If Utah’s economy keeps booming, we may see the triumphant return of an old friend to Utah’s Capitol Hill in 2016.
I’m talking about tax cuts.
This year, lawmakers spent a lot of time trying to figure out what to do with a budget surplus topping $700 million. In the context of a $15 billion overall budget, that’s nearly 5%. A staggering sum to be sure. Only $400 million of that was ongoing money, but that's still a lot of funding.
If we see big surpluses like these again next year, it’s almost certain that lawmakers will start talking about tax cuts. 2016 is also an election year, so that will add fuel to the tax cut fire.
It was abundantly clear Utah’s lawmakers were uncomfortable having this much money to spend in 2015. After years of cutting due to the great recession, the culture on the hill is one of setting low expectations. Most of that is led by Sen. Lyle Hillyard, R-Logan, who is the resident “Dr. Doom” when it comes to budgetary matters. He is quick to slap down any economic optimism, pointing out that most of the surplus monies are already spent, and people shouldn’t get their hopes up.
They spent nearly as much energy pretending the state didn't have those big surplusses as they did fighting over Medicaid expansion. There was the "budget exercise" at the beginning of the session where they made state agencies "cut" 2% from their budgets so they could find "inefficiencies." While that sounds good from a budgetary stance, it effectively dampened expectations. Why ask for more money when you're being told to pretend there's not enough to go around?
They also took $116 million of the surplus off the table at the beginning of the session, saying they were afraid that big surplus is an illusion. They didn't want to allocate that money in case the economy takes a downturn. So, they stashed it away in a number of reserve accounts that are for building maintenance and other sundry purposes. If revenues go south, theoretically they can tap that money to make up for shortfalls.
The constant refrain we hear from legislative leadership is caution regarding these big surpluses. They’re rightfully afraid that they may be part of a “bubble” instead of a fundamental shift in the state’s economy. They don’t want to start spending money that might not be around later. The Great Recession taught all of them a very harsh lesson.
But, if we see similar surpluses next year, cutting taxes will be an almost irresistible siren call to lawmakers.
That would be the easy path, but it would be wrong. So many areas that are dependent on government funding, particularly education, suffered during the lean years. It’s only right that they're made whole again if revenues warrant. But that can't happen if the tax cut genie is let out of the bottle.
But the “fiscally conservative” thing to do would be to cut taxes. The politically expedient thing to do would be to cut taxes. Touting a tax cut to voters would be a wonderful stump speech element in an election year.
However, cutting taxes would do another thing that lawmakers profess hatred for - kicking the fiscal can down the road. Tax cuts take money away that could be spent on other things.
Pushing for tax cuts in another good revenue year would stand in direct contrast to the "being careful about the budget" mantra lawmakers have pushed so aggressively over the past few years.
I'm afraid that's where we're going. Education got a big funding boost this year, but we're still far short of where we were at pre-recession levels. There's also needed funding for water development, and transportation and, and, and. There's always something.
Utah lawmakers are caught in a feedback loop. When times are tough, we cut spending. When times are good, we cut taxes.
They haven't been in a position to cut taxes for a while now. I'm sure many of them are getting itchy to make that happen. I just hope they don't decide to scratch at the expense of so many other critical needs.