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Scott G. Winterton, Deseret News
Utah Governor Jon Huntsman Jr. presents the State Budget for 2009 from the Gold room in the State Capitol.

Hard times have come to Utah state government.

Thursday, Gov. Jon Huntsman Jr. recommended a budget for the next fiscal year that is $1.1 billion less than his spending plan of just a year ago.

The $10.6 billion budget represents a 4.2 percent drop in spending for the budget year that begins July 1, 2009. Huntsman does not propose any tax increases, but he does want to boost motor vehicle registration fees by as much as $22 a vehicle to help secure bonding for state transportation projects.

The governor scrapped — at least for now — the suggestion that the gas tax be shifted from a flat 24.5 cents a gallon to a percentage of the sales price but said he'd be supportive of a similar proposal from lawmakers this session.

His budget does not include pay raises for state employees or teachers and Huntsman acknowledged that come the start of the new budget year, some state workers will be out of a job. Just how many, he said, remains to be seen.

All state agencies are being asked to cut 7 percent from their budgets, although some of that money would be restored in areas deemed critical, including human services and education.

But even education, traditionally a top budget priority for the governor and lawmakers, would end up with up to a 4 percent spending reduction next budget year under Huntsman's recommendations.

The governor said the budget is the best the state can hope for in tough economic times.

"I wish we had a gold-plated budget to present — no such luck today," Huntsman said, standing in the lavishly renovated Gold Room outside his office. "This is all we can do," he said, calling his budget "prudent and balanced."

The governor said Utah is better off than many other states and focused on his intent to fully fund $62 million in public school enrollment growth as well what he described as an "economic kick-start package" that would save some 20,000 jobs paying $600 million in wages.

That plan, praised at the press conference by Salt Lake Chamber president Lane Beattie, would use the increase in motor vehicle registration fees to bond for $2.5 billion in transportation projects as well as start work on buildings funded by donations, including those on college campuses. Another $5 million would go toward helping Utahns buy some of the 4,000 homes on the market.

And the governor said he was confident a federal economic stimulus package proposed by President-elect Barack Obama would come through and boost the amount available for infrastructure projects as well as for human services needs such as Medicaid.

While next year's budget is bad, more spending cuts must be made to this year's budget, too.

Huntsman said the current budget is still about $350 million short despite cuts made during a special legislative session earlier this year. He said the shortfall will be made up by having state agencies slice 1 percent from their budgets and dipping into cash set aside for transportation projects as well as the state's Rainy Day Fund. The road projects would then be funded through bonding, the governor said.

Lawmakers are usually loath to bond, but Huntsman insisted that is the best way for the state to go. His budget director, John Nixon, said the state would only be at about 85 percent of its bonding capacity under the governor's budget.

"I'm going to stand firmly by our budget," Huntsman said.

The GOP-controlled Legislature usually takes its own course in setting budgets, only glancing at the recommendations made by the governor, a fellow Republican.

Legislators met in special session in September to trim more than $350 million in ongoing and one-time tax monies from the current year's budget. In that effort, public education was held harmless.

Some legislative leaders want another special session this month, to get a jump on trimming ongoing budgets again before they can get at them in late January's general session.

"We have some real budget challenges," said incoming House Speaker Dave Clark, R-Santa Clara. "We're ready to cut another $350 million" from the current budget, Clark said, adding that such action in early December would greatly help lawmakers start the difficult work of reducing budgets for next year.

Huntsman, who met with legislative leaders Thursday before making his budget public, said he still doesn't see a need for a special session before the 2009 Legislature starts on Jan. 26. Only the governor can call lawmakers into special session, and he — not lawmakers — sets the agenda.

Clark said even a special session the first week of January (with the new leadership teams and new legislators in office) would be helpful. "We're burning through money at a rate we can't afford — the hole we're in doubles almost every day," said Clark.

New Senate President Michael Waddoups, R-Taylorsville, said Huntsman is "backfilling" some of the cuts in the current budget with one-time tax surpluses from previous years. And that is dangerous, said Waddoups, and just makes lawmakers' job of balancing next year's budget more difficult. "It could affect our bond rating if we spend too much out of the Rainy Day Fund," Waddoups said.

While Huntsman would tap nearly $150 million out of the current state Rainy Day fund, he plans on keeping around $270 million in the fund in case the current economic downturn draws out for more than a year or 18 months.

Sen. Pat Jones, D-Holladay, incoming Senate minority leader, said Huntsman "has made a good effort — spending some Rainy Day Fund, saving some of it, and trying to protect teachers and kids. I don't see him calling a special session so close to the general session."

Utah's failing economy means the end of recent state tax cuts. In 2006 Huntsman suggested a $60 million tax cut, lawmakers gave a $90 million cut. In 2007 the governor recommended a $100 million tax cut, and lawmakers gave a $220 million tax reduction. No general tax cuts were made in 2008.

Tax revenues will end up dropping a total of $720 million. Combine that with the $270 million already trimmed from state budgets earlier this year, and it's a record decline of some $1 billion in tax collections over a two-year span.

That's even more than the $700 million that lawmakers cut from budgets in the early part of the decade. And the current troubles are a far cry from Huntsman's own assessment a year ago, of the state's "continued prosperity and robust economy" he bragged of when he released his 2008-09 budget.

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