Throughout most of the 20th century, Kiribati, a Pacific island nation, based much of its economy on mining guano for fertilizer. In 1956, the island set up an endowment fund to invest taxes raised from these mining operations. Today, the guano is long gone, but the pile of money ($400 million) remains. That is enough, reported the British news magazine The Economist to boost the islands' GDP by a sixth. The same report suggested that rather than spend all our natural resource revenues in boom times, it is wiser to save for the generations that will follow long after the resources are exhausted.
Are our needs today more important and more urgent than those of our grandchildren? Do Utah's natural resources and their associated severance taxes belong to every generation or just those that exploit them? Honest answers to these questions suggest that, like Kiribati, we must invest a portion of the revenues from our natural resources for future generations.
But that's not what we're doing.
Over the past 75 years, Utah has collected more than $1.5 billion in severance taxes from oil, gas and minerals extracted from our lands, but we've spent just about every penny.
In the 1970s, some of our neighboring states started building up severance tax endowments for future generations. These funds have been growing ever since. Today, Wyoming and New Mexico each have more than $4 billion in their severance tax funds. Interest from these funds now helps these states pay for education, infrastructure and government operations. As these endowments continue to grow, their contribution to their states' budgets will grow as well.
Seeing the success of our neighbors, two-thirds of Utah voters in 2008 approved a constitutional amendment allowing severance taxes to be added to the Permanent State Trust Fund. Revenues from Utah's portion of the national tobacco settlement had been invested in this fund previously. In accordance with the new constitutional amendment, the trust fund began receiving limited severance tax revenues in 2009. Just two years later, however, the 2011 Legislature increased severance tax spending, leaving nothing to be invested.
Today the Legislature decides by simple majority how much severance tax revenue, if any, will be invested for the future. In contrast, proposed Constitution Amendment A sets a formula by which revenue will be invested in the Permanent State Trust Fund each year. The amount invested is proportionally greater when receipts are high and lower when revenues decrease. These new requirements will phase in over four years. Spending trust fund dollars would require a more difficult 3/4 vote of both House and Senate, plus the governor's approval.
If we truly are the best-managed state in the union, we must save for tomorrow. Putting money into the Permanent State Trust Fund is much like saving for retirement. Before long our investment will provide revenues to make up for severance taxes that will surely shrink and one day disappear. We may say that we will start saving when things get better, when the economy improves. But what if these are the good times? When will we ever be able to do right by future generations?4 comments on this story
As the people of that tiny Pacific island nation Kiribati recognized, natural resources belong to all generations. In Utah, we must begin investing a portion of our Severance Tax revenues for the future. These revenues come from non-renewable resources that will be gone one day. Our needs today do not and must not trump the needs of our grandchildren and every generation that comes after them.
The Legislature voted in favor of this investment — in the Senate the vote was unanimous, as members of both parties stood in favor of long-term vision and investment. Now it's your turn. Please join us in planning for the needs of future generations. Vote for Constitutional Amendment A.
Jim Nielson is the Utah state representative for District 19, Bountiful. Lyle Hillyard is the state senator for Cache and Rich Counties. Both are Republicans.