This week Gov. Gary Herbert released his fiscal year 2015 budget. He recommended $13.3 billion in spending – a cool $36 million a day to pay for Utah’s education system, transportation network, human services, public safety and other important public functions. I worked in the state budget office for 18 years, and I think the governor got it right. Here’s my take on state finances:
Fiscal fitness – Every year the governor and Legislature deliver a carefully crafted, fiscally conservative and economically smart budget. They balance revenues and expenses, keep spending under control, and bond only when prudent to do so. Our credit worthiness is the best in the business; nobody borrows more cheaply than the state of Utah. And our governor has line-item veto authority as a check on spending. When it comes to fiscal responsibility, it doesn’t get any better than Utah.
Education funding – Gov. Herbert made it no secret that education is his top priority. I was pleased to see in the news coverage that House Speaker Becky Lockhart agrees. Utah has reached a tipping point in education funding. Our commitment to public education (education revenues per $1,000 of personal income) has fallen from seventh among states in 1995 to 29th in 2010. It’s time to reverse this trend. Herbert’s budget is a step in the right direction.
No new general taxes – Gov. Herbert has always made the Utah economy his focus and has lots to show for his leadership. His string of economic development successes is without peer. The governor also consistently has held the line on taxes, a stance most of his legislative colleagues also support. Utah still has 60,000 unemployed people and arguably a similar amount of workers who have dropped out of the labor force. For this reason I support the governor and Legislature for their no new tax stance, with one important exception.
Raise the motor fuel tax – The motor fuel tax needs to be raised to make up for lost purchasing power from inflation. In inflation-adjusted terms the tax per gallon has dropped from 24.5 cents in 1997 to 17.1 cents today. As a consequence, state policy makers take money from other important state needs to pay for needed investment in Utah’s transportation system. We need the transportation investment, but highway users should pay more. It’s time to raise Utah’s motor fuel tax to make up for lost revenue. While the governor did not propose this, I’d like to see the Legislature consider it.
Earmarks – Revenue earmarks have become a dangerous trend, a point highlighted in the governor’s budget recommendations. When I left state government in 2003 sales tax earmarks were less than $50 million. Today they are over $500 million. I have a philosophical problem with earmarks. I call them “intravenous funds” because they go to their intended use without being vetted in the marketplace of priorities. Budget conditions change year to year and I think it’s better to give elected officials more flexibility in meeting state needs.
Debt – This is my biggest concern with Utah’s current budget. Per capita debt in Utah tripled between 2008 and 2012, rising from $445 in general obligation debt to $1,283. Don’t get me wrong, this rapid increase occurred for a really important reason. We re-built I-15 in Utah County, which is critical to our long-term economic growth. And it could not have happened at a better time – the economy needed the jobs and interest rates were low. But it’s time to pay down this debt. Our target should be to bring the debt to the $600 per person range over the next five years. Gov. Herbert wisely chose to pay cash for state capital projects in this year’s budget, a point that Senate President Wayne Neiderhauser agreed with in his public commentary.
Gov. Herbert has provided a useful framework for the Legislature to fulfill its constitutional duty. The partnership between the executive and legislative branch works. The governor proposes; the Legislature disposes. Utah is well positioned for the future. We have our good governor to thank for setting the framework. It’s now the Legislature’s task to get the job done.
Natalie Gochnour is an associate dean in the David Eccles School of Business at the University of Utah and chief economist for the Salt Lake Chamber.
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