Proposals Aim to Slow State Spending Growth

The battle over allocating new tax revenue growth every year in the Utah Legislature is always intense.

 

Who will get $100,000 more out of that pot for a new law or a new program?

Which powerful legislator, or group, will see $1 million or $10 million in new funding?

As that grabbing goes forward, there are at times cautionary voices who ask if all of the new revenue growth should be spent.

What if enhanced programs find, after just one year of extraordinary economic growth, that revenues fall off?

Cutbacks are always painful, workers let go, clients disappointed.

Rep. Brad Wilson, R-Kaysville, has a rule change and a new law proposed this session aimed at restricting in some manner the grasping hands aiming to spend every last dollar of new revenue growth.

HJR11 and HB311 combined look to place restrictions on how much new revenue can be counted as “ongoing” cash, and how much must be categorized as “one-time surpluses” – which may or may not reoccur in the next fiscal year.

The two bills have a public hearing Thursday afternoon.

For those who understand and deal with the complicated Utah legislative budget-setting and bill-funding processes each general session, the differences are enormous.

Utah is one of the best fiscally-managed states in the nation, winning various awards for frugality and thoughtful planning.

But one area needs attention, says Wilson, the House vice-chairman of the all-powerful Executive Appropriations Committee.

“My aim, at the end of the day, is to force a look” in the budget-setting process “to make sure we consider the overall health of the state long-term,” says Wilson, who in private life is a home-building and developer.

Often, short-term spending sprees – Wilson doesn’t use that term – can take place in a legislature where appetites exceed revenue numbers.

HJR11 is a new rule that would limit “ongoing” new revenue to 5 percent above the 10-year or 15-year new revenue growth average.

In other words, if over the last decade Utah tax revenue, taken as a whole, has grown by 5 percent a year, and in the Legislature considering the next fiscal budget revenues grow by 6 percent, then lawmakers could only consider 5 percent of that amount as “ongoing” revenue.

The other 1 percentage point would have to be treated in the budget-adopting process as surplus, one-time funds.

Historically, fiscally conservative Utah lawmakers use one-time surpluses for one-time purchases, like replacing a bridge, building a new building at the University of Utah or buying new computers.

Ongoing monies go for student growth in public and higher education, teacher and state worker pay raises or expanding a specific social program – costs that will reoccur year-after-year.

If the state puts one-time surpluses into an ongoing program, as lawmakers did in the current year when the State Office of Education made a mistake in calculating the student growth numbers by $25 million, then that is called a “structural imbalance.”

And in the next budget year new revenue growth dollars are put into the required budget to make up for that ongoing deficit.

Wilson said, when other adjustments are made, lawmakers have $206 million in new revenue for fiscal year 2014-2015.

While the numbers have not been run yet (but he says they will as his bills go to committee for hearings), he doesn’t believe that new revenue for the upcoming budget will be more than 5 percentage points over the last 10-year base line growth.

But Utah certainly has seen boom years when new revenue has grown dramatically.

For example, one year in the early 2000s between one-time surpluses and new revenue growth, lawmakers had more than $500 million – a quarter of $1 billion – to spend.

Under that scenario, Wilson’s bills would have had a major impact on where those monies could have gone.

HJR11 says that lawmakers and budget-setters must consider:

 — debt;

 —  long-term liabilities;

 — General Fund borrowing;

 — reserves;

 — fund balances;

 — nonlapsing appropriation balances;

 — cash funded infrastructure investment; and

 changes in federal funds paid to the state;

HJR11 is a rule. And by majority vote, any rule can be suspended.

Wilson says he knows that in boom years there will be great temptation to suspend HJR11 and spend more ongoing funds than otherwise allowed under the rule.

Toward stopping that, HB311 requires the Legislature’s fiscal analyst to produce each year a long-term “dashboard” showing Utah’s overall financial health, including a 15-year trend line on revenue growth.

All kinds of items will be included – bonding and debt owed, surplus accounts, retirement/pension obligations, underfunding in transportation and building maintenance.

“Before we make a decision on suspending the 5 percent rule, we should have a look at where we stand in many financial areas – see exactly where we are long-term.”

Maybe future lawmakers will be so sobered by those numbers that they gladly will not spend more than the 5 percent increase in new revenues flowing into Utah coffers.

Or maybe not.

“We have $206 million” in new revenues this year, said Wilson. “But what if we had $406 million in new revenues? Would it be smart long-term to spend it all in one year?”

In an attempt to slow the growth of Utah state government, years ago lawmakers adopted a law that limits the overall budget to a percent of population increase and inflation.

But lawmakers later exempted public education from that formula, and at least once have suspended the law so needy programs could grow faster than otherwise allowed.

Before each Legislature, fiscal analysts brief Executive Appropriations on how fast state spending could occur before the statute cap is hit.

And in recent years the top number is well below the estimated growth in new revenues – so the cap has had no impact at all.