State officials on Tuesday released revised revenue estimates for the state’s upcoming fiscal year, leaving state revenue projections essentially “flat” from estimates released at the end of 2022.
Overall, after accounting for existing commitments, the estimates leave Utah lawmakers with about $817 million in one-time funds and $410 million in ongoing money available to allocate in the remainder of the Utah Legislature’s 2023 general session that ends in less than two weeks, on March 3.
The state’s combined general and income tax revenue is “largely unchanged,” legislators at the helm of the Utah Legislature’s Executive Appropriations Committee told lawmakers on the House and Senate floor, up $11.3 million in one-time funds and down $11.8 million in ongoing funds compared to November estimates.
In total, the state’s general and income tax revenue is projected to be $11.7 billion in fiscal year 2023 and $11.8 billion in fiscal year 2024.
The state’s general fund revenue estimates, largely funded by sales taxes, were revised up by $127 million in one-time funds and $103 million in ongoing funds. However, income tax revenue estimates, which fund public education, were revised down $115 million in ongoing funds and down $115 million in one-time funds, according to the estimates agreed upon by legislative economists, the governor’s office and the Utah State Tax Commission.
“So the bottom line to everything is we’re flat,” House Executive Appropriations Chairman Val Peterson, R-Orem, told the House.
Senate Executive Appropriations Chairman Jerry Stevenson, R-Layton, told his fellow senators it “isn’t great news.”
“The billions that we have been forecast to have in front of us ... they evaporated,” Stevenson said. “I think that kind of gives us all an indication of (where) we are headed, we’re going to be tightening things up a little bit.”
Stevenson said it “leaves us about where we started” in December when the Executive Appropriations Committee made its initial budget recommendations for the 2023 session, including $400 million for tax cuts.
Last week, Republican legislators announced how they plan to distribute that $400 million in a tax package that includes $208 million for an income tax rate cut, as targeted tax cuts for lower- and middle-income earners through expanding the earned income and social security tax credit.
Given the new revenue estimates, lawmakers aren’t likely to expand that tax cut, said Senate President Stuart Adams, R-Layton.
“Looks like we’ll probably keep the tax cut where it’s at,” Adams told reporters, though he added “never say never” when asked if that means no one-time rebates, like what the governor recommended in his budget.
That $400 million tax cut package, in HB54, advanced through a House committee earlier Tuesday on a 9-2 vote. Critics argued it would largely benefit high-income earners and largely go unfelt by moderate- and low-income Utahns. They urged lawmakers to instead use the funds for unmet needs including housing, health and transportation.
However, simultaneously, groups including the Utah Taxpayers Association argue the income tax rate cut doesn’t go deep enough, arguing Utah is falling behind other states when it comes to keeping income taxes low.
The new revenue estimates come as the national economy experiences what Stevenson in a media availability called a “correction.” As economic tides shift, the country is experiencing increased risk and volatility with economists predicting economic slowdowns. The slowing housing market is also taking its toll, Stevenson said.
“State leaders cannot ignore the federal government’s out-of-control spending, climbing interest rates, soaring inflation and company layoffs,” stated a joint news release issued by Gov. Spencer Cox’s office and House and Senate GOP leadership. “The state budget will reflect prudent policies and meet current and future needs by making strategic investments, including funding education, investing in statewide infrastructure and water needs, allocating money for rainy day reserves and reducing taxes for Utahns.”
Meanwhile, state leaders say Utah’s economy remains strong.
“Thanks to our strong economy, these numbers show Utah can safely cut taxes and make major investments in water, education, housing and infrastructure,” Cox said in a prepared statement. “Still, high inflation and increasing interest rates signal we should proceed cautiously. We’re grateful the Legislature shares our commitment to fiscal responsibility.”
Adams said Utah is a “safe harbor in global uncertainties.”
“Our strong economy allows us, for the third year in a row, to cut taxes and fund education at record levels, even during a pandemic and with a slowing economy, while making generational investments,” Adams said. “Additionally, ongoing tax revenue is being spent on one-time projects, resulting in a significant working rainy day fund that no other state has, positioning Utah to best navigate economic downturns.”
House Speaker Brad Wilson, R-Kaysville, said while Utah “continues to have one of the strongest economies in the nation,” the state “can never be too cautious and prudent as we plan for the upcoming fiscal year.”
“We remain optimistic,” Wilson said, “and will make significant, generational investments in perennial areas such as water, housing, transportation and education.”