Utah too dependent on federal dollars, state auditor warns

Published: Tuesday, Dec. 3 2013 6:33 p.m. MST

Utah State Auditor John Dougall included a warning about the state's dependency on money from Washington, D.C., in issuing the latest annual audit of federal spending.

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SALT LAKE CITY — Utah State Auditor John Dougall included a warning about the state's dependency on money from Washington, D.C., in issuing the latest annual audit of federal spending.

"Given the recent partial shutdown and the budget turmoil in Congress, Utahns should consider the concerns raised by such a significant amount of funding dependent on a single source with such fiscal dysfunction," Dougall said.

Federal funds are expected to once again be the largest single source of revenue in Gov. Gary Herbert's nearly $13 billion spending plan for the budget year that begins July 1, 2014, scheduled to be released Wednesday.

"All I'm trying to do here is flag that we're heavily dependent on them," Dougall said of the federal government. "We know they have serious budget problems. Wake up, folks."

A member of the Legislature for 10 years before being elected auditor in 2012, Dougall said he hopes to reinforce efforts already underway to reduce the state's reliance on federal funds.

Utah lawmakers created the Federal Funds Commission last session to examine what the state would do if the flow of money from Washington, D.C., slowed or even stopped, given the growing national debt.

"The risk is severe," said Rep. Ken Ivory, R-West Jordan, the commission's vice chairman. He said the goal of the commission is to ready the state for the coming "financial earthquake," as well as to become economically self-reliant.

"With more than 40 percent of our revenue coming from a federal government that is committing fiscal suicide, we have to get pretty serious," Ivory said.

He said the commission plans to hire a consultant to help with the work.

Ivory, who was on his way Tuesday to talk about Utah's commission at an American Legislative Exchange Council meeting in Washington, D.C., described the planning as "blazing new ground. We're in kind of uncharted territory."

Past studies have shown that Utah receives more federal money than it sends to the nation's capital in taxes, but Ivory said that can't be counted on to continue in a time of forced federal cuts known as sequestration and shutdowns.

"That's like being diagnosed with cancer and pretending morphine is a cure," Ivory said, labeling the federal budget situation as a growing cancer. "We can either begin to prepare for that or we deal with the consequences."

While the federal government may be the state's largest employer, with Hill Air Force Base and other installations, Dougall said that doesn't mean federal spending is a plus.

"We see a lot of the benefit of the dollars that are spent here," the auditor said. "We don't always see the harm that's caused as a result of the taxation that takes place."

Some of the more than $6.7 billion identified as federal spending in the audit is not included in the state budget, such as outstanding student loan balances and various loan programs for community needs.

The audit found that in the budget year that ended June 30, Utah received $4.5 billion in federal funds, plus another $2.7 billion in loans, endowments and loan guarantees.

That's compared with almost $3 billion collected in individual income taxes and a little more than $2 billion in state sales taxes, the largest sources of state government revenue.

University of Utah political science professor Matthew Burbank said although he understands the concerns raised about federal funding, the state has little alternative but to depend on Washington, D.C.

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