No new taxes, more funds for schools expected in gov's budget

Gov. Gary Herbert is promising no new taxes, no new debt and an increase in spending per-pupil when he unveils a $13 billion-plus state budget proposal early next month.

State and legislative economists are forecasting $338 million in new tax revenue will be collected in the coming budget year, a welcome departure from the not-too-distant past, when the Great Recession resulted in shrinking budgets and belt-tightening across government.

But don't expect that money to stretch too far, cautions Kristen Cox, director of the Governor's Office of Management and Budget.

Educating a projected 10,300 new public-school students, managing the growing prison population, maintaining state buildings, meeting growing Medicaid demands and paying state workers will put serious demands on state dollars, Cox told reporters Monday.

Cox said Herbert will propose spending the $60 million needed to educate the new students and will likely seek an increase in the state's per-pupil spending, which remains the lowest in the nation.

House Speaker Becky Lockhart expects paying for the education growth will again be a top priority, as it is every year.

"That's one of the things we look at very first," she said. "We'll be looking at that right away."

Beyond education, however, there could be a competition for dollars.

"There are always a lot more [requests] than there is money," said Senate President Wayne Niederhauser. "At the end of the day, we have to balance all that out and we have to proceed cautiously, as we do and have done in times past."

The governor will not seek to incur any more debt — through the issuance of state bonds — to build roads or buildings, even though some lawmakers have already approached the office with building wish-lists.

"There is a time and place where bonding makes sense, but we are very clear that we don't think that this year is the time for bonding to occur," Cox said. "We need to demonstrate fiscal discipline."

Lockhart and Niederhauser agree with that strategy.

"What I anticipate is there is going to be some significant resistance in the House to any kind of bonding," Lockhart said, based on discussions with Republican House leaders and members of the GOP caucus.

The state has $3.4 billion in outstanding debt, largely the result of hundreds of millions in bonds issued to pay to rebuild Interstate 15 through Utah County. As a result, each Utahn has roughly $1,200 in state debt, double what the figure has traditionally been. Moreover, the state is paying $430 million a year in interest on the outstanding bonds.

Herbert will not propose any new taxes in his budget. That includes no increase in the gas tax, a proposal that has been batted around by the Legislature for the past several years.

"I think it's highly unlikely it will be considered this year," Cox said.

Juliette Tennert, chief economist with the governor's budget office, said uncertainty at the national level — including sequestration, the federal government shutdown, and the implementation of the Affordable Care Act — are thwarting growth in the state. However, the projected 3.8 percent growth rate, while down from the rate this year, is on par with the state's historic growth curve, she said.

Lockhart said lagging sales tax revenue is a signal that growth isn't as strong as leaders would like.

Niederhauser said the overall economic growth shows Utah leaders are doing things right.

"It's the economy that generates the tax revenues so it is pleasing to me and I think to most in the Legislature we are creating at least an environment that is generating some growth in revenue," he said. "So I think we are doing some things right."

Medicaid continues to be a growing share of the state budget, now consuming 22 percent of state revenue with the possibility of swelling to 30 percent. Today, 12 percent of Utahns are on Medicaid, compared to 6 percent in years past.

Medicaid changes mandated by the Affordable Care Act, commonly referred to as Obamacare, will cost the state an extra $5 million in the coming year, Tennert said.

That is without the proposed expansion of Medicaid to cover about 123,000 Utahns who make up to 138 percent of the federal poverty level. The governor has promised to work with legislators to decide whether to expand the program — which, in the initial years, would be paid for by the federal government.

Herbert will not make a recommendation on expansion in his budget, although Herbert has said he doesn't expect it would have a major impact on the budget either way.

Of the $338 million in anticipated new state money flowing to the state, $132 million will be available only once, meaning it can be used to build buildings or roads or buy equipment, but lawmakers can't count on it to pay salaries or other recurring costs.

gehrke@sltrib.com

Twitter: @RobertGehrke