Utah taxpayers should get a $19 million tax cut next year and state workers and teachers at least a 3 percent pay raise, Gov. Norm Bangerter said Wednesday in recommending his fiscal 1989-90 budget.

If the Republican-dominated Legislature goes along with Bangerter's recommendations, it will be the second tax reduction in a year and only the second pay raise for state workers in almost four years.The governor, fresh from a close re-election victory last month, briefed House and Senate members Wednesday morning in the House Chambers about the budget and then answered reporters' questions.

He recommends a 1989-90 budget - which becomes effective July 1 - of $2.933 billion, a 0.7 percent increase over spending this current fiscal year.

However, the governor said that if the current year's budget and the budget he's recommending for next year are added together and adjusted for inflation and population growth, "in such real terms state spending has gone down 2 percent."

Bangerter told lawmakers: "We in state government must live within our means. I and others have received the (tax-limitation) message. We will be frugal. This is a fair budget that addresses the needs in state government while respecting the taxpayer."

Bangerter said state revenues will grow naturally - without any tax rate increases - by an estimated $84 million in fiscal 1990. "Utah's economy is coming back strong, and increased revenues reflect that." Sales tax revenues are estimated to increase by 2 percent next year, income tax revenues up almost 5 percent and property tax revenues up 3.5 percent, he said.

Of the $84 million in new revenues, the governor wants $36 million for the 3 percent pay raises for state workers, teachers and college professors. "It's time our hard-working employees got a pay raise," he said. If, by the end of February when the Legislature ends, updated revenue estimates show more than $84 million in growth next year, Bangerter said he wants the extra money to go for even higher pay raises. "I would support adding a point (to 4 percent raises) if we can do it," he said. Each 1 percent raise costs about $12.5 million.

Next, out of that $84 million Bangerter wants a $19 million tax cut. He and legislators gave an $80 million income tax rebate, in the form of checks to taxpayers, this summer after a $110 million surplus turned up. To prohibit the surplus from showing up again, they cut the income tax rates by 11.5 percent.

Bangerter doesn't yet recommend which tax or taxes should be reduced by $19 million. "It wouldn't be a rebate program like before. No money would be sent back to the taxpayer in a check. Rates would just be reduced next year so less is collected," the governor said in an interview.

House Minority Leader Mike Dmitrich, D-Price, doesn't want to give the $19 million back. "It is better spent giving another 1 percent to our (state) employees who've been held down financially for so long and in adding several million dollars to abate property taxes for the poor and elderly."

Budget Director Dale Hatch said $19 million equates to a 2-mill reduction in the property tax that lawmakers mandate for public education; or a 2.5 percent reduction in the income tax rates; or restoring half of the deduction for federal income taxes on state returns (a third of the deduction was restored last year); or cutting the state sales tax by one-eighth percent; or a combination of the above.

"This is an important public policy decision (which tax to cut) and I want a full public debate," Bangerter said.

Some lawmakers, Republicans and Democrats, want to remove the sales tax from food. But that would cost between $60 million and $100 million. "I don't oppose that, if they (lawmakers) really want to do it. (The $19 million) would be enough to begin a phase-in of reducing that (food) tax," the governor said.

Bangerter trailed in public opinion polls to Democrat Ted Wilson until the weekend before the election, and his win is considered by some an upset. In an effort to soften the hard feelings some felt toward Bangerter after he suggested a $220 million tax increase in 1987, about a month before the election the governor suggested a six-point plan to hold down taxes, including freezing property taxes at current levels. He hasn't yet proposed how to freeze property taxes and may not this upcoming session. Although in his budget address he again committed to such a freeze, his recommended budget doesn't deal with that issue directly.

But his $19 million tax reduction is one point of that promise - working to further reduce Utahns' tax burden.

Bangerter also recommends that the current $1 million going to abate property taxes for the elderly and poor be increased to $2 million, another point in his six-point promise. And he reiterated that he wants a law holding down government growth, another point in his six-point plan.

Finally, the governor wants an additional $41 million to be spent on funding student growth in public and higher education, $10 million for additional Medicare/Medicaid spending to obtain a $30 million federal match, $5 million to the courts and $3 million for the corrections work. Also, state officials have been "raiding" the transportation fund for several years and spending the money on non-transportation items. "We're going to give back, if you will, $5 million to that fund," Bangerter said.

The governor also suggests a $50 million bond to pay for various state building projects and a 3 percent increase in Social Service welfare and other aid grants.

Senate President Arnold Christensen, R-Sandy, said he supports Bangerter's $19 million tax cut. "I want more of a tax cut, and I want the money spent to restore totally the federal deduction (on state income taxes)."

House Speaker-elect Nolan Karras, R-Roy, said he doesn't yet know if giving the $19 million back in tax cuts is the best use of the money. But Karras recognizes the sensitive tax climate. "We beat the tax-cutting initiatives by the hair on our chinny-chin-chins and we have to be aware of that."

Summary of recommendations

Departments/Fund Authorized RecommendedPercent

1988-89 1989-90 Change

Business, labor, and

agriculture 60,806,200 60,450,500 -0.6

Community and economic

development 52,112,400 47,709,600 -8.4

Corrections 74,738,100 79,044,600 5.8

Courts 34,346,400 41,323,500 20.3

Elected officials 17,334,400 17,878,600 3.1

Government operations 61,499,100 60,925,600 -0.9

Health 286,768,500 311,066,800 8.5

Higher education 349,706,600 365,881,400 4.6

One-time appropriation 3,000,000 0 -100.0

Legislature 6,531,300 6,551,700 0.3

National Guard 2,998,600 3,272,700 9.1

Natural resources 64,610,700 59,118,900 -8.5 > Public education 1,031,722,600 1,066,400,900 3.4

One-time appropriation 4,000,000 0 -100.0

Public safety 40,397,700 39,406,500 -2.5 > Social services 269,127,100 274,032,800 1.8

Transportation 121,645,000 122,261,700 0.5 > Operations budget 2,481,344,700 2,555,325,800 3.0

Capital budget 341,023,700 312,532,600 -8.4

Debt service 65,066,800 64,676,900 -0.6 > Thrift settlement 25,000,000 0 -100.0

State Insurance Fund 0 0 0.0

TOTAL 2,912,435,200 2,932,535,300 0.7 > tp0

>