Republican legislative leaders are proposing an amendment to the Utah Constitution that would effectively eliminate a decades old earmark of income tax for public education.
House Speaker Brad Wilson, R-Kaysville, addressing the Utah State Board of Education Tuesday, said a change is needed to give lawmakers more budget flexibility at a time sales tax revenue is not growing at the same rate as income tax.
“We don’t really have a revenue problem in the state of Utah, but we do have a budget problem. We don’t have really the flexibility as policymakers up here on Capitol Hill at times, to address statewide needs in the way that we feel we should be,” he said.
Voters would be asked to amend the constitution to eliminate “the firewall” between sales tax and income tax. The proposal would “continue to prioritize funding for education with additional guarantees,” according to Wilson’s presentation to the elected State School Board.
The proposal also contemplates eliminating the sales tax on food, which one-third of Utahns said they would most prefer among tax cuts the Utah Legislature could enact this session, according to results of a new Deseret News/Hinckley Institute of Politics poll.
The poll found 33% of Utahns preferred eliminating the sale tax on food; 22% favored reducing the income tax rate while 15% said they favored reducing the income tax rate for low-income Utahns only, the poll found.
The poll, conducted by Dan Jones & Associates from Feb. 7 to 17 — prior to GOP leaders releasing details about a proposed constitutional amendment — surveyed 808 registered voters in Utah. The poll has a margin of error of plus or minus 3.45 percentage points.
In 2020, 54% of Utahns voted for Amendment G, which allows income tax to also be used for services for children and those with disabilities.
HB357, companion legislation to the resolution that placed the proposed 2020 constitutional amendment on the ballot, statutorily requires legislators to fund enrollment growth and inflation and provides a safety net to protect education funding during an economic downturn and other unforeseen circumstances.
While Amendment G provided more flexibility, projections suggest Utah needs to do more to get ahead of the imbalance between income and sales tax revenues.
“One thing we’re good at in this state, and I hope that we can continue to be good at, is avoiding problems before they arrive. This isn’t a crisis today, but in a year or two we are going to have some really, really tough things happening. It’s not really our nature as a state to wait until we’re in the middle of the ocean floating without a life jacket,” Wilson said.
Another proposal contemplates amending the Utah Constitution to add a provision that the Legislature “shall establish programs to stabilize public education budgets and mitigate economic downturns” according to Wilson’s proposal.
The latter was created following the passage of Amendment G but the new proposal would place it in the constitution rather than state statute.
To place a constitutional amendment on the November ballot, a joint resolution would have to pass both legislative houses by a two-thirds majority vote.
Heidi Matthews, president of the Utah Education Association, said in a statement that the association is committed to assuring Utah’s public schools “have the resources, funding and support to be the best they can be for all our students, regardless of the funding source. Any proposed changes to the Utah Constitution require significant study and reflection of both intended and potentially unintended impacts on our schools.”
The State School Board took no position on the proposals. Board Chairman Mark Huntsman said the board’s next opportunity to respond would be its previously scheduled meeting on Thursday.
Wilson and Senate Majority Whip Ann Millner have been “checking (the) temperature” and “appetite” of the education community on the proposal, Huntsman said.
“I think this is moving forward with or without us,” he said.
Utah Senate President Stuart Adams, R-Layton, speaking to reporters during the Senate’s daily media briefing Tuesday, said part of the problem is that income tax is “extremely volatile” depending on economic conditions.
In 2008, “we had an 8% increase in income tax. The following year, we had a 10% decrease. The year after that we had a 9% decrease. So in a period of three years, we saw almost 35% to 40% swing in income taxes. And when we have a volatile funding system for education, it creates problems and part of that problem is, our balance between the general fund sales tax and income tax,” he said.
“We actually thought with Amendment G, that would have a period of time before we could look at these types of imbalances” but it appears further action is needed, Adams said.
Millner, addressing reporters, agreed that lawmakers had hoped that Amendment G “would carry us for a period of time in terms of giving us the budget flexibility that we need, because this is not, as people know, it’s not a revenue issue. It’s really a budgetary flexibility issue,” she said.
When revenue streams are “targeted to particular budgets to be funded,” it makes it difficult for lawmakers “to be really focused on the high priority needs of the state, which is what we’re tasked to do,” Millner said.
She continued, “So we’re trying to find a way to give us some flexibility in the constitution in terms of being able to exercise our ability to support and fund things while at the same time providing some protection for public education because this is really important to public education.”
Income taxes have been dedicated toward education since the 1940s. A 1996 constitutional amendment expanded the definition of public education to include higher education and Amendment G permitted certain services for children and people with disabilities to also be funded with income tax.
Having an earmark on revenue doesn’t necessarily “translate into money in a budget,” Millner said.
“We would like to reframe that a bit and try to say ‘How do we make sure this really does translate into stable funding in the budget, some predictable growth in the budget, having rainy day funds that will that are also protected and our public education stabilization fund is also protected so we can have a really consistent approach for public education going forward,” she said.
Contributing: Katie McKellar