Thanks to a booming economy, Utah enjoys a $1.3 billion revenue surplus. It’s always good to have extra money, but it raises some interesting dilemmas for the governor and for the Legislature when it convenes later this month.
Gov. Gary Herbert wants to broaden the state tax base while also offering a $200 million tax cut. Is this the best way to financially position the state for the future?
Pignanelli: "Tax reform exists, sort of, as an outline — miles away from being actual passed legislation.” — Kristen Soltis Anderson
The country’s gambling industry uses creative methods (i.e. food, wine, entertainment) to persuade Americans to willingly part with their hard-earned money. Messaging is key to casinos’ success.
For over 50 years, various Utah governors suggested expanding sales taxes to include professional services. Yet, deliberations on structural modifications to taxes rarely lead to actual changes. “Reform” usually suggests decreasing collections in one area while expanding into untouched realms, sparking campaigns of resistance that alarm decision-makers. As veteran politicos note, no legislator ever sponsored such initiatives.
The governor is appropriately raising attention to the state’s changing economy. But, a successful expansion of sales tax to include professional services requires a massive, energetic effort of strong messaging. My clients, friends and family impacted by this proposal are (to be kind) unpersuaded. They counter with legitimate arguments in opposition.
Perhaps an endless buffet or drink coupons should be offered. Such tactics usually persuade me.
Webb: To the credit of past and present governors and legislatures, Utah has been fiscally prudent and responsible, allowing the state to meet the needs of citizens while keeping taxes reasonable. With a large surplus, now is the time to further ensure the state’s financial stability by creating a tax structure that fits current and future economic realities. This can be done without raising overall taxes. In fact, a modest tax cut can be granted.
Tax modernization should include extending the sales tax into the growing service sector, eliminating outdated exemptions, and making transportation funding more user-based.
This means taxes will go up a bit in some areas, down in others, but taxation overall will not increase and, in fact, may decrease.
This is a once-in-a-generation opportunity to invest in the future, to ensure financial stability for the next generation.
Properly funding education has been a top political priority for many years. With a big surplus, is this the right time to provide a large increase to public education?
Pignanelli: For decades, legislators were inundated with polls demonstrating public demand for more state revenues directed to education. Utah's elite, combined with the grass-roots effort, projected a perception of massive public support. But savvy supporters of the recent ballot Question 1 (which originated as an initiative) whispered concerns that should this effort fail, legislators will not be compelled to push massive resources to the schools.
The margin of opposition to Question 1 was large enough to deflate criticism of legislators for education funding. However, recent history indicates the Legislature will likely provide another large infusion of ongoing monies to benefit schoolchildren.
Webb: This is the time to invest in Utah’s young people and make Utah a top education state. Nothing is more important to the state’s economic future.
Don’t just throw money at education. Invest strategically in the education programs that really work. The business leaders supporting Our Schools Now did extensive research into education best practices around the country. We know what works.
Improving education isn’t rocket science, but it is extremely hard work that requires additional funding and intense focus on details. Massachusetts produces education results superior to Utah’s. Why is that? Are Utah children dumber? Are Utah teachers less committed? Are Utah parents less caring and involved?
No. The difference is money. Massachusetts invests a lot more money in excellent programs that work. We will never match Massachusetts’ performance while spending the least per pupil in the nation.
Should the Legislature put a large chunk of the surplus into rainy day funds, anticipating a future economic decline and reduced state revenues?
Pignanelli: I served in the Legislature when Utah suffered a major economic recession during the late 1980s. Revenues plummeted, unemployment was high and there was a net outmigration of residents seeking jobs. Assistance from the federal government was unthinkable. The budget process was a bloody, heart-wrenching process. Numerous special sessions were convened to cut even more throughout the fiscal years. Actual human suffering did result. This nightmare must not be repeated. Therefore, placing a responsible amount in the Rainy Day Fund is not only fiscally sound, but a moral imperative.12 comments on this story
Webb: We should have fat rainy day funds, and we do. But most of the surplus should be put to use improving education, building the economy and creating jobs, without jacking up state agency ongoing budgets. That means using much of the money as a working rainy day fund for one-time expenditures like transportation infrastructure (including public transit), and critical building projects (like the new state prison).
If the economy stays strong, that money will be available when those projects are completed. If the economy tanks, the money won’t have been built into agency ongoing budgets.