Utah lawmakers will see a big budget surplus in 2018, but will start $21 million in the hole

So, will Utah State government get windfalls of upwards of $150 million from the federal Republicans’ tax reform?

Yeah, says state House Speaker Greg Hughes, R-Draper – maybe between $75 million and $150 million in ongoing tax surpluses unless the Legislature acts over the next few months to ameliorate it.

Nope, says Senate President Wayne Niederhauser, R-Sandy. “We don’t know yet!” says the Senate leader, and he’s not ready to say the federal tax changes will bring Utah governor one dime more.

Either way, the state does have anticipated revenue surpluses of $382 million in ongoing tax revenue for the upcoming 2018 Legislature, which starts in a few weeks, Sen. Jerry Stevenson, R-Layton, co-chairman of the powerful Executive Appropriations Committee, told a Utah Taxpayers Association pre-legislative conference Monday in the Grand America Hotel.

That comes from natural tax growth because of Utah’s steady over-performing economy.

Also, there will be $101 million in one-time tax surpluses for lawmakers to deal with in the 45-day general session – which comes from “conservative” budgeting by the 2017 Legislature.

But, adds Stevenson, when you take out monies that by law must go to the state’s Rainy Day funds, revenues committed to state building projects and other demands based on more students to educate, more folks on Medicaid, the Legislature actually starts its budgeting process with $21 million in the hole.

That’s right, says Stevenson, that nearly half a billion dollars in extra cash is already allocated – unless legislators cut back on program growth or other needs.

Is all this sounding a bit confusing? Even crazy?

Well, says Hughes, welcome to the 2018 Legislature and budget and tax reform.

“It’s ragging waters ahead,” Hughes told several hundred conference attendees.

If the $150 million in extra state revenues does indeed come from federal tax reform (see what that reform means to the “average Joe” Utah taxpayer in this UtahPolicy story), then Hughes believes some of it should be returned to Utah taxpayers either through rebates or lower tax rates on personal and corporate state taxes.

Well, that’s sounds promising.

But wait, says Niederhauser.

Through years of diverting state sales tax – which is supposed to support general government programs – to transportation spending, the road budget is out of whack.

“Those using the roads should be paying for them – that’s always been our” process, says Niederhauser, a certified public accountant.

Something in the 2018 session should be done about the $600 million that is going from the General Fund (mostly sales tax) into roads, he adds.

A higher state gasoline tax?

That’s a possibility, says Niederhauser. But 2018 is an election year for all 75 House members and half of the 29-member Senate.

And Niederhauser says a gas tax hike would be “politically” difficult, and a “big lift.”

On top of all this, UtahPolicy is reporting that a special legislative tax reform task force is recommending something be done about “equalizing” property taxes levied by the 41 different local school districts and making other changes that could raise more than $800 million for schools over the next 10 years.

But that won’t derail the Our Schools Now citizen initiative petition aimed at raising the state sales and personal income taxes slightly to bring in more than $700 million immediately to Utah’s struggling K-12 education system.

That initiative is going forward, OSN leaders say.

So, you think maybe tax reform/budgets/tax collections are up in the air for the 2018 Legislature?

You’d be right.

Niederhauser said within two weeks – or just before lawmakers convene on Jan. 22 – lawmakers will have consensus numbers on what the federal tax reform means to Utah state income taxpayers, and if there will be any unanticipated tax surpluses because of it.

Then the GOP supermajority caucuses in the House and Senate, along with Republican Gov. Gary Herbert, can start negotiating tax reform policy, transportation funding, budgets and such for the next year.

Stay tuned.

This is going to be a complicated session, full of election-year politicking, and a rugged ride ahead.