Thanks to an influx of federal money and a booming state economy, Utah lawmakers will be considering proposals during their 2022 legislative session on how to spend a surplus of approximately $1 billion in one-time money and $219 million in ongoing money.
Lawmakers, whose 45-day session begins Tuesday, want those funds to have long-term benefits for state residents.
“We’re trying to make sure that the way we spend this money will have a generational impact,” said Rep. Brad Last, R-Hurricane, the House chair of the Executive Appropriations Committee.
The surplus is the amount above the base budget proposed for fiscal 2023, which begins July 1.
The committee has recommended that the additional money be put into education; social services, including Medicaid; state employee compensation; rainy day funds; and water projects. Another recommendation is to pay down bonds instead of borrowing for infrastructure and transit in order to preserve the state’s AAA bonding capacity.
In addition, the committee says a tax cut is a top priority and has set aside $160 million, the amount of the ongoing reduction that it recommends. Gov. Spencer Cox and several lawmakers have offered their own tax proposals.
Utah began receiving about $1.5 billion in COVID-19 fiscal relief funds earlier this year under the federal American Rescue Plan. During a special session in May, lawmakers spent or set aside some of that money, leaving $1,064,000 in available funds.
Billions of federal dollars more have flowed to the state through stimulus payments, unemployment checks, the child tax credit, and other relief to Utahns, Last said. Then, spending by residents boosts the economy, he said.
“That’s part of the reason we have so much more state money to spend,” Last said. “All this federal money is spinning around in our economy and that money is driving our tax revenues.”
Opportunities created by investments
The Executive Appropriations Committee has recommended social services allocations of $17 million in one-time money and $68 million in ongoing funds to fully fund Medicaid growth and inflation; $19 million in ongoing funds for autism insurance coverage, home and community-based providers for individuals with disabilities and additional services for those with mental and emotional health issues; and $25 million in one-time funding will be used to build a new veterans’ nursing home in Salt Lake City.
Additions of $335 million for public education and $200 million to double-track Utah Transit Authority’s FrontRunner commuter rail system have been proposed. Trains sharing a single track that are going in opposite directions can pass each other only at sidings or stations. With a double-track railway, trains can run in opposite directions on the same route.
Rep. Brad Last
Last said a total of $100 million has already been allocated for the water projects and he expects more will be allocated during this legislative session. He hopes the state can pool resources with cities and counties that also received money to do some of these infrastructure projects.
Funding for education and networking also have a big impact, according to Last.
“We’re trying to get broadband out to rural areas and into other areas of the state where they don’t have it,” he said. “That can mean jobs in rural Utah. That can mean people can work from home who wouldn’t have been able to otherwise, in case of another pandemic or even if there isn’t another pandemic. That changes the opportunities for people because of the investment that we made.”
The Executive Appropriations Committee also recommends that to keep up with the cost of living and retain employees, $125 million in state worker compensation, as well as $30 million for law enforcement pay increases, be allocated.
We need to make sure to take care of our employees,” Sen. Jerry Stevenson, R-Layton, the committee’s Senate chair, said.
He added that there are some positions that are hard to fill in a tight labor market.
“This isn’t anything that isn’t happening in the private sector, also,” Stevenson said. “We’re just in a round of heavy inflation and then we don’t have enough employees to go around. The market bids those employees up and I think the issue we’re dealing with at the state is that we don’t have the ability to react as fast as we do in private business.”
Cox also has voiced support for major investments in water planning and infrastructure “following the dire drought conditions Utah has experienced over the past year.”
At a news conference last month at Antelope Island where Cox and Lt. Governor Deidre Henderson presented their $25 billion budget proposal, the governor proposed a $45 million investment to preserve the Great Salt Lake, in addition to the $5 million already allocated by the Legislature.
The budget also calls for allocations of $100 million for developing affordable housing; $128 million for housing aimed at assisting homeless people; $556 million for kindergarten-to-12th-grade schools: and $420 million for higher education.
“These measures aim to improve outcomes for at-risk students, eliminate K-12 school fees, add mental health resources on college campuses and expand opportunities for adult workers to retrain and upskill,” a Dec. 7 news release says.
Another ‘year of the tax cut’
At the Utah Taxpayers Legislative Outlook Conference on Jan. 12, Senate President Stuart Adams reminded the attendees that he had announced last year at the organization’s that 2021 was going to be “the year of the tax cut.” Lawmakers passed legislation giving a $100 million tax break to families with children, veterans and seniors.
“Well, guess what? 2022 is the year of the tax cut again,” Adams said.
He reminded the audience that $160 million has been set aside for a reduction and added, “That’s probably the minimum amount of money we’ll do for a tax cut.”
Senate Majority Leader Evan Vickers, R-Cedar City, has introduced a bill, S.B. 59, that would reduce the current income tax rate from 4.95% to 4.9% and cost the state $78.5 million annually.
Rep. Travis Seegmiller, R-St. George, wants to cut the income rate to 4.75%. The cost of H.B. 105 would be $320.6 million a year.
Sen. Dan McCay, R-Riverton, would make an even deeper cut in S.B. 62, to 4.6%, at a cost of $560 million a year. However, he said at the Utah Taxpayers Legislative Outlook Conference that he might make a change.
“2022 is the year of the tax cut again.”
Senate President Stuart Adams
McCay, who is chair of the Senate Revenue and Taxation Committee, said he’s been working with Rep. Mike Winder, R-West Valley City, about the potential of creating some type of earned income tax credit as a portion of the income tax cut.
“Obviously, we’ll work to find a balance during the legislative session,” he said.
Cox wants the $160 million to be used for a grocery tax credit. According to an analysis by the Governor’s Office of Planning and Budget, the credit would give more money back to lower- and middle-income households than cutting the food tax would.
“For example, cutting the food tax would result in a $185 benefit for a two-parent household with six kids, while our proposed grocery tax credit would provide a $400 benefit,” a news release from the governor’s office says. “For a single parent with two children making $20,000 a year, cutting the food tax rate would give that family an extra $85 while our grocery tax credit would provide a $240 benefit.
Henderson said at the legislative outlook conference that a sales tax is a very stable revenue source
“The sales tax on food is unfair because food is such a big part of the family budget for low-income and working families.’
Rep. Rosemary Lesser
“It’s great for government because when the economy sinks, people still have to eat,” she said. “They may not buy as many clothes or remodel their basement but they still have to buy food. I feel like our tax credit proposal is the best of both worlds.”
“Utah’s existing tax on food, even at its lower rate of 1.75% compared to the full 4.85% sales tax rate, is still wrong,” Lesser writes in the Oct. 21 opinion piece. “It disproportionately hurts low-income Utahns and contributes to food insecurity. According to the U.S. Department of Agriculture’s Economic Research Service, low-income families pay 36% of their income on food while higher-income families spend only 8%.”
Utah has one of the most robust economies in the country, she says.
If my legislative colleagues want to really help the Utahns who need it most, cutting the food tax is the way to go,” Lesser says.
