Don't Get Too Excited About Spending Utah's Budget Surplus

Written by Bob Bernick on . Posted in Today At Utah Policy

All the numbers are in.

And reports that Utah state government is doing well financially are absolutely true.

 

For fiscal year 2012-2013, which ended last June 30, the state took in a very fine $242 million more than budgeted for.

Yes, the budget was around $13 billion.

Still, $242 million ain’t pocket change.

Now, legislative leaders in the Executive Appropriations Committee warned Tuesday afternoon don’t get all anxious about how to spend that extra cash.

Much of it must, by law, go into the Rainy Day funds within the General Fund and the Education Fund.

When those Rainy Day funds are combined with this past year’s surplus, the state is sitting on a nice pile of cash of $347.5 million.

Sen. Lyle Hillyard, R-Logan, the Senate budget chair said he can’t remember such a large amount of cash sitting in the Education Rainy Day Fund.

Saying that there “was a theme” of Tuesday’s meeting – surplus monies in various accounts and departments – Jonathan Ball, chief of the Legislature’s budget staff, said state budgeters continue to refine the revenue estimate procedures and formulas, all with a goal of setting budgets that fairly guess how much revenue the state and public schools will have in any one fiscal year.

Most state departments and agencies, including the Legislature itself, keep what are known as “nonlapsing” monies at the end of each fiscal year.

Basically those are monies allocated to them by the Legislature, but for whatever reasons are not spent.

The Legislative Fiscal Analyst said that number for fiscal 2013 is $328.1 million. That’s about 5.5 percent of the whole 2012-2013 spending plan.

There are some interesting excesses in those “nonlapsing” surpluses:

-- The Legislature itself has a $5.5 million surplus in a $20.6 million budget. That’s a 26.7 percent of budget surplus – a full fourth of allocated funds -- the highest percentage in state government.

Ball says the Legislative branch of government is especially hard to budget for – the governor could call any number of special sessions, which cost money, with no real say by lawmakers.

“What if there is an impeachment?” asked Ball. That costs funds as well.

In fact, it’s estimated that the House’s investigation of Attorney General John Swallow could cost between $2 million and $3 million, money not specifically budgeted for when lawmakers adjourned their 2013 general session in mid-March.

But there are a number of other state agencies or offices that routinely run high “nonlapsing” surpluses – extra money put aside if needed.

-- The governor’s office has a surplus of 18.7 percent, $8.2 million. So why is it again Lt. Gov. Greg Bell has to resign to make more money?

-- The Tax Commission, which collects taxes, has a nonlapsing surplus of $11.8 million, or 14.3 percent of its annual budget. You really don’t want to mess with these guys, for they clearly have the money to come after you.

-- The Commerce Department, which regulates businesses, is no extra-cash slouch – it has a 20.1 percent surplus of $6.2 million.

You can see a whole list of state agencies’ “nonlapsing” surpluses in the chart below. 

Ball told leaders that his office suggests that each and every state agency – including the Legislature – should have about three months worth of salary and core expenses in reserve at all times.

What would happen if the governor and Legislature got into an historic budget fight and no budget was adopted when the fiscal year started each July 1.

Would state agencies shut down?

Would citizens lose critical services?

No way, that’s only Congress that acts so irresponsibly, some may say. But Ball said that’s exactly what has happened in Iowa, Minnesota, and Wisconsin in recent years.

But when politicians, especially fiscally conservative Republican politicians, see such big cash surpluses, their palms begin to sweat a bit.

What will their constituents think?

Will they demand some kind of tax cut?

In reality, many lawmakers would like to put more money into public and higher education – especially now after a new GOP-required public school grading program has turned up so many schools with F, D, and C grades.

While it’s true that Florida’s school grading program – now more than a decade old – reformed that state’s education system, it’s also true that Florida has poured hundreds of millions of new dollars into their schools.

The final audit of last fiscal year, released to the top legislative leaders, finds a $122 million surplus in the Education Fund. That’s after money by law must go into the Education Fund’s Rainy Day Fund.

That comes mainly in higher personal and corporate income taxes.

There’s actually no extra cash in the General Fund, which is fueled by the sales tax.

GOP Gov. Gary Herbert has been saying for more than a year that Utah – under the wise fiscal management of Republicans like himself and the legislative majority – is the U.S. leader in recovery from the Great Recession.

But look at some of these numbers.

The personal income tax take from fiscal 2012 to fiscal 2013 was up a whopping 15.7 percent to $2.5 billion.

Amazing.

But the corporate income tax? Up 25.7 percent over the previous year to $272 million.

Maybe the state song should be changed from “Utah We Love Thee” to “Happy Days Are Here Again.”

And you may recall that the Legislature over the last several years have loosened up liquor control – now you can get liquor by the drink in properly state-licensed bars.

Liquor sales, from all sources, are up 14.9 percent, or $11 million more.

There’s serious talk that lawmakers will consider some kind of vehicle fuel tax hike come January’s general legislative session.

Even though Utahns got back on the road last year as the recession ended, motor fuel taxes went up only 0.3 percent.

Because of the federal government’s sequestration, federal funds coming into state government dropped by 12.1 percent, or $55 million in general state revenues.

(Actually, overall federal funds, including things like the Utah National Guard, Transportation and Medicaid, make up a third of the state budget.)

In a press release, Herbert said: “Utah’s steady economic progress is evident on several fronts—job creation, a dropping unemployment rate, and additional revenues for the state. “This surplus is not only encouraging, it’s needed. We can now augment the critical investment we make in education and economic development.”



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