Estimated read time: 5-6 minutes
- Utah's tax revenue estimates fell by $112 million compared with projections from last year.
- The decrease is mostly offset by "high risk" funds that were set aside for just this scenario, but means lawmakers will have less than they hoped for.
- Lawmakers continue to weigh tax relief after setting aside about $200 million last year.
SALT LAKE CITY — Utah's estimated tax revenues came in lower than previously projected Wednesday, meaning lawmakers may need to get creative to continue with plans to further cut taxes or fund bills seeking various funding increases.
The decrease of about $112 million in the latest revenue estimates as compared with projections from late last year wasn't wholly unexpected — lawmakers set aside nearly the exact same amount as "high-risk" revenue in December — but it means lawmakers will have less than they were hoping for as they work to finalize the state budget over the final two-and-a-half weeks of the legislative session.
House Executive Appropriations Chairman Val Peterson, R-Orem — who warned of estimates showing no new revenue growth last month — noted that things are looking even tighter with the latest estimates.
"What do you mean? They always go up," Peterson said he was told by someone in response to the projections. "Well, today is one of those days when the revenue estimates actually went down. So, as we approach the end of the session, we have $74 million less in one-time funds from our December estimates and $38 million less in ongoing."
Top lawmakers and the governor announced the estimates in a news release, noting that overall revenue growth is expected at about 3.5%, even if that growth is smaller than they would like.
"So, as we approach the rest of the building of the state budget, we'll be doing that with less revenue than we anticipated, and I just want you to know that this is manageable," he told House colleagues. "We have different mechanisms and levers that we can work as we start to do this, but there is not as much money as we had hoped."
The question is whether the estimates will impact what Utahns get in tax relief as lawmakers have set their sights on another reduction in the state's income tax rate. They already set aside $66 million in one-time funds and $165 million in ongoing funds for potential tax cuts — money that is still available even with reduced revenues.
"That's a question that's above my pay grade," Senate Budget Chairman Jerry Stevenson, R-Layton, told reporters when asked if the decreased revenue will close the door on tax cuts. "We set aside tax cuts last year, so they're still definitely being debated."
Stevenson — who has served in the Legislature since 2010 — said this is the first time he has seen revenue estimates come in lower in February compared with the previous year.
Senate President Stuart Adams, R-Layton, also declined to rule out tax cuts but said negotiations are still ongoing to determine what that could look like.
"Tax cuts will be on the table 'til we say they're not," he said. "We took a lot of the money off the table in December, but there's still money there that we've set aside. We'll be evaluating what the needs are. And tax cuts are still on the table, but they're maybe a little harder to do right now."
The revenue decrease will also impact how much the state can spend to create or grow state programs, along with individual requests for grants and other appropriations. Bills that add to the state's overall spending already face an uphill climb, but this year could see more bills get nixed due to a lack of funding.
"This will be fine, I have no doubt about it," Sen. Scott Sandall, R-Tremonton, told reporters. "We always have to make those hard decisions. If we fund this, we can't fund this, whether we have an extra $200 million or whether we have less than $100 million. We still have to make those decisions."
Policymakers also set aside just over $100 million for compensation increases for state employees and already approved raises for state employees and teachers, along with an increase in per-pupil spending in the base budget that was approved early on in the session. Those increases quickly ate up most of the year-over-year revenue growth, leaving lawmakers with little room to do more.
They could, however, use some or all of the money set aside for tax relief to fund other programs. Senate Minority Leader Luz Escamilla, D-Salt Lake City, said her caucus still prefers that any tax cuts be directed toward eliminating the state tax on Social Security benefits in lieu of lowering the income tax rate. She also wants to prioritize child tax credits and tax credits for businesses that offer child care services.
"We've been pretty clear and consistent on that," she said. "We hope we can see that one moving forward and hold on the other ones so we can get the child tax credit."
Top Republicans remained optimistic about the the state's economic outlook, even if some belt-tightening measures will need to be considered by lawmakers.
"Utah is consistently recognized as one of the best-managed states in the nation, and that's no accident," Gov. Spencer Cox said. "We work hard to ensure every dollar of state funds is spent wisely and reflects the values and priorities of Utahns. We'll continue to build a state that serves its people and stands as a beacon of economic prosperity for the nation."
"The Legislature is committed to continuing our longstanding tradition of responsible fiscal management," added House Speaker Mike Schultz, R-Hooper. "Our priorities remain clear: keeping Utah affordable, maintaining essential services and ensuring long-term prosperity for generations to come."
