Gov. Jon Huntsman Jr. will release his recommended 2008-09 state budget next week, and Capitol Hill sources say it will lack something that Huntsman has pushed each year since he took office in 2005 a general state tax cut.
Huntsman, a Republican, and the GOP super-majorities in the state House and Senate have given significant tax cuts over the past two years and some "targeted," smaller tax cuts in 2005, Huntsman's first year in office.
Huntsman and lawmakers have "reformed" the state's personal income taxes giving a tax cut to nearly all Utahns. They have cut the state portion of the sales tax on food by more than half. They've also cut smaller taxes or given specific tax breaks.
Some of those multimillion-dollar general tax cuts won't really be felt by Utahns until this spring, when they pay their 2007 income taxes. On Jan. 1, most Utahns go from an income tax rate of around 7 percent to 5 percent.
With Huntsman seeking re-election in 2008 (he already says he won't seek a third term as governor), and with all 75 House members and half of the 29-member Senate also up for re-election, one could think that Huntsman, much-beloved by citizens as public opinion polls show, might want to suggest another round of tax cuts.
But several legislators are guessing just the opposite, believing that Huntsman will want to spend what new tax revenues there are on his already-announced main goals for 2008 higher teacher pay, health insurance for the uninsured and improved air quality.
"When I heard of his priorities for next year," said House Minority Leader Brad King, D-Price, an 11-year legislative veteran, "it looked like there wasn't room for a big tax cut."
"That's probably accurate," said House Speaker Greg Curtis, R-Sandy, who has not yet been privately briefed on Huntsman's budget. "We don't want to mess with the (personal) income tax; that reform takes effect Jan. 1. All property tax goes to education" budgets that are being built up by lawmakers. "And I don't see the Senate cutting any more of the sales tax on food so there's really nowhere to go" for tax cuts.
While Utah's economy is still booming even the housing market here has not turned as quickly as in many other states legislative conservatives worry that if the state spends as much as it will raise next fiscal year, it may have to cut state programs within a year or two or raise taxes if Utah's economy eventually weakens.
As one Capitol Hill wag put it: If Huntsman gets most of his large uninsured health care program which could well cost a lot of tax dollars who in their right political mind would vote to cut health insurance for the needy if, or when, state tax revenues turn south in a few years? "And so we'd be faced with a tax increase," he added, just a couple of sessions after the 2008 Legislature gave a considerable tax cut.
Huntsman's new budget will likely top $12 billion, continuing a rise in recent state government spending beyond population and inflation growth.
And there's going to be a lot of money in 2008.
"Not only do we have a lot of one-time money" through tax collection surpluses, says Rep. Greg Hughes, R-Draper, chairman of the House's conservative caucus. "I'm hearing we're going to have a lot of (new) ongoing tax revenue, as well."
The state's two "rainy day" surplus accounts have both topped out by law no more money can go into the $300 million funds. An October revenue update (a new update will come with Huntsman's Monday budget release) estimated tax surpluses in the current budget year upward of $400 million.
Yes, the state has multibillion-dollar transportation needs, including rebuilding and expanding I-15 in Utah County and I-80 from State Street to Parley's Canyon in Salt Lake County. And it's true that lawmakers and Huntsman have been pouring hundreds of millions of dollars in sales tax and other general revenues into roads for several years.
But state highways have always been built and rebuilt with multiyear bonds, with gasoline tax revenues playing a big part of the funding. It has been the idea that future generations will drive on those roads, and so should help pay for them; that motorists use the roads, and so should pay for a large part of them through the gas tax.
Paying cash for roads with today's general revenue tax surpluses goes against both of those long-held policies.
The state is seeing a crush of new public school students, and veteran schoolteachers retiring a double whammy on the education front.
But the state has faced rapid school enrollments before, some lawmakers say. And along with many of the new kids will come parents earning ever-increasing wages and making new purchases both taxable.
"We have to keep state spending under control," warns Hughes, who, along with his conservative caucus, yearly attempts to slow the growth in state programs.
While Utah government had to actually cut many state programs in the early 2000s when tax collections fell $700 million short over several years state revenues rebounded with a vengeance. Including only state not federal dollars, state spending went up by nearly a third over the past two budget years even while $310 million in tax cuts were adopted.
"The best way to stop increased spending is to take the money off the table" at the first of the 45-day general session, which starts Jan. 21, said Hughes. And the best way to sell that idea is with tax cuts, he added.
However, Hughes has been around long enough "to know that the spending plan we start out with" at the first of each session "is almost nothing like we see the end of February" when lawmakers set the final budget for the upcoming fiscal year, which starts each July 1."But with the surpluses we're seeing in one-time money and ongoing (new tax) revenues, tax cuts have to be part of the discussion" in the 2008 Legislature, said Hughes, even if Huntsman doesn't recommend any on Monday.
Tax cuts in recent Utah legislatures
• 2007 Gov. Jon Huntsman Jr. suggests a $100 million general tax cut; the Legislature passes a $220 million tax cut.
• 2006 Huntsman suggests a $60 million general tax cut; Legislature approves a $90 million tax cut.• 2005 Outgoing Gov. Olene Walker suggests no tax cut; newly installed Gov. Jon Huntsman Jr. suggests phasing out the 5 percent corporate income tax, a $200 million tax cut by 2012; the Legislature makes no general tax cuts but adopts several small, "targeted" tax breaks.
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