There is a time and place where bonding makes sense. But we are very clear this year we don't think bonding needs to occur. We need to make some progress on paying our debt down. —Kristen Cox, executive director of the Office of Management and Budget
SALT LAKE CITY — There will be $206 million in new revenue to spend in the new budget year that begins July 1, 2014, plus another $132 million in surplus funds, Gov. Gary Herbert announced Monday.
The extra money is less than was available in the current budget year, but the governor called the revenue forecast agreed to by the Legislature encouraging given the uncertainty in Washington, D.C.
"With sequestration and the federal government shutdown, Utah is not immune from the effects Washington, D.C., has on the nation," Herbert said in a statement that stressed his top priority remains growing Utah's economy.
"The latest revenue figures are encouraging because they demonstrate this focus is working. We must continue to be careful with investing every dollar wisely to increase job growth, improve education and sustain our high quality of life," he said.
The 3.8 percent increase is in line with the long-term revenue growth rates, said Juliette Tennert, budget director and chief economist in the Governor's Office of Management and Budget.
"I wouldn't say we're actually seeing drops," Tennert told reporters in a briefing about the governor's budget, set to be released next week. But there is what she called a "softening" in sales tax collection, likely due to consumer uncertainty.
House Speaker Becky Lockhart, R-Provo, suggested there may be reason to worry.
"There are some things we're a little concerned about. We're seeing a slowing in the general fund, which is suggesting our economic growth is not a strong as we thought it would be," Lockhart said.
Senate President Wayne Niederhauser, R-Sandy, was more upbeat.
"I really don't have a huge concern. We are a growth state, and I think we've been succesful to create the environment for business," he said. "I think the fact that we actually have revenue increases highlights the facts that things are working."
Herbert's budget will not contain any tax increases, the office's executive director, Kristen Cox, said at the briefing. She said an increase in the gas tax, long debated as needed to fund transportation improvements, is off the table.
"I think it's highly unlikely it will be considered this year," Cox said.
The state already allocates what is in effect 25 percent of sales tax collections to roads, thanks in large part to legislation setting up an earmark. Herbert vetoed that bill, but legislators overrode his action.
Both Lockhart and Niederhauser said it might be difficult to consider a tax increase in an election year for most lawmakers, though there needs to at least be talk about funding road construction.
"The gas tax, I think, will be one of the biggest issues that we discuss in the legislative session," Niederhauser said. "We need to look at ways to either cut the cost of roads or you are going to have to have some additional revenue in the future."
Salt Lake Chamber spokesman Marty Carpenter said money needs to be found at some point to cover what will be an $11 billion shortfall in roads funding by 2040. Raising the gas tax, which has not increased since 1997, makes sense, he said.
"It makes it so those people who are actually using the roads are the ones who pay," Carpenter said, comparing the gas tax to a user fee. "It's a really good option and something we feel needs to be done."
Cox also said there will be no new bonding proposed for buildings, roads or other construction projects.
"There is a time and place where bonding makes sense. But we are very clear this year we don't think bonding needs to occur," Cox said. "We need to make some progress on paying our debt down."
Lockhart said lawmakers still need to talk about bonding.
"It's a little early for me to say absolutely," the speaker said. "But I think there's going to be significant resistance" to any increase in the state's debt.
Pay increases for state employees as well as educators are expected to be in Herbert's nearly $13 billion budget that will be submitted to the 2014 Legislature that begins meeting in late January.
"We're looking heavily at compensation," Cox said, even though health insurance and pension costs are rising. "The governor is very sensitive to the impact labor and employees have on government performance."
The briefing focused on what the office called budget drivers, expenses that must be funded — including debt payments and building maintenance that add up to 80 percent of the budget.
Education remains at the top of the governor's list for spending, Cox said.
"The governor's priority has always been education," she said. For this budget, that includes funding an expected 10,500 increase in student enrollment at a cost of some $60 million.
The Medicaid expansion available to the state under the Affordable Care Act is not part of the governor's budget. Herbert has yet to decide whether Utah will accept the expansion.
The consensus revenue estimates released Monday will be updated toward the end of the 45-day legislative session.
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