It was revealed Tuesday in the Executive Appropriations Committee that Utah’s budget is in better shape than originally expected, resulting in greater funds being available for education and transportation in the Beehive state.
Overall, revenues for the fiscal year were between $135 million and $195 million over previous estimates. Education is the big winner, seeing an projected increase of between $50 million and $180 million, though this is due to federal tax changes and policies that changed their reporting—resulting in one time funds rather than ongoing money. This confirms what many lawmakers were saying at the end of the legislative session in 2013, cautioning that if the federal accounting were to be altered, Utah would see a one time shot in the arm for education funding.
“Revenue to the education fund is anticipated to be the highest on record” said Thomas Young, Staff Economist for the Office of Legislative Fiscal Analysts. However, Young was quick to reemphasize that these were one time funds.
The states transportation budget is not as certain but, according to Andrea Wilco, Chief Economist for the Office of Legislative Fiscal Analysts, the transportation budget should be +/- $5 million higher than projections, with all indicators (primarily revenue from the gas tax) indicating the state should be pleasantly surprised when it comes time to close the books at the end of the fiscal year, which runs from July 1 to June 30 of each calendar year.
This improvement, said Wilco, is due to Utah’s economy seeing solid growth, with business in Utah creating jobs at twice the national rate. Utah’s economic growth rate in 2013 is expected to be 3.4 percent, with even higher numbers next year, and an estimated economic growth rate of 3.6 percent, both of which are above historical growth rates. This growth has been across Utah’s various industries, and Wilco reported that the state has regained all of the jobs lost at the bottom of the Great Recession that began December 2007.
“When you compare that to the mountain states and the national average, they are still in the process of recovery and we have actually gained back those jobs, so we are positioned quite well for growth” Wilco announced. She went on to inform the committee that employment trends estimate that 42,400 new jobs are expected to be created to the states economy over the next year, outpacing population growth. At the same time, wages are growing which is estimated to grow at 2.5 percent. When you add all this to the overall economy, total wages are expected to rise by 6 percent over the next year.
This is driving overall housing growth as well, which has a profound, positive, effect on the overall economy. Over the next year, 15,000 new housing permits are expected and an additional 18,500 are estimated in 2014.
However one form of state revenue, severance taxes, are actually below projections.
Severance taxes are the taxes the state collects from companies when the extract natural resources from Utah land such as oil and minerals. The state has been hit with a one-two punch of decreased production (the recent woes at Kennecott Copper have taken their toll on state revenue) and decreases in the price of these goods such as natural gas in the global marketplace has meant that the state simply has not received as much money from this revenue stream. The problem has been compounded by Utah having one of the lowest severance tax rates in the nation, so we already take in a smaller piece of the pie than most neighboring states.
One other area below projections were the so-called “sin taxes.” It appears that people are buying less alcohol and cigarettes than the state expected.
However, the State of Utah is in the envious position of being one of the first economies to recover from the recent recession. This fact will make Utah even more attractive to business in the future and should continue to allow the state to be on solid economic footing.