Utah's budget-setting process got under way this week with GOP Gov. Jon Huntsman Jr. recommending a record-setting $10.7 billion spending plan for next year.

The governor also wants to trim state personal income taxes by $100 million, reducing the new flat-rate income tax's rate from 5.35 percent to 5.0 percent, and give per-person tax credits.

Utah's strong economy is pushing state tax revenue into the stratosphere. Between one-time surpluses and new revenue growth for 2007-08, legislators will have $1.6 billion in new monies to allocate in the 2007 Legislature, which convenes Jan. 15. In 2006, lawmakers had an extra $1 billion to spend.

The current year's budget grew by 17 percent in the two main state funds. Huntsman's budget calls for 15 percent growth in those two funds for next year.

So state government spending would grow by nearly one-third over just two years.

Huntsman points out that even with such growth, the "real" measure of government — the number of state employees — stays about the same.

Considering that Utah is also undergoing a population boom, Huntsman says that state government is frugal, as the ratio of state workers compared to the number of people they serve is dropping. He's right.

But that's little solace for conservatives, especially in the Utah House.

Downturns in the local economy will certainly come, they argue, and with it a drop in tax collection. And just like in 2001 and 2002, the state will have to trim back spending and/or raise taxes when that happens.

At the same time, 50,000 new schoolchildren will be hitting already overcrowded public schools over the next decade. And how do we pay for all of them, as well?

Just hours after Huntsman released his recommended budget, House Republicans came out of a daylong closed caucus to announce that they have the votes for a $300 million tax cut.

Senate Republicans haven't set a number, yet, for tax cuts. But Senate President John Valentine, R-Orem, says many in his caucus like Huntsman's $100 million cut.

House Speaker Greg Curtis, R-Sandy, said while his colleagues have not decided exactly how to allocate that $300 million, the numbers show that legislators could fund Huntsman's lower flat-rate income tax plan and remove the final 2.75 percentage points from the state's sales tax from unprepared food. (Two percentage points come off the food tax Jan. 1.)

In other words, if Huntsman and senators go along with the House's budget ideas, the state could effectively work all the way through so-called "tax reform" in just two years — a goal thought unreachable just last year.

Now the politics of tax cuts and budget-setting starts in earnest.