A state economic development incentive program is bringing out-of-state companies' operations to Utah. Now a state agency is working to make sure the program does not cut into funding education and other allocations.

The Governor's Office of Economic Development is looking for options for paying out tax-rebate commitments made under its Economic Development Tax Incentive Fund program. Through the relatively new program, the state can offer up to a 30 percent rebate of individual income and corporate taxes, payroll taxes and sales taxes created if a company puts operations in Utah. Procter & Gamble, among others, has received rebate approvals through EDTIF.

But Andrea Wilko, chief economist for the Legislature's Economic Development and Revenue Appropriations Subcommittee, told the group Thursday that incentive commitments are growing while the current way to repay those obligations is out of the state's general fund.

"The problem that I see is that all of the incentive is being rebated back out of the general fund," she told the subcommittee. "This hasn't been a problem the first couple of years. I think the first-year allocation was $918,000. Last year, we were given a request for $1.5 million. This year, you'll have a request for $15.8 million. The program is a good program and it's yielding the results we wanted; the problem is that it's created a structural problem that all of the money is coming out of the general fund. ... There are currently about $173 million in commitment over a period of time. This will all come out of the general fund, and this will become a larger problem as you want to spend other items out of the general fund."

Jason Perry, executive director of GOED, noted that companies receiving the incentives get their rebate only after they have paid the appropriate taxes. He said GOED is considering several options for changing the program-funding statute, but the best way may be a tax credit rather than a tax rebate.

"The clearest and cleanest way, and what at least a couple of other states are doing, is they've converted this to a tax credit scenario so that you very clearly audit the performance measures over the year. They tell you how many jobs they've created, what the new state revenue was," he said.

"After you audit those (and) make sure that they've earned it, then they can take a tax credit, which means that we don't have to come back to the Legislature and we don't have to hit that general fund. The way our great economy is in the future, a very significant portion of that general fund could be taken up from commitments from the EDTIF."