Utah expecting big tax surplus

It may reach $260 million by end of fiscal year, July 1

Utah's state government is rolling in dough.

And this comes after significant tax cuts both last year and this year.

At the end of the fiscal year in two weeks, state coffers will hold between $160 million and $260 million in surplus cash. By August, state executives and the Legislature will have a specific tax surplus number.

But the new numbers clearly show that Utah's economy is still running at a high clip. And Utah workers should see their wages go up by an average 10.2 percent this year, and inflation (except for gasoline) should stay in check.

"That means real wage growth" for Utahns, said Andrea Wilko, the Legislature's chief economist.

Wilko made her report to the Executive Appropriations Committee of Republican and Democratic Senate and House leaders. This is the first official revenue update newsletter issued by state economists. It will be followed by updates on Oct. 15 and in early December and late February of each year as first the governor and then lawmakers set future state budgets.

The new report comes more than a year after the State Tax Commission stopped predicting tax revenue surpluses, leaving state bosses economically blind for much of each fiscal year.

Assuming that tax revenues come in at the top range, that doesn't mean lawmakers and Gov. Jon Huntsman Jr. will have an extra $260 million to spend in the 2008 Legislature. By law, there are several automatic allocations that come out of each fiscal year's surpluses before the remainder can be spent.

But even so, 2008 — an election year for Huntsman, all of the 75 House members and half of the 29-member Senate — may bring yet another round of tax cuts for Utahns.

The governor and Legislature have given around $400 million in tax relief over the last two years — years that also saw record growth in state spending, especially on public education.

Wilko said the sales tax reduction on unprepared food — from 4.75 percent to 2.75 percent on Jan. 1 — will save Utahns nearly $70 million a year. While sales tax revenue growth is still strong, that tax cut will reduce sales tax revenue increases in years to come.

The Utah economy — and tax take — has been so strong that even with slower growth next year, Utah is still growing faster than most other states.

For example, next year wage growth is expected to slow to 7.7 percent. But Wilko said one shouldn't worry about that slow-down, considering how strong it's been.

Residential construction may be down a bit, also. But when the new wave of commercial construction starts up — with the LDS Church's billion-dollar remodeling of two downtown blocks — that section of the Utah economy will also move forward, she said.

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