The economies of Utah and the United States are going great guns these days.
But some kind of recession is coming – sooner or later.
And Utah legislative analysts say should the U.S. economy suffer a “moderate” recession over the next few years, Utah state government budgets will fall short of revenue by around $275 million.
And if the U.S. economy suffers more than a “moderate” recession, the state will suffer even more.
All the more reason, GOP legislative leaders say, for the state to reform its sales tax over the next year. A special task force was just named last week, and will soon start its work.
Except for some large ups and downs in the stock markets – often reflecting GOP President Donald Trump’s tariff wars with China – the U.S. economy has been on 10-year growth surge, a record for modern times.
So a recession will come soon, economists say.
In their Tuesday meeting of the Executive Appropriations Committee, leaders were told that if there is no recession over the next five years – and if the sales tax problem is not fixed – then the huge revenue surpluses of the last few years will go away.
Revenues v. spending basically equate each other in 2021 and 2022 and 2023. (See chart).
Then revenues start once again to outstrip projected spending – with more tax surpluses coming in mainly because of the state’s own good economy.
But if there is a recession – some big deficits are coming to the state budget.
You may recall that in the last general session there was around $1 billion in surplus funds. A lot of that money went by law into the state’s two Rainy Day funds – now at record levels.
They also paid cash for the new state prison being built out by the Salt Lake International Airport
Still, as late-session revenue projections went down, $100 million recommended by Gov. Gary Herbert for a new air quality program was cut.
In addition, $75 million was kept back for anticipated tax cuts coming from sales tax reform.
All well and good, legislative leaders were told.
However, if there is a recession, then the tax revenue picture gets bleak for several years – beyond fiscal year 2022.
If (when?) the recession comes, legislators will need to use various tools to get by – some budget cuts, use of the Rainy Day funds for (hopefully) one-time expenses (but even for ongoing programs in the short term), sweeping various special accounts where some surplus monies may be lingering, or even tax hikes, if so desired by legislators.
The later likely won’t be done if history holds.
At the start of the Great Recession, the fiscally conservative Legislature cut back on a variety of programs, spent Rainy Day funds and made other changes to stop a general tax hike – suffered by any number of other states.