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More Santa than Scrooge

Published December 10, 2005 12:09 am

Record budget, $60M tax cut
This is an archived article that was published on sltrib.com in 2005, and information in the article may be outdated. It is provided only for personal research purposes and may not be reprinted.

Gov. Jon Huntsman Jr. on Friday laid out a nearly $10 billion blueprint for state spending that includes record high funding for education and highways - yet manages to include a $60 million tax cut.

In short, the state is wallowing in money.



The governor's recommended 2007 budget includes $221 million for increased compensation of public and higher education teachers, $278 million for roads and buildings and $176 million for student growth and Medicaid.

He also wants to spend $38 million to give state employees a 2.5 percent cost-of-living raise and an extra 2 percent merit hike. And, corrections officers would be in line for a 5.5 percent salary increase on top of that.

"This budget is a lot more Santa than Scrooge," Huntsman said.

Huntsman's benevolence is fueled by a spectacular string of state revenue surpluses. Revised projections show the state will rake in $344 million more in taxes in 2006 than predicted.

And in 2007, sales tax will bring in 12 percent more and personal income tax an additional 15 percent. That should mean a state revenue jump in 2007 of $581 million.

Nevertheless, the Grinch may be lurking in the Legislature.

Huntsman's $9.6 billion budget is 7 percent bigger than this year's. "That's a significant growth in government," says Rep. Wayne Harper, chairman of the House Revenue and Taxation Committee. "Many legislators are going to have a problem with that."

Huntsman argues his government's growth is not significant considering that it would add only 270 employees, for a 1.3 percent increase. That tracks favorably with the state's 3.2 percent population growth (triple the national average).

"This is a very sound budget," the governor said, but "I'm sure I'm going to be called a big spender."

Senate President John Valentine is already appealing to lawmakers in the path of this tsunami of cash to exercise prudence.

"My first impression is that we have a very robust economy," Valentine said of the revenue estimates. "But some caution needs to be exercised before we get caught up in the numbers."

A portion of the money pouring in is from oil and gas severance taxes (a 48 percent jump), corporate income tax (up 71 percent) and capital gains (20 percent growth) - all volatile income sources, Valentine said. "That can't be sustained at those levels. If we build programs into those numbers, we could end up overspending."

But Huntsman says his budget's emphasis on economic development should keep revenues flowing. "We have become known as a business-development state. We have a lot more years like this coming."

In the end, it is the Legislature that writes the budget, though leading lawmakers say Huntsman's general approach is in tune with theirs. Still, traditional battles are shaping up, including the annual highway funding fight.

Lawmakers are likely to ask for more cash committed to road construction than the governor's $140 million, even though when added to this year's $155 million spending, it represents the most general fund money spent on roads in Utah history. Huntsman's $83 million in bonds, in particular, is likely to be challenged.

The Legislature likes to cache an ample amount of one-time money into highway building. For one thing, that money can be shifted to other programs if the economy falters, as it did in the 1990s.

"I like to have a lower debt ratio than maybe the governor does," Harper said.

For the same reason, the House members also will favor putting more money into the so-called rainy day emergency fund than Huntsman's $25 million that would bring the fund to a record $195 million. "We would like to see $300 million to $500 million in the rainy day fund," says Harper.

Philosophically, Huntsman's budget, from roads to education to tourism, is focused on economic development. But lawmakers may have a hard time in swallowing his pet project, USTAR (Utah Science Technology and Research Initiative), the governor says. The plan would pump $50 million into building technology centers, then recruit the stars of bio- and high-tech research.

"This is a visionary thing," Huntsman said. "You have to be willing to take a leap into the future."

But Valentine says lawmakers were put off by a lack of specifics when Huntsman floated USTAR last year. ''We didn't like the 'Field of Dreams' approach - build a facility and they will come. If he's coming with specific projects, he'll do better.''

The budget also is anchored in tax reform. About $23 million of the $60 million tax break will come from the "flatter" individual income tax, which would see a rate reduction from 7 percent to 5 percent. The rest would come from removing the tax on groceries, a goal dear to Huntsman.

Huntsman said he is committed to do whatever it takes to "lift the oppressive tax on food."

The loss of local revenue from the food tax, which could be catastrophic to some small communities, would be replaced by a small increase - one tenth of one percent - in the sales tax on nongrocery products, the governor said.

"We will fill the hole," said Huntsman. "It's just what you choose to struggle with to get there."

Removal of the grocery tax, which has failed many times in the past, is likely to win approval, Huntsman says. "I wouldn't bet my motorcycle on it," Huntsman joked. "But I really love my motorcycle."

Huntsman's budget proposal:

Education

$109.9 million for a 5.5 percent increase in per pupil funding.

$10 million for a 4th-6th grade math program to prepare students for advanced concepts.

$7 million for voluntary all-day kindergarten at high-risk schools.

$6.1 million for teacher supplies and materials.

Economic revitalization

$60 million set aside to support tax reform of individual and sales tax.

$12 million to recruit research teams to Utah.

$50 million for constructing new research labs.

$33.5 million for higher ed employee compensation, faculty and staff retention.

$7.4 million for utility increases

Transportation & environment

$295 million investment in highway construction and other transportation projects.

$138.1 million to construct new facilities for higher education and state agencies.

$2.5 million for the LeRay McAllister Fund for critical lands.

$2 million for watershed and rangeland conservation.

Government

$38.4 million for state employee compensation, raises and benefit increases.

$16.5 million to fund the states actuarial liability for other post-employment benefits $45.6 million for Medicaid use and caseload growth, provider increases, and other changes.

$4.7 million for Medicaid adult dental and vision benefits

$4.9 million for core rate increases and jail reimbursement growth.

$4.1 million to staff a new 288-bed facility in Gunnison.

 

 

 

 

 

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