The 59th general session of the Utah State Legislature is about to commence. And with several hot-button issues simmering—and a budget to balance—the session will usher in weeks of scripted floor debates, dull-as-dirt committee meetings, impassioned public testimony and grandstanding before television cameras.
Within all of this activity, legislators will tackle tough problems, like funding the growing demands on Medicaid, and take on deep philosophical challenges, like the balance of power between states and the federal government.
The business community will be watching the session with an eye to preserving Utah’s status as the “Best State for Business” (according to Forbes). How can we improve and fully fund our public education system? Can we tackle the thorny issues around immigration reform without damaging our fragile economy? And just as important are the nuts and bolts of our economy, like taxes, transportation and vital human services.
The Bottom Line
Nailing down the budget is by far the top priority of the Legislature. Last year, in the face of declining state revenues, the Legislature relied on a significant amount of “one-time” funding in several areas to avoid severe budget cuts. This means that legislators must examine those budget items again this year and find sources of revenue to keep them funded.
While the Governor’s Office is projecting a healthy growth in state revenues for this year, with additional revenue of $215.6 million, that money will be sucked up almost immediately by the need to replace one-time funding—pulled mostly from the state’s rainy-day fund—with ongoing funding.
“The budget that we put together [last year] had a structural imbalance of over $300 million, so we’d like to work on getting that back in,” says Senate President Michael Waddoups. “Without that, we’ll probably devastate the rainy-day fund. It’s gone from nearly $500 million down to just over $200 million.”
The rainy-day fund will almost surely be tapped again this year, but Waddoups is hoping to preserve at least $100 million in the fund. Gov. Gary R. Herbert’s budget recommendation is to replace one-time funding with about $100 million in ongoing funds and to retain $110 million in the rainy-day fund.
Herbert’s budget recommendations have already sparked controversy, however, as the governor has proposed requiring businesses to file their state taxes quarterly, rather than once each year. While this does not technically change the amount businesses will pay, it does force them to pay it several months sooner, creating a one-time cash windfall for the state.
Republicans in the Legislature have already vowed to block this proposal and instead slash government budgets to make up the difference of a projected $130 million.
Education is the biggest budget item for the state, and with enrollment continually growing, keeping education fully funded is a constant challenge.
“Last year, the Legislature was able to find a way to fund education at the same dollar amount that they had the year before. The only downside to that is that there were 11,000 new students in public schools and about 11,000 new students in higher education. So while funding remained the same, it was essentially the same money for more kids,” explains Marty Carpenter, spokesman for the Salt Lake Chamber.
And in addition to the unfunded growth from last year, the state is expecting upwards of 14,700 more students in public education this year. “If we don’t fund them, we’ll have to push more students toward year-round schools or have bigger classrooms,” says Waddoups. “I don’t think that’s a way to achieve education excellence.”
The governor’s recommendations include fully funding enrollment growth in public education with an additional $50 million. Furthermore, the governor wants to devote $7.5 million to continue an optional extended-day kindergarten program.
“Utah benefits from the reputation of having a young, well-educated workforce. It doesn’t look like the trends will change the young part, but we have to work to ensure the well-educated part,” says Carpenter.
While education funding is a key focus of the chamber, it is also pushing for reforms to create better “efficiencies” in the system. The chamber’s CEO, Lane Beattie, is among the members of the Governor’s Education Excellence Commission, which spent the year drafting strategies for improving the state’s educational system, all the way from kindergarten to higher education.
Some of the commission’s recom-mendations include implementing a mission-based funding system for the state’s colleges and universities; expanding public/private partnerships like the Utah Cluster Acceleration Partnership, which focuses on workforce development; and providing high school seniors with greater opportunities to complete required college courses.
The commission also wants the schools to achieve 90 percent proficiency in third grade reading and sixth grade math.
Waddoups says the Legislature will consider the recommendations of the commission, as well as strategies proposed by legislators who have been studying education reform. “We have to find a way to do better,” he says. “That’ll be some of our big debates, to see what our colleagues have learned as they’ve gone to conventions and seminars this summer and…as they’ve talked with business communities and providers in other states.”
The state’s higher education institutions got hammered with budget cuts last year, and the chamber is hoping to make up some of that lost ground this year as well.
“Continuing support for higher ed is among the top priorities for the business community because we know the long-term impact it has on the state,” says Carpenter. “The universities are such catalysts for the economy. They churn out that well-educated workforce, but they also bring some great minds to the state.”
Enrollment in Utah’s colleges and universities has been at an all-time high, but the schools are struggling to accommodate the growth. “I’d like to find a way to alleviate that problem, whether it’s more technology oriented teaching or expanding our campuses, or more summer and night schools,” says Waddoups. “I don’t know what the answer is, but we have to address that because there’s going to be another 12,000 new students in higher ed, is the projection, and that’s very concerning.”
A Looming Battle
Debate about immigration reform began to heat up early in the election season last year with several proposed reforms already up for discussion, including Rep. Stephen Sandstrom’s “Arizona-style” bill.
Waddoups says he has heard of nearly 20 proposed bills dealing with immigration, “ranging anywhere from round-‘em-up and deport ‘em-type bills, to compassion, love and let’s accept them as brothers and sisters and neighbors and find a way to give them the American Dream.”
For the Salt Lake Chamber, the issue is intricately tied with preserving Utah’s tenuous economic recovery. But, says Carpenter, that’s not because “business likes cheap labor.” Rather, the business community is concerned about anything that would draw money out of the economy.
