Public may vote on eliminating tax exemption to fund schools

Bill would give $400M to schools but at expense of big families

Published: Wednesday, Oct. 16 2013 3:08 p.m. MDT

Sen. Pat Jones said she intends to call for a non-binding public vote on a bill that would eliminate the personal tax exemption to fund schools.

Tom Smart, Deseret News

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SALT LAKE CITY — Utahns may be asked to vote "yea" or "nay" on giving up a ubiquitous state income tax exemption to fund public schools if a bill fails to gain the support of lawmakers.

Sen. Pat Jones, D-Holladay, presented her bill on Wednesday to members of the Education Interim Committee. Several lawmakers expressed tentative support of the proposal, but comments were also shared that the bill faces an uphill battle in the tax-averse Utah Legislature.

Jones' proposal would raise roughly $400 million in annual funding that would be distributed at the school level under the discretion of local community councils. But that money would come at the expense of a tax exemption that primarily benefits large families.

Sen. Howard Stephenson, R-Draper, said it's appropriate to discuss the current funding system in the state, which sees families with the most children in public schools paying the lowest taxes toward the education of those children. But he said the elephant in the room is the bill's hefty $400 million price tag, which effectively constitutes a tax increase.

"I think that is really the thing that has kept the bill from passing each time it has come forward, the size of the fiscal note," he said.

Stephenson said it is unlikely that a majority of lawmakers in both the House and Senate would support the bill. But he suggested a nonbinding referendum be forwarded to gauge the public's support of the issue, similar to what was done in the lead-up to Utah's hosting of the 2002 Winter Olympic Games.

Jones said she plans to run a bill calling for a nonbinding public vote during the upcoming legislative session. Should her tax reform bill prove unsuccessful, but enough lawmakers support the nonbinding referendum, an opinion question on ending the tax exemption to fund schools would be placed on the November 2014 ballot, allowing lawmakers to take up the issue again during the 2015 legislative session.

"I feel quite confident that the public will be supportive of it if they know the money will end up in schools," she said.

Rep. Francis Gibson, R-Mapleton, spoke in favor of a nonbinding referendum. He said he hoped the people of Utah would turn out to vote their opinion so that their 104 elected lawmakers could act on the issue with confidence rather than fear of losing re-election.

He also expressed frustration toward the attitude of some Utahns who oppose tax increases while criticizing lawmakers for failing to adequately fund schools.

Currently, per-pupil funding in Utah is the lowest in the nation.

"I want this discussion, I’m tired of arguing about feral cats," Gibson said. "I want the citizens of Utah to either put up or be quiet when it comes to funding education."

Jones said the extra funding would help schools lower class sizes and hire teacher aides to give one-on-one instruction to students. She said an investment in schools is necessary to achieve the state's goals of higher student proficiency, graduation rates and degree attainment.

She also said the Office of the Legislative Fiscal Analyst estimates 6,000 jobs would be created throughout all areas of the state by the bill.

Her presentation came one day after a report was released by the Alliance for Excellent Education showing that raising Utah's graduation rate to 90 percent for a single year would boost the state's economy by as much as $55 million.

But several lawmakers also expressed opposition, or mixed support, of the idea of ending the tax exemption. Sen. Stuart Reid, R-Ogden, said he could support the bill if some level of direction was given to local schools concerning how the money would be spent.

He suggested that the bill be written to include an advisory and oversight role of the State School Board, which would identify the most effective investments to improve student performance and allow schools to choose between those options.

"There needs to be some guard rails," he said. "I’m not going to support a program that allows them to, whatever the most wild idea that comes to the community council, to try to fund that in some way."

Rep. Steven Eliason, R-Sandy, expressed concern that the financial burden of the bill would fall disproportionately on large families.

"Families with schoolage children primarily would be the ones paying extra taxes annually to fund this," he said.

But Rep. Patrice Arent, D-Millcreek, countered that point by saying that large families gain the most from improvements to the education system.

"It is true that for the most part this is funded by families, but it is families who get the greatest benefit," she said. "What would be better for the families of our state than to have a better education system?"

Jones emphasized that the bill would not raise the tax rate but would broaden the tax base by eliminating a specific tax exemption. Currently one-third of Utah households pay no state income tax as a result of exemptions, she said, adding that her bill would reaffirm Utah's values as a state that supports education and personal responsibility.

"I think we need to start looking at education as one of our top values in our state," Jones said. "We have to do something about it. We have to invest and it can’t be looked upon as a punishment."

While the specific costs would vary by household, Jones said the average cost of her bill for a family of four would be $400 each year that would otherwise be exempted. The bill would maintain an effective income tax rate of 5 percent or lower, and on average would provide $400,000 for each elementary school, $700,000 for each middle school and $1 million for each high school.

Email: benwood@deseretnews.com

Twitter: bjaminwood

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