Bob Bernick, Utah Policy Contributing Editor
Herbert’s new spending proposal is $12.8 billion, including state revenue and monies from the federal government. Because of losses in federal funding, overall that will be just an increase of 2.9 percent from the current year’s budget – now half way through the fiscal year, which ends June 30, Ron Bigelow, Herbert’s budget boss, told UtahPolicy.
However, just looking at state revenues – personal and corporate income taxes, sales taxes and various fees – Bigelow says next year’s budget will grow by 6.2 percent, or up to the $5.4 billion level.
The 2013 Legislature, which convenes Jan. 28 for its annual 45-day general session, will adopt next year’s budget.
Herbert, fresh off a November win for his own full four-year term, is basing his new budget on spending as usual by the federal government, whose state aide packages are severely in question as the “fiscal cliff” approaches at the end of this year.
Herbert told a press conference that by law he must present a balanced budget a month before the Legislature’s annual general session.
Besides being against the law, it would send a bad message to Utahns and Utah businesses if he and his budget staff either didn’t present a recommended budget on time or tried to guess what losses of federal monies could mean one-month out.
If President Barack Obama and Congress – the U.S. House controlled by Republicans – can’t reach a deal, then Utah’s next year budget (like other states’) falls apart.
Utah legislative leaders several weeks ago said that if the U.S. falls off the fiscal cliff, all bets are off and a likely $300 million revenue surplus in fiscal 2014 will turn into a $200 million deficit.
Herbert, who met with Obama and congressional leaders last week in Washington, D.C., as part of a National Governors Association delegation, said he’s “cautiously optimistic” that the president and Congress can reach an agreement.
Even politicians can’t be so stupid as to endanger America in that way, Herbert said.
As previously reported, Utah state legislative leaders and Herbert’s budget experts have agreed that, barring any “fiscal cliff” fall, Utah will see $300 million in new revenue growth next year, more than $100 million in one-time revenue surpluses in the current budget year.
In a chart passed out with a shortened version of his budget proposal, for the top two state funds – the General Fund and the Education Fund – the spending levels grow back to $5.3 billion.
That’s the same spending level as the fiscal 2007 budget.
So, in essence, Utah has had several years of actual spending decreases.
Herbert on Wednesday stressed time and again that his “No. 1 spending priority is education.”
Adding spending on public education, higher education and applied technology schools together, around 67 percent of next year’s state budget is allocated for teaching Utahns’ children and young adults.
No one should question his education commitment, said Herbert.
However, Utah legislative Democrats – down to their lowest numbers in recent history for the 2013 session – certainly will.
Already minority party leaders say Republican political bosses are talking a good education game, but they aren’t putting the financial effort there.
In their campaigns for the governorship and legislative races, Democratic candidates said now is the time to reform Utah’s aging tax code, get rid of all kinds of loopholes and special interest deductions, and significantly raise revenues for public schools and colleges.
But Herbert said in that regard “mine is a status quo budget” – no tax increases, no tax cuts.
Announcing that on Wednesday Forbes Magazine recognized Utah as the best state to do business in America, Herbert said the “three-pete” – Utah has won the business journal’s “Best State” award two other times recently – comes in part because Utah keeps taxes low, state government regulations under control, and businesses know there won’t be big swings in either.
“We have a stable” and good business climate, said Herbert.
His 2013-1014 budget reflects that, he said.
Herbert does call for $52.4 million in new state bonding, to build various critically-needed buildings, including new classrooms for Utah Valley University, the state’s fastest growing college, and expansion of the Gunnison state prison.
Conservative lawmakers refused to issue General Obligation bonds last Legislature, and Herbert agreed with that.
It is unclear if GOP House and Senate members will support new bonding next year.
Herbert said with interest rates and construction costs low, and with Utah again falling below the 85 percent traditional threshold in state indebtedness constitutional cap, now is a good time for “prudent” borrowing again.
Some of Herbert’s budget highlights:
-- He proposes a 1 percent increase in the Weighted Pupil Unit, money most likely to go to public education teacher salaries. “I don’t micro-manage,” said Herbert, and under his budget Utah’s 41 school districts will decide for themselves how that 1 percent WPU hike will be spent.
-- State workers, who got no pay raises during the Great Recession, will also get money for 1 percent pay hikes, although with workers whose pay is under 20 percent of market-scale getting extra money to bring them closer to fairness, some other employees may not see the whole 1 percent.
-- State Board of Education officials made a $25 million mistake in calculating the cost of growth in the number of new students this past school year. That $25 million gap was plugged with one-time monies by Herbert and lawmakers in a summer special session.
In his new budget Herbert makes up for that growth money with ongoing revenues, so there will not be a structural imbalance next year. GOP legislative leaders have already promised to do the same.
-- Extra money will be put into the state Health Department’s budget for computer security to make sure that private health records can’t be hacked again – like was done last spring. More funds will also be allocated to Utahns who are fighting loss of their private information, including Social Security numbers, said Herbert.
-- Public education is fully funded for growth in students next year. And various special programs, like all-day kindergarten for young children whose parents want that service, will also be funded.
-- Several million dollars more will go into STEM programs both to high schools and colleges. STEM is a program to get more young people turned toward math, science and technology classes and, hopefully, careers.
Herbert said if Utah doesn’t make these efforts, our future workforce won’t be prepared for the changing marketplace and global economy.
-- Herbert declined to say whether he supports or opposes the plan by a number of state Senate Republicans to place the whole state sales tax back on unprepared food.
The plan calls for the 4.75 percent state sales tax to be reduced slightly as the 1.75 percent food tax is raised back to the top state level.
Herbert said he likes the idea of broadening any tax base and lowering the rate, but that he’s yet to see what the Legislature may do in that regard. Any plan, he said, has to have some kind of safety net so the really poor among us won’t see their overall food tax burden increased.
However, House GOP leaders are skeptical of the Senate plan, with House Speaker Becky Lockhart, R-Provo, saying that any food tax hike “is a tax increase on someone, and I’m against a tax increase.”
-- All this education effort, said Herbert, is aimed to make sure that by 2020 two-thirds of all Utahns have some kind of post-high school degree, either a trade certificate, a two-year or four-year college diploma.
With a recent report showing that Utah is falling behind – not making progress – in how many teenagers graduate from high school, Herbert’s 66 percent by 2020 plan is certainly optimistic.
But the governor said he is optimistic, just like Utah citizens and families are optimistic about the future.
“We want a business-friendly environment,” said Herbert. “The way you pay your bills is to grow the economy, not raise taxes” as other states have done and are doing.
“We’ve taken a different approach. With correct principles” on low tax rates, low regulation and low debt, Utah will continue to be an example of good government in America and across the world, Herbert said.
In the end, however, Herbert’s new budget proposal may not be the blueprint he hopes it will be.
In recent years, the GOP House and Senate caucuses have made major budget decisions, and in public hearings in all of the various legislative budget subcommittees the governor’s spending plan has been given little light.
Especially if Congress and Obama can’t agree on a fiscal cliff compromise – or even if they do and it includes real cuts to federal programs administered by the states – then much of Herbert’s 2013-2014 spending plan may have to be scraped.
And GOP lawmakers have to work with much less federal money to spend next year.
Fy 2014 Budget Announcement
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