Utah may raise taxes on cigarettes by $1.31 per pack

Groundwork is being laid for a state tobacco tax hike next year, but with a gubernatorial race now set for 2010, any tax increases coming out of the next Utah Legislature are questionable.

"We're looking at tobacco, maybe alcohol" tax increases, House Speaker Dave Clark, R-Santa Clara, told Deseret News.

With the conservative, GOP-dominated Legislature, any tax increase is always considered a last resort, he said.

Lt. Gov. Gary Herbert, who will become governor later this summer, said it is too early to talk about any "revenue enhancements" for 2010, regardless of politics.

Still, state officials could see another $700 million hole for the 2010-11 budget, to be adopted next March by the Legislature, taking effect July 1, 2010. That big number must be closed somehow because Utah by law has to have a balanced budget.

"We have a leaner budget today" after cutting state spending by more than seven percent in the recently completed session, said Clark. "And we still have our Rainy Day Fund of $414 million."

But to keep the state's AAA bond rating, all of the state reserves can't be spent, he added. And Utah still has billions of dollars to spend in freeway construction coming, and so must get good borrowing rates for those road bonds.

The federal government's stimulus funds for Utah have also been figured in to those dismal budget figures. "And we are not going to lay off 2,000 teachers" and other state workers, added Clark.

So some targeted tax increases will be part of the discussion, state leaders say.

Clark said Gov. Jon Huntsman Jr., while playing a key role in budget negotiations, basically punted some of the most difficult budget decisions to legislators last session.

"The politics of budgeting is very interesting," said Clark. Huntsman told us "you are on your own" in setting the budget by not calling lawmakers into a special session last December. "That was clearly a political move."

When Huntsman is confirmed as U.S. ambassador to China and resigns as governor, Herbert will move up to the top post and put together a recommended budget in December for next year.

Will Herbert recommend the tough choices that need to be made? After all, Herbert will have to face fiscal conservative GOP delegates in his re-election effort next spring. Or will Herbert leave the unpleasant cuts or tax increases to the Legislature?

"I hope that politics doesn't get in the way of making correct decisions, regardless of an election year," said Herbert, reached in Washington, D.C., where he is attending meetings.