State revenue projections down from $300 million to $264 million, lawmakers told
Scott G Winterton, Deseret News
SALT LAKE CITY — The latest state revenue estimates show growth in tax collections is expected to fall from $300 million to $264 million in the coming budget year, lawmakers learned Monday.
Legislative leaders blamed the drop on the ongoing fiscal fights in Washington, D.C., and credited Utah's healthy economic environment with keeping the state from sustaining a bigger financial blow.
"That's better than we had initially thought," House Speaker Becky Lockhart, R-Provo, said. "It's an indication the Utah economy is doing quite well and is able to overcome some of the impacts of the federal politics."
Gov. Gary Herbert, who spent the past few days in Washington, D.C., talking with other governors about the impacts of the looming federal budget cuts known as sequestration, said the gridlock is having a "chilling effect" on Utah's economic recovery.
"We would be seeing even greater growth were it not for the backdrop of federal uncertainty and a fragile national economic recovery," the governor said in a prepared statement. "It's good news that the state economy is largely resilient, but we are not immune to national economic dynamics."
Herbert later told CNN he and other governors are frustrated over the inability to get the federal budget under control and suggested the impact of spending cuts is being overblown.
“The sky is falling mentality permeates, I think, some of the efforts here in Washington, D.C.," he said. "I think that is hyperbole. I think it’s exaggeration, downright on the offensive side of the line. In most of the states, we've had to cut our budgets, live within our means, and we get are getting better outcomes than we had did before.”
The new estimates, agreed to by both the governor and the Legislature, are not as bad as had been feared at the start of the session. Then, it appeared that Congress' last-minute "fiscal cliff" deal raising taxes on the wealthy would strip $100 million from last fall's $300 million forecast.
The one exception to Monday's declining revenue estimates was in projected one-time or surplus income tax collections in the current budget year, which rose $40 million to $161 million. But the additional revenue is not expected to continue into the new budget year.
That's because the estimates for what will be left over when the current budget year ends June 30 went up due to a flurry of stock and real estate deals at the end of 2012 to avoid paying higher tax rates on the income.
The key factors contributing to the growth in ongoing revenue for the new budget year that starts July 1 are climbing wages and new construction, according to Juliette Tennart, deputy director of the Governor's Office of Management and Budget.
"Those are the biggest drivers," Tennart said, noting wages are still expected to jump 5.9 percent this year after being adjusted from last fall's 6.6 percent forecast, while residential construction in the state is expected to be up by 26 percent.
Tennart said the adjustments take into account the economic impact of mandatory furloughs for federal workers under sequestration, set to take effect Friday unless Congress and President Barack Obama reach agreement on tax increases and spending cuts.
Not included in the new revenue numbers, however, are the $40 million in federal funds anticipated in next year's budget that would be lost if the automatic cuts aren't stopped.
According to the Obama administration, federal budget cuts would hurt programs in many areas, including education, air and water quality, military, law enforcement and public health.
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