Utah Capitol 22

While there will not be a compromise ready for a Dec. 12 special legislative session between GOP state leaders and the public education community, what lawmakers ultimately do in amending the state Constitution’s income tax earmark for schools is critical to a comprehensive tax reform overall.

And Sen. Lincoln Fillmore, R-South Jordan, who sits on the Tax Reform Task Force, says any solution to the Legislature’s ultimate public-school funding reform “must be honest and fully transparent.”

In other words, he says, legislators and Gov. Gary Herbert must let voters know their if their taxes could go up to support schools, or government budgets will be cut to offset any future shortfalls in school funding, or both happen at the same time.

UtahPolicy.com first reported on private negotiations between GOP legislative leaders and the public education community.

Sen. Ann Millner, R-Ogden, gave a brief update to the task force a week ago in a public meeting.

Lawmakers have argued that the requirement in Utah's constitution that all income taxes go toward public and higher education complicates their ability to properly budget for all state needs. 

In exchange for removing that requirement from the constitution, lawmakers are proposing a number of ideas that would tie education funding to economic indicators, guaranteeing that funding for schools would increase every year. 

One idea shifts a portion of the burden to increase education funding on to local entities through a mechanism, likely tying them to the consumer price index. That would gradually boost property taxes without the need for the cumbersome truth in taxation requirements. There would be safeguards to keep property taxes from rising too quickly, and if a local entity wanted to raise their rates beyond inflationary numbers, they would still need to go through the regular process.

Legislators are also eyeing a way to guarantee that the state fund the annual growth in public schools, and provide for an annual boost in per-pupil funding. Again, that could be tied to the consumer price index.

Fillmore says -- it is not quit a warning -- that changing the Constitution from the current income tax earmark for schools could end up harming state government/schools even more down the road.

Right now the personal income tax is collecting much more money than lawmakers have estimated. And has been doing so year in and year out during the current Utah economic boom.

“But that boom will end,” says Fillmore. And even a slight economic downturn could really drop income tax revenues.

Any “guarantee” that schools get growth-plus-inflation -- especially if it comes in the Constitution -- could really harm either/or state programs, like health or air quality, or schools themselves.

Ironically, while GOP leaders are saying the current earmark ties their hands in setting good state budgets, an even more specific “guarantee” over school funding could kill some future budgets -- or create what could become an automatic tax hike.

“I’m all for a more stable funding source for public schools than the income tax,” said Fillmore. For the income tax revenue fluctuates with economic swings.

A better tax source may be the property tax. And task force members have been talking about giving school districts across the state more leeway in raising their own citizens’ property taxes.

But taxpayers have to understand, says Fillmore, that what legislators are doing today could have real life tax consequences down the road.