Ours is the best-managed state in the union, we are told. We're better off financially than most surrounding states. We live within our means. Sound financial management, however, means not just balancing our books today, but also investing for the future.
Take severance taxes from oil, gas and minerals, for example. We ought to invest these revenues from non-renewable resources for future generations. But instead, we spend every penny for ongoing programs.
We are supposed to invest severance taxes in our Permanent State Trust Fund. We've put in some tobacco settlement money and a little severance tax revenue; even so our fund balance isn't much over $100 million. New Mexico, by contrast, has been saving up since 1973. Their fund is worth more than $3.5 billion. Wyoming's is more than $4 billion. In those states, fund earnings already furnish badly needed revenues for schools, public safety and transportation. As long as these states don't raid their fund principal, earnings will flow from generation to generation.
To take money out of Utah's Permanent State Trust Fund requires approval by a three-quarter majority of the House and Senate. But even though it takes this large supermajority to get emergency money out of the fund, my fellow lawmakers have learned that a simple majority vote can divert as much severance tax as desired before it ever makes it into the trust fund.
Last session, for example, the Legislature increased the amount of oil and gas severance taxes we spent to $77 million. How much will be left over to go into the trust fund this year? Nothing. Many of my colleagues and I tried to stop this raid on our grandchildren's inheritance. We mustered 34 no votes — not quite enough to block it.
When the day comes that extraction of natural resources ceases, so will severance tax revenues. These one-time revenues shouldn't be used to fund ongoing programs. If we keep spending all of the severance taxes generated by non-renewable resources for ongoing government programs, our descendents will surely ask us one day why we wasted the limited revenues that came from the natural resources that once belonged to all of us. They will wonder why we didn't invest something for them.
We must stop squandering the revenues from our natural resources and save instead for tomorrow. This is why I am sponsoring a constitutional amendment that will require Utah to invest severance taxes for the future. If the effort succeeds, all of us will have a chance to vote on this amendment in November. The amendment will require that every severance tax dollar be deposited directly into the Permanent State Trust Fund with no opportunity for the Legislature to intercept it.
We (and future generations) can use earnings from the fund to pay for ongoing programs, but we'll have to stop spending the fund principal each year. Of course it will still be possible to make a withdrawal from the fund for a serious economic emergency, but only by a three-quarter supermajority vote. Thus this fund will function as one more last-resort safety net in challenging economic times — a fallback fund for severe economic weather once we've already exhausted our regular rainy-day funds.
As economic conditions slowly improve in Utah, we face tremendous pressure to spend in many useful ways the small surpluses that are beginning to emerge. But if we really are the best-managed state, we must resist the inclination to spend everything today rather than save for tomorrow. Fiduciary duty requires that we invest severance taxes from non-renewable resources for our children, our grandchildren and each generation that follows.
Jim Nielson represents Utah House District 19, Bountiful.