With apologies to Alan Greenspan, Utah lawmakers are guilty of succumbing to a spell of “irrational exuberance” as they thought there would be more than a billion dollars of surplus available for them to spend this year. That’s not the case.
New revenue numbers released on Friday afternoon show a projected $1.3 billion budget surplus has been trimmed by about $200 million, dropping the total to $1.1 billion. Lawmakers announced $525 million in one-time money and $570 million in ongoing surplus revenue for next year.
However, a big chunk of that has already been spoken for. Legislators set aside $300 million at the end of last year just in case those rosy estimates fell short of the mark, which is the case.
Additionally, lawmakers paid cash to finish the construction of the new Utah State Prison, which takes another $350 million or so out of the kitty. The limited Medicaid expansion program passed earlier this year takes another $72 million out of play, meaning the total amount of remaining extra money lawmakers have to spend this year is closer to $650 million.
Obviously, some hard budget choices are coming over the final 20 days of the 2019 session as elected officials work to set the budget for next fiscal year.
Sen. Jerry Stevenson, R-Layton, who is the Senate chair of the powerful Executive Appropriations Committee said that astronomical surplus amount set expectations for spending that legislators cannot possibly meet now.
“There’s gonna be a lot of sad faces when this is all over,” he said. “A lot of those requests will have to be scaled back or not funded at all.”
“We thought these numbers would drift down, but not as much as some thought,” said House Speaker Brad Wilson, R-Kaysville. “However, how the numbers are moving (up and down, month to month) shows a significant problem in our tax structure, which will have to address sooner rather than later.”
The state’s General Fund, fueled by the state sales tax, is not keeping up with the personal and corporate income tax take, Wilson said. And if that is not fixed – by sales tax reform – then the state won’t be able to fund roads or other vital state programs, Wilson added.
Lawmakers are aiming to couple that sales tax reform with a tax cut, either in the sales or income tax, or a combination of the two. Gov. Gary Herbert proposed a $200 million cut in his budget, but Wilson called for a $225 million cut on the opening day of the 2019 session.
Now, legislative leaders are warning that, with the dip in revenue, the only way they’ll be able to do a tax cut this year is if tax reform passes, which will help stabilize revenue in the General Fund.
“If we don’t get tax reform passed, then a lot of us will be really nervous about doing a tax cut this year,” said one legislative leader.
Lawmakers are currently working through the details of that sales tax overhaul plan, which would impose sales taxes on hundreds of services that are not currently taxed while dropping the overall sales tax rate in order to make the proposal revenue neutral this year.