Utah legislators salivating at the prospect of record-setting surpluses may find themselves gazing enviously toward other states' even better fortunes.
Around the country, revenue surpluses are the norm, with many states seeing a boost in revenues thanks to increased jobs, a recovering stock market and booming real estate sales, according to a report released by the National Conference of State Legislatures. All told, 42 states have reported revenue collections that are above expectations, and budget officials in more than half of the states are optimistic that the upward revenue tick will continue for the foreseeable future.
While Utah is among that group of optimists, it is probably best considered the median state: Utah ranks 25th in surplus percentage, with 4 percent growth during the first quarter of fiscal year 2006 and $40 million in surplus. Many of the states above, especially those with double-digit growth, are economies driven by oil and gas, while those below are struggling with fading industries or an aging population.
State budget reports from the Nelson A. Rockefeller Institute of Government in Albany, N.Y., and a joint report from the National Governors Association and the National Association of Budget Officers show similar growth at state levels.
Richard Ellis, the budget director for Gov. Jon Huntsman Jr., said Utah's growth is as much a result of a recovering national economy as it is anything particular to the state. As opposed to growing rapidly like energy-reliant states such as Alaska or Wyoming or shrinking in Midwestern industrial states like Michigan, the Utah economy is growing steadily.
"I think it's just that the economy is picking up," Ellis said. "There are some states that are struggling, especially in the 'iron belt,' but many states are growing their economies."
The biggest growth in state revenues was in Alaska, which experienced more than 25 percent growth and already had a $650 million surplus, while New Mexico was second with 23 percent growth. Both states attributed much of their surplus to energy revenues, and both economies are expected to maintain that growth as long as energy prices remain stable.
Energy prices can be a double-edged sword, however, as many states with revenue growth have seen equally rapid expenditure growth. Hardest hit are those in the Northeast, where corporate taxes and personal income taxes are both up significantly but assistance programs such as Medicaid are often outpacing revenue gains. A number of states are also using the surpluses to pay off debt incurred during the economic downturn in 2001-2003.
While Utah is also seeing an increase in spending requirements in programs such as Medicaid, it is able to absorb those because legislators chose to cut state spending during the economic downturn instead of increasing taxes or borrowing money, Senate President John Valentine, R-Orem, said.
The state is also benefitting because it has a diverse tax base as opposed to a state like Oregon, which has no sales tax, or Washington, which has no income tax and does not rely heavily on any one economic sector.
"We chose to reduce expenditures during the downturn, and are now recovering," he said. "But those states that raised taxes are finding that the economic recovery is not robust as they expected."
As for those states with growth far superior to Utah? Valentine said he is fine with Utah's steady growth and the projected $344 million surplus for this fiscal year, as it will help avoid the risk of having the economy go negative, as it did in 2001, and finding the state burdened with expenses it cannot cover."That is sufficient for this year," he said. "It gives us the ability to be versatile, without getting euphoric about tax cuts or other expenditures."