Money Fueling Legislative Fights in 2015

Expect some “lively debates” coming in the 2015 Legislature, now just two weeks away, over restructuring the gasoline tax, increasing the state personal income tax and cutting the state’s corporate income tax, GOP legislative leaders told a tax conference Monday morning.

One GOP House member said Republican Gov. Gary Herbert’s recommended $500 million increase in public education funding for next year is “smoke and mirrors” because it takes $92 million in General Fund sales tax out of road-building and shifts it to schools, but doesn’t replace the road money at all.

That is just a tax increase for roads waiting to happen, said Rep. Jack Draxler, R-North Logan.

Draxler said it’s time for Utah leaders to just step up and raise the personal income tax to bring needed hundreds of millions to public schools.

A new UtahPolicy poll by Dan Jones & Associates released Monday shows that 54 percent of Utahns oppose Draxler’s 1 percentage-point income tax hike, while 43 percent favor it.

The annual Utah Taxpayers Association meeting held in the Grand America Hotel had 16 speakers, most of them current leading Republican lawmakers, discussing a number of tax-related issues.

Several leaders, including Senate President Wayne Niederhauser, R-Sandy, and Speaker Greg Hughes, R-Draper, hinted that the current state per-gallon gasoline tax will likely be restructured in a way that provides more road-building money.

Both men, and House Transportation Committee chairman Johnny Anderson, R-Taylorsville, told the conference something will be done with the gasoline tax this session.

Most likely GOP lawmakers will restructure the tax to not take in more money in fiscal year 2015-2016 than currently.

That way, legislative Republicans can say they didn’t raise taxes.

However, in following years the new gasoline tax would keep pace with road construction inflation, or inflation in general, to bring in more money.

Included in the complicated restructuring could be a quarter-cent increase in the sales tax earmarked for cities, counties and transit districts – to provide more money for local roads, busses and light rail.

Meanwhile, Draxler outlined his idea to raise the state personal income tax from 5 percent to 6 percent for public schools.

And Sen. Deidre Henderson, R-Spanish Fork, explained why the state corporate income tax, now at 5 percent, should be cut in half to 2.5 percent.

She said reducing the corporate income tax would stimulate Utah’s economy, providing more jobs, more wages that could then be taxed.

Her corporate income tax cut would provide more economic stimulus than the state’s current business tax incentive program, Henderson said, leading to 4,256 new jobs over the next decade and an additional $416 million of taxable income for Utah workers.

Both the personal and corporate income taxes are ordered by the Utah Constitution to go to public and higher education.

So if the 2015 Legislature adopted both Draxler’s and Henderson’s tax changes some may argue would be like robbing Peter to pay Paul.

But such dichotomies are not unusual in the Utah Legislature.

Meanwhile, Senate Budget Chairman Lyle Hillyard, R-Logan, said he’s tired of the media repeating that the 2015 Legislature has $637 million to spend this session.

Actually, said Hillyard, there is estimated to be $325 million in natural new revenue growth in the next fiscal year, which starts July 1.

In addition, there is $312 million in one-time revenue surpluses in the last and current fiscal years.

While that does add up to $637 million, only the “new” revenue growth should be put in ongoing programs, Hillyard added. The one-time surplus should be spent, if it is spent at all, only on one-time expenditures, like building new college buildings.

In addition, under a new rule adopted last year, legislative budgeters must determine if on-going new tax and fee revenues are above or below a multi-year growth trend line.

And last month, the Legislature’s Executive Appropriations Committee (made up of leaders from both parties, House and Senate) voted to take $116 million in new revenue growth and put it in the one-time tax surplus category, worrying that it won’t show up again a year from now and really is a “bubble” of new tax collections.

Thus, according to Hillyard, the $637 million in new money the media keeps talking about is really just $209 million that could go into state program growth.

And out of that $209 million, suggests Herbert, public education should see 6.25 percent increase in the Weighted Pupil Unit, the basic school funding formula from which the state’s 41 individual school districts provide teacher pay raises.

Also there should be a 3 percent increase going to public colleges and universities and a 2 percent increase for state employee pay raises, the governor says.

However, said Hillyard, historically lawmakers have tried to give about the same pay raises to schoolteachers, university workers and state employees.

So Herbert’s proposed budget already is treating those three public employees differently as far as pay is concerned – another budget problem for lawmakers.

Draxler said the new UtahPolicy poll findings are just a starting point for the discussion of Utah’s perpetually underfunded public school system.

“We’ve done a marvelous job” of growing the state’s economy, said Draxler. Various business publications and other studies rank Utah as the best place to do business in America.

But even with all that economic and tax growth, Utah still ranks as having the 43rd or 44th best public education system.

Simply put, Utah can’t grow its economy fast enough to make up for its lagging spending on public schools.

“We can’t remain down so far on the rung in our education system.”