The House Majority, during an all-day caucus meeting yesterday, took a position on what to do with a large slice of the on-going portion of the approximately $1.5B surplus.  What $1.5B surplus you ask?  The New One!  Utah has a new surplus for the coming year’s budget.  The position you ask…

The House position is to “earmark” $300M for increased Public Education Funding and $300M for Tax Reform/Tax Cuts.  These two figures reflect a total of $600M of the currently projected $762M on-going budget surplus estimated by the Office of the Legislative Fiscal Analyst.  One important note (a caveat): these two numbers are inseparably linked together—married, “yoked equally.”  And, any change to either one of these figures, increase OR decrease, has a reactionary, proportional rise OR fall in its corresponding companion dollar amount.  $1 (education) up =  $1 (tax cut) up, $1 (education) down = $1 (tax cut) down.

Now, one thing to remember is that the House has not taken a position on the ratio of spending (or appropriate mix) of the “coupled” $600M surplus.  For public education’s $300M any number of possibilities or combinations of spending exist.  For example, the Legislature could fund the WPU (Working Pupil Unit) at a higher rate.  Last year the Legislature Funded the increase in WPU at $133M or a 6% increase over the previous year.  Additionally the Legislature could allocate money for class size reduction or how about teacher retention and incentives.

Now, let’s address the $300M for additional tax reform.  How about another cut in the Personal Income tax  (flatter-tax plan…we’ll call it the J2+ plan)?  The Legislature can take the current flat rate of 5.35% down to 5% (approximately) for another $100M  ($150M for retroactivity).  Or how about even more for personal income tax cuts?  How about eliminating the rest of the state’s portion of the Sales Tax on food?  2.75%, POOF!   Gone!   Worth about another $100M.   (Property tax is primarily a “local” issue and even thought the Legislature has some controls many of the property taxes are controlled by counties, municipalities and other special districts.)

The other figure that you’ll see floating around out there is $805M.  This figure reflects the current projected one-time budget surplus amount.  Philosophically, one-time money is not spent for on-going programs or projects.  However, one-time money can be spent for debt reduction, state transportation projects, and any number of other issues where a single infusion of cash will help solve a problem (remember to factor in state spending limitations laws).  Oh, also, surplus money can be refunded or sent back to the taxpayers from whence it came in the form of a tax cut and/or tax “reform.”

There are some in the House who don’t believe that the Legislature will come out of the General Session Appropriations discussions with an even 50-50 split (Education to Tax Reform)—but, it’s a good starting point.  The message that’s being sent, I believe, is that we can’t let education spending get out of control, become “unsustainable” and at the same time the taxpayer needs some representation and someone to look after their interests.  Utah’s high tax burden is crippling many families on the high, as well as, the low end of the income spectrum.  The message appears to be that to every educational interest’s action their will be an equal and “opposite” taxpayer reaction.

Of course, in the days to come the Senate will come up with its own wacky, convoluted “plan” for the $1.5B surplus.  And, the Governor has already announced his $10.7B budget—where is that shredder, anyway?  Then the games will begin all over again.

To Be Continued…