Lawmakers anticipate they’ll have somewhere in the neighborhood of $50 million more to spend on education and another $30-50 million in the cash strapped General Fund when new revenue numbers are released on Thursday morning.
The latest revenue summary for Utah shows income tax collections are up over the first seven months of the fiscal by 10.5 percent, while sales tax collections are up 11 percent. Utah’s constitution mandates income taxes, both individual and corporate, can only be used to pay for education, while everything else funds the rest.
Lawmakers have been warning that sales tax collections are not keeping up with the rest of the economy, leading to a structural imbalance between the Education and General Funds. Since the economy is booming, there’s plenty of money to spend on education because income taxes are up. But, sales tax collections have been growing slower than normal year to year because of the state’s slow shift from a goods and manufacturing-based economy to a more service-oriented one.
While 11 percent growth is notable, House Speaker Brad Wilson, R-Kaysville, says a lot of the increase we’re seeing right now in the sales tax is a one-time boost as the state is collecting more sales taxes from online transactions.
“The concerning thing is how do you pay for the fastest-growing state in the country and all of the growth that comes with it? The General Fund is not growing at the same rate as your other revenue sources,” said Wilson.
Once lawmakers get those new revenue numbers on Thursday, they can get down to the business of how to spend that cash.
UtahPolicy.com is told House leadership is hoping to provide some sort of tax relief this year, while the Senate is a bit more reticent to do anything until they figure out how to fix the state’s budgeting mechanism in the next year. The legislature put aside $80 million for a tax cut in the tax reform package that was jettisoned at the start of the session. That money is still sitting there, and lawmakers are still trying to figure out what to do with it.
One idea that is starting to percolate on the Hill is giving taxpayers a rebate instead of doing a permanent cut. That way, they’re not locked into a long-term solution.
Wilson says a rebate offers a few advantages, especially in an election year.
“It gets money in the hands of people right away and they can use it the way they see fit. However, it doesn’t create an ongoing commitment
The Education Fund has an estimated $641 million in new money available right now. $390 million is ongoing money, while $241 is one time. That sum is expected to grow with the new revenue numbers. Accordingly, Utah’s schools are poised to get a healthy boost in next year’s budget.
The Education Appropriations Subcommittee is recommending a $136 million increase in the Weighted Pupil Unit, the basic mechanism for school funding. That total means an increase of a little over 4 percent. They’ve also prioritized another $3.3 million to supplement teacher salaries. They’ve already used $50 million of the extra money to fund enrollment growth in the base budget. That boost eats up nearly half of the ongoing money available. Lawmakers have also talked about socking a good portion of that money away in the rainy day fund for education as a hedge against a future economic downturn.
The Utah Education Association was pushing for a 6 percent increase in the WPU this year, or $198 million, which is $60 million more than lawmakers are recommending. Heidi Matthews, UEA President, says the boost in funding is welcome, but the state’s education system has $2.5 billion in needs, and a bigger boost in funding would be a more prudent move.
“It’s an astronomical number. All we’re saying is we’ve got start moving in that direction. A six percent boost is what it’s going to take to begin to address the critical needs with our teachers and move the programs and investments in the right direction,” she said.
Meanwhile, lawmakers are scrimping and sweeping the corners to find enough money to fund everything else in the state budget. If legislators go through with a planned 2.5 percent cost of living increase for state employees, that could eat up a big chunk of whatever new money is available in the General Fund.
For example, the Business, Economic Development and Labor Appropriations Subcommittee was able to find about $7.5 million in ongoing money they could re-allocate on their priority list. The top funding item was $3 million for an arts grant program asked for by the governor, which would consume most of those reallocated funds.
If lawmakers do decide to provide some tax relief, whether through a cut or rebate, that money will come out of the new money in the Education Fund.