“We have a recovery underway; we’ve seen job growth in the state…but it’s not bad-decision proof. Those who are here who are undocumented workers contribute to our economy,” says Carpenter, who explains that undocumented workers pay taxes into state and local coffers through gas, food and sales taxes. “When they write a rent check for their apartment, they pay property tax,” he says.
“But it’s not just the taxes on the things they consume—those are goods that they’re buying as well. They contribute to the economy as consumers, and they contribute as taxpayers,” adds Carpenter. “We have to make sure that whatever policy we craft, we’re not cutting off our nose to spite our face—that we’re making sure what the immediate and long-term effects on the economy are.”
Several issues come into play when looking at immigration reform, and Waddoups expects any successful bills will take a broad approach to reform. “To get enough votes to pass, a bill is going to have to be a little more comprehensive and deal with two or three of the concerns—maybe employer involvement and public safety involvement and tax involvement—before you’ll get enough votes to get something passed,” he says.
Investments in the Future
Continued economic growth in Utah hinges on the expansion of local companies and on recruiting new companies to the state.
One focus for the Governor’s Office of Economic Development (GOED) is the Tourism Performance Fund, which finances marketing efforts to promote the state nationally and internationally. Hand-in-hand with that fund is a cooperative marketing program that matches state funding with the efforts of local governments to promote tourism.
The cooperative marketing program “enables us to really reach into our rural communities and help them,” says Spencer Eccles, executive director of GOED. “More than 110,000 people are employed in the tourism industry. That’s close to 6 or 7 percent of our employment base. A lot of those jobs are located in rural parts of the state.”
GOED is also seeking additional funding for its Motion Picture Incentive Fund, which Eccles says also stimulates spending in the state. The department would like to be able to offer greater rebates to film production companies that shoot movies in Utah.
But one of the biggest priorities for GOED is its Business Expansion and Retention (BEAR) program. “It’s economic gardening—finding the hidden gems in our community and helping them to expand,” explains Derek Miller, former deputy director of GOED.
In the BEAR program, local economic development directors visit with companies in rural areas to learn about their obstacles to growth. “They are able to connect companies with the resources that exist throughout the state and sometimes the federal government, whether that’s loans, grants or even workforce training,” says Miller. “This outreach results in follow-up from public and private officials to help the company to be successful.”
What GOED is hoping for is the ability to use existing funding through the Industrial Assistance Fund to hire people to do more of this business outreach. “We want to modify the governing statute so that the state can contribute some portion of funding,” says Miller. “This is going to be transformative in rural communities.”
Waddoups agrees that economic development incentives and programs are vital, and he looks forward to seeing specific proposals from GOED.
“We love business and [programs] that bring in jobs. The question is how do you fund them?” he says.
Up for Discussion
Several other issues will also be on the front burner for legislators.
“Medicaid reform is going to be an interesting thing. We are seeing an increasing budget share there every year,” says Waddoups. “We’re going to have to find a way for medical costs to be controlled somewhat, whether it’s higher co-pays or reduced services or better use of generics. We’ll be looking at all those things to better control a swiftly growing sector.”
Health reform in general will be up for discussion, as legislators try to improve and strengthen the Utah Health Exchange.
“There’s so much progress the state of Utah has made in building the pieces of health reform, but there’s still a long way to go,” says Bill Crim, vice president of community impact and public policy for United Way of Salt Lake (UWSL). Crim says state leaders would rather tackle health reform at the local level, rather than wait for federal mandates. “If we want that to occur, we have to move forward a little bit faster at the state level.”
He adds, “We need the Exchange to grow in for it to have the benefits of greater efficiency and lower costs. We’re going to have to make sure, as the Exchange marketplace grows, that the rules stay the same inside and outside [the Exchange] and that people have an incentive to use the good tools the Exchange provides.”
Transportation improvements are another constant need, but Waddoups says the state is running dry on funding for new projects. “We’ve really encumbered the state with our recent bonding, and we’re significantly close to our debt limit, so I don’t see a lot of new bonding for new projects. We’ll probably look at the needs and evaluate the priority of them. If they’re significant, we may even consider a gas tax increase to fund some of them, because I don’t think the state’s prepared to go much further in debt for these infrastructure needs this year,” he says.
And speaking of taxes, no one expects an increase in sales, income or property taxes this year, despite the huge imbalance in the budget. However, Waddoups says legislators may take a look at various licensing fees and user fees to see if they can wring additional revenue out of those sources. “We’ll look at adjusting licensing and user fees to make sure they are carrying their own weight,” he says.
Under-the-Radar Hot Topic
One additional topic has legislators and business leaders ready to do battle with the federal government—natural resources and the ability of the state to access them.
“Nearly 80 percent of the state is owned by government entities—federal, state, local governments, school districts, school trust lands—that are not paying taxes. That’s why we’re struggling so much in education and services like Medicaid,” explains Waddoups.
“We’ve got to do something with our natural resources. If you look at the map, everything east of the Rocky Mountains has government-owned lands in the teens or lower. Then, if you look from the Rocky Mountains to the Pacific Coast, they go from the 30s to near 90,” he says. “The federal government, just like immigration, is the problem. We need to get help from Washington and these people need to get serious about being fair to the states. We should be co-equal with them.”
Carpenter agrees that energy and natural resources are subjects that will be significant during the legislative session. “There are a number of energy issues that will have a long-term economic impact in the state. We need the groundwork to make sure we’re in a position to take advantage of the natural resources we have here,” he says.