Lawmakers Consider Changing How They Handle Budget Surpluses

Both Utah legislative leaders and GOP Gov. Gary Herbert like to brag about how well-managed our state government is.


There are all kinds of measurements – economic growth, online citizen help, fewer state employees doing more and more work.

One really big aid in the Beehive State during the Great Recession of five years ago were the state’s Rainy Day funds.

There used to be just one RD fund, but now there are two, the General Fund and the Education Fund surplus funds.

Although in general state revenues are fungible – that is you can flow them into the accounts where you want to spend the money – it does matter where the tax surpluses come because the state Constitution says income tax revenues can go only to public or higher education.

Anyway, in a new attempt to manage state budgets even better, legislators are moving into a politically sensitive area – how they can, or better put, how they CAN NOT, budget for tax surplus revenues year in and year out.

The top GOP and Democratic leaders in the House and Senate will, over the next few months, look at how other states are using “above revenue trending” economic models in their revenue projections and budget-setting.

I know, this kind of stuff can put you to sleep.

But there are real-world political implications.

Take, for instance, what could happen in the future if Utah’s economy grows faster than lawmakers and their economists conservatively set a budget six to 18 months out from their general session, and find later that the state is taking in $100 million more than anticipated.

Under the current system, lawmakers would classify that $100 million as “one time” income.

Some of it automatically goes into the Rainy Day funds (depending on its tax source).

And the rest is available to spend.

There is always a lot of pressure to spend those one-time monies – a building here, a road there – maybe even a one-time bonus for some workers.

HB311 and HJR11 outline how the Executive Appropriations Committee is to handle “above-trend” revenues in forecasting future tax growth – and then setting those ongoing budgets.

Rep. Brad Wilson, R-Kaysville, House budget vice-chair, says it is bad budgeting to just spend what may be “bubble” surpluses.

And worse to incorporate those “bubble” surpluses into the following year’s base budgeting.

For example, let’s say that the Utah housing market really takes off over several years.

That means more sales tax, as carpet, paint and furniture and appliances are spent on the new homes, or remodeling of existing housing.

In theory, budgeters can adjust for those “bubbles” in tax take by using a modeling system.

The Pew Center has conducted several studies of current above-trend usage. You can read one of their reports here.

While all this sounds good, the political reality comes in when legislators – seeking money for their special projects – run up against an economic model that KEEPS some surplus monies away from them.

Currently, Utah lawmakers can take money out of the Rainy Day funds, as needed.

It only takes a majority vote on various budget bills to do that.

And it makes sense that lawmakers could also decide to ultimately disregard any “above-trend bubbles” in setting budgets.

But the new bill and resolution says that the Executive Appropriations Committee – the super budget-setting committee made up of majority and minority leaders of both the House and Senate – must take into account “above-trend bubbles” as it puts together the massive $13 billion state budget each general session.

Remember how House Speaker Becky Lockhart, R-Provo, failed to get Herbert and the GOP Senate to give $35 million to her STEM in-class computer effort in the 2014 Legislature?

Well, with even more money being siphoned off at the front-end of the budgeting via above-trend economic modeling, programs that powerful lawmakers may want to fund could suffer.

Some may say that is good.

But, like so many political/funding questions in the Utah Legislature, that call could well depend on where one is standing when viewing the program that won’t get funding because of economic modeling.

“Budgeting based on bubbles tend to be bad decisions,” says Wilson. “Such windfalls” should not go into building ongoing base budgets, but spent on one-time purchases or to pay down debt.