From Deseret News archives:

Surplus poses problem

Spending caps limit how legislators can use it

Published: Wednesday, Dec. 6, 2006 11:30 p.m. MST
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When Gov. Jon Huntsman Jr. announces his proposed 2007-08 budget next week and a new Legislature meets in a month to consider it, there will be a lot of extra cash on the table.

But legislators could find themselves hamstrung in their freedom to spend the cash any way they wish because of various spending limitation caps now being hit as the state becomes flush with hundreds of millions of dollars.

"This all creates the perfect storm for more tax reform, more tax cuts," says Rep. Greg Hughes, R-Draper. "We can't sustain the kind of government growth" that spending all the new cash will bring, he adds.

Two new reports show just how robust tax revenue growth is for Utah and surrounding Western states.

The state's Finance Department has announced that Utah's two so-called "Rainy Day" surplus funds have completely rebounded from the revenue-short days of the early 2000s.

The two funds have topped out, and any additional tax surpluses can only flow into them as next year's budget is increased by lawmakers. Without legislators voting to lift the caps, none of the current tax surpluses can go into the Rainy Day funds.

And the National Conference of State Legislatures has compiled a nationwide accounting of tax revenue surpluses state-by-state, which shows healthy revenue growth in the American West.

Utah is one of only three states that don't provide the public with estimates of tax surpluses, as reflected in the NCSL survey.

But the NCSL report shows that surrounding states — Nevada, Wyoming, Idaho, New Mexico — are running revenue increases of between $132 million and $150 million.

Montana is seeing a whopping $552 million in additional revenue, Oregon an additional $490 million, the NCSL report shows.

The Deseret Morning News has reported that former Utah State Tax Commission chief economist Doug Macdonald, recently retired from the commission, estimates that Utah is running a $150 million tax surplus through the first four months of the state's fiscal year. If tax revenues continue to come in at such a high rate, the state will have a $450 million surplus at the end of the fiscal year, July 2007.

"There is a 6 percent cap" on the Rainy Day funds, says John Massey, director of the Legislature's budget office. That means that the Rainy Day funds attached to the state's General Fund and the Uniform School Fund can only grow to 6 percent of those funds — limits that have been reached.

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