Certainly, challenging economic times remain. But there is good news, as well.

BOUNTIFUL — Gov. Gary Herbert provided a group of Bountiful High School students studying financial literacy with an unusual lesson in budgeting Monday — how to spend $12.9 billion.

The governor chose to unveil his proposed budget for the fiscal year beginning July 1, 2012, in front of the students to showcase not only his emphasis on funding public education but also his budgeting priniciples.

"It's not just a matter of, here's a math game and here's how the money is cut up," Herbert told the juniors and seniors gathered in the school's media center along with members of the governor's cabinet, advocates and the news media.

Instead, Herbert said he applied the same principles the students are learning in class, including paying bills on time, avoiding excessive debt and saving for a rainy day.

The result surprised Kiet Tran, 17. 

"I was just appalled at some of the numbers," Tran said. "At just how much money our state really has. I mean, millions and billions. I've never seen that amount of money, ever, as a high school student."

But even Tran said he was pleased to hear how much money would go to education.

Education was a top priority in the governor's budget, along with job creation, energy development and what he called "self-determination." Herbert called an educated workforce critical to the state's economy.

His budget would boost public education spending by $111 million, enough to cover the cost of more students as well as expand all-day kindergarten and other early intervention programs, add testing and start new charter schools.

There's even an extra 1 percent in the state formula used to fund public schools, money intended to pay for a pay increase for teachers. "That's a reward for a job well-done," the governor said. State employees would see a 1 percent salary hike, too.

Higher education would get an additional $23 million for a variety of programs largely targeted at meeting the governor's goal of increasing the number of Utahns who earn post-secondary degrees. But there's no money for higher education raises.

Herbert's goal of creating 100,000 jobs by mid-2013 is backed with $20.4 million for economic development initiatives, $11.6 million to provide incentives for job creation and $6 million for tourism marketing.

He is also recommending a $26.4 million decrease in unemployment insurance rates. The drop in costs to employers should encourage small businesses to make new hires, the governor said, without any change in unemployment benefits.

There is also another $700,000 for the governor's Office of Energy Development in his budget, to further the state's efforts to ease access to energy resources located on federally controlled public lands and develop alternative fuels.

Additional funds are allocated in the governor's budget to hire six new Utah Highway Patrol troopers, create a parole violator center to free up prison space, conduct more health and safety inspections and government audits, keep state parks and liquor stores open, and cover increased Medicaid and Children's Health Insurance Program costs.

Herbert said his goal of self-determination is met through a budget that is "conservative, fiscally responsible and structurally balanced," meeting needs in critical areas without increasing taxes or dipping into the state's $232 million Rainy Day fund.

That was made possible by projected growth in state revenues for the first time since the nation's economic downturn in 2008.

Last month, the governor announced the state anticipated a $128 million surplus from the current budget year that ends June 30, 2012, plus nearly $280 million in additional revenues in the upcoming budget year, much of it from increased income and sales tax collections.

In a letter to Utahns accompanying his budget, Herbert said he is "pleased with what we see on Utah's economic horizon," citing encouraging signs in many areas of the economy.

"Certainly, challenging economic times remain. But there is good news, as well," he said, promising the state "will continue to take careful, measured steps to position the state to address challenges and seize opportunities ahead."

The governor and GOP legislative leadership are in agreement on the need to do away with the $52 million so-called "structural imbalance" in the budget, created by using one-time moneys to cover ongoing costs.

Legislative leaders still had some concerns about the governor's budget, however.

"He spent all the money. Well, I think we still need to be planning for the future," said Senate President Michael Waddoups, R-Taylorsville. He said that means paying down some of the state's bond debt. "In times of surplus, we need to start working that down."

Waddoups also questioned why the governor didn't recommend pay raises for higher education employees. "I just want to treat all of our state employees the same," he said. "You don't pick and choose." 

The Utah Public Employees Association, which represents the more than 20,000 state workers including some in higher education, cited a recent study showing they already earn some 10 percent less than the private sector.

"It's a good start," UPEA employee representative Todd Sutton said of the 1 percent boost. "It's not going to solve all of our problems."

House Speaker Becky Lockhart, R-Provo, said lawmakers are "a bit more concerned about the volatility in the economy, so I think you'll find we'll be a bit more cautious in terms of new spending."

Lockhart, too, emphasized the need to reduce the state's debt load, now about $85 million above the Legislature's self-imposed limit. She also said the state should consider replenishing some of the reserve accounts drained in the economic downturn, including money set aside specifically for building maintenance and people with disabilities.

Herbert said reducing the debt can wait. "I don't see that as a big issue right now," he said. But he also made it clear this was not the time for the state to borrow any more money. 

University of Utah political science professor Matthew Burbank said the governor is clearly trying to avoid a confrontation with fellow Republicans over the budget in an election year.

Herbert is already being challenged in his 2012 re-election bid by Rep. Ken Sumsion, R-American Fork, and former GOP congressional candidate Morgan Philpot.

"Some politicians might look at this and say, 'This is my opportunity to make a big statement and this is what I want to carry into the election with me,'" Burbank said. But Herbert "does not want to have any big fights." 

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The governor's proposed unemployment tax decrease will help him make his case to conservatives, Burbank said, and the issue of whether to pay off bond debt is not likely to resonate with voters. 

Herbert's budget won an endorsement from the Salt Lake Chamber, which praised his spending plan as "bold, practical and future-oriented." 

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