Wednesday afternoon, Governor Gary Herbert (Republican) released his wish list of budget priorities for the 2014 and 2015 fiscal years. Overall, the governor provides a mixed outlook—acknowledging that local, national, and international economic conditions are improving, but not yet booming. In particular, Herbert expressed concerns that Congress might shutdown the government again.
Regardless of these concerns, Herbert is pushing for a slight increase in education funding—a hot topic every year as neighborhood school advocates cry foul over Utah having the lowest education funding per pupil in the nation. As it currently stands, direct funding for education is expected to take a hit over the next three years, primarily due to a drop in corporate income tax collections. The biggest reductions in corporate taxes will take place in 2014, when that revenue is expected to drop by 4.2 percent. Herbert’s budget proposal is pushing for an additional $2.8 million in public education funding in 2014, and just under $125 million in public education funding in 2015. Likewise, higher education would see a $150.5 million increase in 2015 if Herbert’s budgetary wishes were to come true.
Overall gains in education spending, however, will come from one-time funds created by changengs in the federal tax code that caused many to sell assets – allowing the state to benefit from the taxes on that income. The end result is that the increases are not permanent and will drop back down the following year. In all, the state provides 55 percent of all school funding, with 35 percent coming from local cities and municipalities, and 10 percent coming from the federal government.
One ongoing expense in Herbert’s proposed education budget is the $61.7 million increase designed to increase per-pupil spending by 2.5 percent. This increase, at roughly $150 per student, still ranks Utah dead last in the nation for per-pupil spending, trailing more than $500 behind the 49th lowest state, Idaho.
Transportation spending should remain largely stable, as Herbert noted he was not eager to take out new debt to pay for projects. The Governor raised concerns about Utah’s self-imposed debt ceiling, designed to keep the state’s AAA bond rating. In 2012, the state came relatively close to hitting that ceiling, but has been slowly stepping away from this possibility. The state spends nearly $450 million annually to pay back its debts, which currently sit at $3.3 billion.
Under Herbert’s proposed budget, the only way Utah could pay for new projects would be through tax increases, a prospect Herbert has said he has little interest in exploring. The Governor’s Office did not include a proposed increase to the gas tax—an increase that is expected to be a topic of debate during the 2014 legislative session. The reason for the omission, claims the Governor’s Office, is because Herbert did not want to speculate on if or when such an increase would become law.
“We’ve reached the proper tipping point,” said Herbert, who went on to say that although taxation needs to take place to run the state, he is concerned that further taxation would harm the economy.
Herbert is also requesting a one-time payment of $1.8 million to fund air quality research, $1.3 million in grants for small businesses to purchase emission-reducing equipment, $600,000 to make public buildings more energy efficient, and $14.3 million to upgrade the state’s vehicle fleet and school buses.
Tourism and economic development are also on Herbert’s wish list. $15.7 million in one-time funds will be directed towards a general tourism campaign, $700,000 in campaigns to attract outside business to the state, and over $600,000 to help support and expand businesses large and small.
Noticeably missing from the Governor’s budget was any mention of Medicaid Expansion. Herbert continues to claim he needs more and more time to study the topic, but proponents argue the issue has been sitting on his desk for nearly a year and he needs to make a decision. An independent study, commission by the state, estimated that participating in the Medicaid Expansion program would create 3,000 new jobs, help insure nearly 123,000 low-income Utahns, and add $2.2 billion to the local economy if Utah began participating at the start of the year. Critics contend that the state could be left holding the bag if federal funds are cut.
Half of all governors around the country have decided to participate in the expansion, including eight Republican governors. Herbert, for his part, has signaled that he will not make a decision on the expansion until next year. Utah is one only four states yet to make a formal decision on expansion, and it’s likely the Governor is waiting to see how the politics and public favorability towards the expansion swings.
In all, incoming funds to the state are expected to be $5.4 Billion in 2015, the highest revenue ever seen in the state. But this positive news is shadowed by an estimated reduction in the budget next year. The state’s bank account is expected to be $82 million smaller during the 2013-14 fiscal year when compaired to the current fiscal year. Such a reduction will likely push legislators to make further budget cuts during the upcoming legislative session, on top of the roughly $1 billion in cuts they made during when the 2007 recession began.
Ultimately, it is the legislature, not Herbert, who will decide the fate of the state budget. While the Governor’s recommendations will be taken under advisement by lawmakers, the House and Senate will negotiate their own budget during the 2014 legislative session.