The Senate Site Here we go again – Budget Preview 2012

Here we go again – Budget Preview 2012

Posted in 2012, Featured on Wednesday, January 18th, 2012 at 9:12 PM 5 Comments

By Senator Lyle Hillyard
Senate Chair of Exec Approps

What a difference a year makes as we begin this one with surpluses.  It has been difficult the past two sessions to spend the first week or two rearranging the ongoing budget with over half the year gone by.

To have a surplus like we do this year in Utah is not the norm for most states, who continue to struggle with downturns in their economies and the resultant decreases in tax revenue.  I am even more pleased when I see the largest part of the increases are coming from personal income tax– we have had no income tax rate hike, so the increase means more people are working and  earning more money.   There have been little capital gains increases like in past years, so this is income from people working.

A few facts:

1) We ended FY 2011 (June 30, 2011) with $60.0 M in the bank, and our current consensus revenue figures indicate that we can expect another $68.0 M surplus at the end of this FY (June 30, 2012) because collections and economic indicators in Utah point to that much more revenue than we estimated when we did the budget at the end of Feb. 2011.  We have also been able to increase the rainy day fund to $232.0 M so that means we should be able to avoid any mid-year budget cuts unless the projected revenue fell below the combined level of these three funds.

2) The consensus revenue figures adopted by the joint agreement of the Governor and legislative staff — both using separate panels of experts — show we will have $280.0 M new revenue to use as we budget for FY 2013 (July 1, 2012 to June 30, 2013).  We immediately took $52.0 M of this and plugged it into the current year’s budget –replacing the one-time money previously allocated to on-going programs. This will end Utah’s structural imbalance. When we budget for FY 2013 we will have a solid base.

3) We will take another look at these figures in mid-February.  In the past it has been over the President’s Day weekend, when the legislature is not in session.  These new numbers take into consideration the sales tax collected through the end of December–hence the Christmas sales and the final year-end income tax records.  These new estimates can impact the projected surplus for this year or the projected $280.0 M for FY 2013.  There are no tax increases being discussed, so there should be no real change in revenue collected based on legislative action.

4) We have heard Prosperity 2020 calling for increased spending in education, and we support their goals.  The killer question is – where do we find the money?  Since we don’t print cash, and we should be very careful about borrowing it, we only have a few sources for new government programs:

* Raise taxes
* Cut someone else and reallocate the money
* Raise user fees (like tuition)
* Find efficiencies in existing programs and used the money saved

No plan, no matter how smart or essential will launch until we answer the question: how will Utah pay for this?  We’ll keep working with Prosperity 2020 to find the answers.

The Governor has released his proposed budget, which again emphasizes public education and covers most of the hot spots.  We in the legislature have two problems with our budget the governor and most other groups don’t have:

1. We have to convince 15 senators and 38 members of the House to vote on final agreement.  That is often not an easy job.

2. We also divide the budgeting responsibilities into 8 sub-committees that will hold open hearings and take votes, making recommendations on where surplus money needs to be spent.  I do not think we will ask the committees to look at any reductions as in the last three years, but we will ask each committee to move money around so they can fund what they think is most important.

Major areas of discussion: 

Public Education – The Governor has recommended funding the growth in WPU’s (weighted pupil unit) for the additional 12,000+ new students.  This does not cover the other areas of growth expense in the school budget. Do we fully fund the growth in public education or just part of it?  What should we also put in the WPU so that the districts that don’t have growth in students, yet rising costs, still have money to meet them?

Higher Education – How much will we be able to fund mission-based funding and change the emphasis of higher education away from student enrollment to student success?  Should Utah pass more costs on to students via tuition increases?

Health and Human Services – We are still learning the impact and costs of Obamacare.  Medicaid is an entitlement program. If we don’t put enough money away to fund it now, we will have to cover it in supplemental next year.  I am concerned that this is a growing area over which we have little or no control.  We have been able to protect public education from the major cuts that most other agencies have received, but Medicaid may swamp us and leave us no other choice than transferring the money we have been historically using for education.  Or we could raise taxes.  These amounts are not small, so the impact with either choice is significant.

I was warned that the automatic cuts put in place by Congress when they punted to the Gang of 12 would mean about a 20% cut in moneys now being used in most of the Health and Human Services areas that rely a great deal on federal money matches.  Some say if you live by the federal dollar, you should die from the federal dollar, but there are programs that may be significantly cut that we as a State want to save.

Bonding – We have a Constitutional bonding limit.  Historically we have kept our bonding between 30-40% of that level.  When we decided to complete major road projects including the expansion of I-15 inUtah County, we bonded up to 85% of that limit.  When we authorized a limited bond last year, we calculated that the value of real property in Utah would drop by 2%.  After the session, that value was recalculated to 3.6%, putting us at 87% of our bonding level.  New revenue figures indicate that next year’s property values may decrease an additional 7% which would put us at 90% of our bonding level in FY 2013.  We thought that $85.0 M of the one-time cash could be used in place of some road bonds that have been authorized, but not issued, and that would bring us down to the 85% level.  I am concerned that we have made 85% bonding the target instead of the ceiling.   It should be reduced back to 30-40% level as soon as we can.

The Triple A Bond Rating – If there is another downgrading of the US bond rating, Utah’s AAA bond rating may be looked at again.  We are fine in three of their five criteria, but two cause me some pause.  First is the level at which we depend on federal funding and Hill Field is a major source on income into the state.  Not much we can do about that.  Second is our bonding level.  If we were to lose our AAA bond rating, it would seriously affect the ability of school districts to borrow money and build schools, as well as other things. While constructing roads and buildings are great ways for legislators to make their service known to their areas, being tagged as the legislature that lost our AAA bonding level is even a greater monument that none of us want.

Just some thoughts as we launch another round of budgeting.  Remember to thank your legislator for their hard work and the tough decisions they must make.

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5 Comments to “Here we go again – Budget Preview 2012”

  1. Senator Hillyard,
    I am baffled that there seems to be any question at all about fully funding growth in education. It is obviously apparent there remains a gap in understanding how not fully funding growth is a loose loose to all. The education pie includes all items above and below the line. To not fully fund growth means we suffer below the line to compensate. Now that the flexible WPU is obliterated, where below the line do legislators think we can cut without negative affects to essential programs. If legislators really don’t understand, there are those of us who would be happy to explain. If they do understand and move forward anyway, that is demonstrative of a lack of concern or complete disregard for what educational leaders have advised. Supt. Garrett and I would like to visit with you on this issue. When would be a good time? Thanks, Zane

  2. Kathy says:

    “Do we fully fund the growth in public education or just part of it?” Do we ever consider only funding part of other growth in Utah? Is there a precedent? Only fund 70% of Medicade or highways? 80%? I don’t get it. Why suggest only funding part of education and not suggest partially funding other areas, Sen. Hillyard?

  3. Don Morgan says:

    We must be doing things right. Our state is not in debt and the. envy of other states. Good job

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