Senate’s Republican leaders have made it clear their preference is to hold onto the $80 million because of the economic effects already being felt as a result of the the new coronavirus curtailing travel and other activities by the public.
.“We were looking at a much larger tax cut but with the stock market reaction to the coronavirus we have hesitated,” Senate President Stuart Adams, R-Layton, told the Deseret News. “However, we would like to do a bigger tax cut when there is more certainty. We think it is prudent to wait to see the effects of the virus.”
But House Speaker Brad Wilson, R-Kaysville, told members of the House Democratic caucus midday that “maybe keeping a good portion of the $80 million that we’ve set aside for tax relief for a rainy day makes sense,” and said he couldn’t be clearer about the GOP plans at this point.
Later, House Budget Chairman Brad Last, R-Hurricane, said House Republicans want to use around $20 million for “a small tax cut,” on state income taxes paid on Social Security benefits, leaving the rest of the $80 million in reserves.
A bill introduced at the start of the session that would provide a tax break for Social Security recipients, HB181, sponsored by Rep. Walt Brooks, R-St. George, was finally assigned Friday to the House Revenue and Taxation Committee for a hearing.
Monday, House and Senate GOP leaders are expected to try to work out their differences, but time is running out. The 45-day session of the Utah Legislature ends Thursday.
Tax cut options that have been considered included increasing the dependent exemption for state income taxes to offset the impact of the 2017 federal tax changes on families and giving retired military personnel a tax credit on their pension benefits.
Adams had raised another possibility — giving Utahns a one-time tax cut that could be in the form of a rebate.
“We’re not sure if that has legs,” the Senate leader said.
The Legislature’s Executive Appropriations Committee meet briefly Friday evening to approve the budget, which contains an additional $400 million for education including a $170 million increase in the amount of per-pupil spending in public education — a 5% boost — even though 4% had been previously recommended by lawmakers.
But the 5% increase to the value of the state’s funding mechanism for education, the weighted pupil unit, is slightly less than the 6% increase request by school boards, including the Utah State Board of Education and the Utah Education Association. It is more, however, than the 4.5% increase recommended by Gov. Gary Herbert.
The proposed budget provides $10 million to expand the number of optional full-day kindergarten programs, $8.6 million less than recommended by the public education appropriations subcommittee. Other education funding includes $3 million for early childhood grants and $5 million to mentor new and aspiring school principals.
For higher education, the budget proposal includes one-time funding for three buildings: $42.5 million for Southern Utah University’s classroom building, $30 million for Salt Lake Community College’s general education building on its Herriman campus, and $58.7 million for the University of Utah’s applied science building.
The budget would provide $5 million in ongoing funding for enrollment growth at the state’s colleges and universities. The college access advising program, which embeds recent college graduates in high schools to help guide students into diploma-granting colleges and universities or technical colleges, will receive $1 million.
There is also $5 million in ongoing funds to make the Regents’ Scholarship also available to students at Utah’s private and nonprofit colleges, and $27.3 million for ongoing pay and benefits and $6.5 million for health insurance increases for higher education employees.
State employees would see a 3% pay raise, and an additional 2% increase or more if they work in targeted areas such as corrections, said Senate Budget Chairman Jerry Stevenson, R-Layton.
The budget includes money for a wide range of items — $1.5 million to help the University of Utah cover security and other costs of hosting the nation’s only vice presidential debate on Oct. 7; $5.2 million for a search and rescue helicopter; and $3 million to improve the state’s ski jumps and other Olympic facilities as Salt Lake bids for another Winter Games in the future.
Stevenson said lawmakers weren’t able to allocate as much as they hoped in a number of areas, including mental health programs, or for affordable housing. And he said some money budgeted may end up not being spent if the economy takes a dive, such as $60 million for a new state office building at the Capitol complex.
“I don’t think you’ll see that move forward,” Stevenson said. “This economy has got to straighten up before we get real serious about that.”
Last said hundreds of millions of dollars in the budget could be pulled back if the state’s financial situation falters, money that would be available to keep government services going in addition to the nearly $1 billion already allocated to the state’s existing rainy day funds.
“We parked a lot of money in a lot of places. We feel like that makes a lot of sense given where we are,” he said. “We know that the coronavirus thing is out there, we see what’s happening in the stock market, and we know perception is reality.”
Tax cuts, though, will continue to be discussed next week. House Majority Whip Mike Schultz, R-Hooper, said he paid for a new poll showing more than three-quarters of Utahns want a tax cut.
Schultz said there were no surprises in the Y2 Analytics poll that found most want the state’s 4.95% income tax rate dropped. It also revealed that 30% of Utahns polled don’t want taxes reduced, behind an income rate tax cut and reducing income taxes on Social Security benefits.
“We have a very mixed body right now and I think that we want to take a cautious approach. There seemed to be support to do something measured,” Schultz said. “But we want to work with our Senate colleagues and see where they’re at.”
The debate over tax cuts follows the Utah Legislature’s failed attempt at tax reform. At the start of the 45-day session, lawmakers voted to repeal a tax reform package passed in special session last December that would have cut income taxes while raising sales taxes on food, gas and some services.
Legislative leaders had initially said they wanted to wait until next year to deal with tax reform. This is an election year for all members of the House and about half the Senate, and a new governor will be elected in November to replace Gov. Gary Herbert, who is not running again after more than a decade in office.
Schultz said he did not know exactly how much he paid for the poll, but that “it wasn’t much.”
Y2 Analytics provided a copy of the poll to the Deseret News. It showed that more than 1,000 members of an online panel were polled Feb. 26-March 2, with a margin of error of plus or minus 3.03 percentage points.
Reducing the state income tax rate, which has been brought up by House Majority Leader Francis Gibson, R-Mapleton, was seen as the most beneficial to Utahns regardless of how much they made, as well as the best for the economy.