SALT LAKE CITY — There won’t be any quick fixes for the damage done to the state’s $20 billion budget by the coronavirus pandemic, a legislative leader said Tuesday, warning it could be years before Utah’s economy fully rebounds.
“I still think we’re going to survive this better than anyone, but I do believe it’s going to be hard to get out from under this,” Senate Budget Chairman Jerry Stevenson, R-Layton, said.
“Is it long term? You bet it’s long term. It’s three or four years out, maybe longer.”
Right now, Stevenson said, he’s not optimistic about what he sees as a long road to recovery.
“It’s possible it could come back quicker than that, but you take the volume of economic activity that we have had and you pull it out of the system almost. The downside of it is it didn’t just get weak, it went flat,” he said. “Some of this stuff is going to be a long time coming back.”
House Budget Chairman Brad Last, R-Hurricane, was only slightly more upbeat.
“Personally, I believe it will take at least 24 months for a full recovery,” he said. “The storm is already here and everyone is aware. But there is a lag in the numbers which may give a false sense of normalcy. There is nothing normal about this situation.”
Newly released numbers from the Utah State Tax Commission show taxable sales dropped in March, only partially affected by the COVID-19 outbreak. According to the commission’s spokeswoman, Tammy Kikuchi, transactions subject to sales tax decreased by about 0.4%, while the number of gallons of gas subject to gas taxes fell by 13%.
An updated revenue report from the state concluded the pandemic’s effects “are just now starting to show up” in the general fund, with growth in sales tax revenues decelerating from 7% in March to 6.6% in April. Gas taxes also saw a decline in growth, from 1.5% in March to 1.1% in April.
Hardest hit are income tax revenues, down 14.4% in April, from a 5.4% increase in March, largely due to the filing deadline being moved from April 15 to July 15. State income taxes were already projected to fall $400 million to $450 million short of estimates, Stevenson said, money that likely won’t all be recovered thanks to job losses.
The Utah Legislature’s Executive Appropriations Committee is meeting Wednesday to get a revised range of estimated revenue shortfalls from state fiscal analysts, the start of what could result in as much as $2 billion in cuts to the budget set to take effect on July 1.
Lawmakers already took action on the current-year budget, in a special legislative session last month, and may need to do more. Stevenson said appropriations subcommittee meetings will be held to recommend reductions, of 2%, 5% and 10% in the upcoming budget that will be dealt with in another special session in June.
He said the subcommittees will be asked to look for cuts in the base budget passed early in the 2020 Legislature, as well as the spending added later on. The base budgets are intended to simply carry over existing programs from year to year.
“This is for real. There are real problems here. We don’t know how deep they go,” the Senate budget chairman said. “This economy is shut down.”
Some segments of the economy have gone into a “freefall,” including the oil and gas industry, agriculture, retail and restaurants, he said, with many businesses “just closed up. There’s a lot of sales taxes that would be coming into us, that are going to be coming in at zero.”
Even the reopening of the state’s economy, put into motion on May 1 when Gov. Gary Herbert shifted the state from a high to moderate risk and allowed some businesses including restaurants and gyms to operate with restrictions, won’t have much of an impact on revenues, he said.
“I believe it’s going to stay flat,” Stevenson said, until the economy adapts. That will take identifying the types of jobs that will survive and retraining workers to do them, he said. “I think there are a lot of folks, this will be a career-changer. I’m not talking about just a few. I think there will be a lot of career changes.”
Last said he believes “things will begin to get better as the economy opens up, but there will be a lag in the state revenues.” That likely means collections for the state’s two major sources of revenues — sales and income taxes — likely will look worse before they look better.
The governor is also monitoring the fiscal effect of the virus.
“While COVID-19 is primarily a health crisis, it is also having large impacts on our economy,” Herbert’s spokeswoman, Anna Lehnardt, said. “Our budget analysts are looking closely at the changes in sales and tax revenue, in context with other changes, to better understand the impact they will have on our budget.”