What do state revenue projections mean for budgets and tax cuts?

Revenue projections for the current and upcoming fiscal year have been announced, and they generally provided good news

By Frank Pignanelli & LaVarr Webb

Perhaps the most critical day of every legislative session is the announcement of revenue projections for the current and upcoming fiscal year. After months of nervousness, the projections generally provided good news. We ruminate on the political ramifications.

Legislative leaders colored the fiscal report as showing that Utah is returning to a strong but normal and balanced economy. One-time funds exceeded expectations in the General, Income, and Transportation funds. Ongoing revenues will see an additional increase in the Income and Transportation funds. Sales tax revenue, however, is expected to decrease. How will this shape the politics of the session?

Pignanelli: “What at first was plunder assumed the softer name of revenue.” — Thomas Paine  

Most members of legislative leadership are parents, with the experience of raising teenagers. Thus, they have firsthand knowledge of setting expectations, establishing limitations and occasionally issuing discipline. These are invaluable attributes in the legislative budgetary process.

Last year, there was a legitimate concern among economists that the nation and our state would be in a recession this season. Thus, available resources for state funded programs would be severely restricted. This was an especially difficult scenario in comparison to the prior years that were flush with pandemic funding from the federal government. Therefore, state officials were not shy in withholding commitments for additional funding requests leading into the 2024 session.

Our well-managed state, combined with the remarkable work ethic of Utahns, has once again paid dividends. Although over $1 billion worth of requests were made, more projects will likely be funded as a result of this careful governance. Many recipients who may have been denied under a recession plagued economy could benefit. The push for these new allocations will flavor the politics of the session’s final days.

Hopefully, there will be more gratitude from the beneficiaries than teenagers often exude.

Webb: Utah today enjoys stable tax revenues, sufficient for state needs, but without the enormous surpluses we have seen recently. The big budget question is whether the income tax should be cut by $160 million. Personally, I oppose a tax cut at this time. The national economy remains uncertain and world affairs are very jittery.

I can think of better ways to use $160 million than an on-going tax cut no one would really notice. We are all rightly concerned about the Great Salt Lake and future water supplies. Billions of dollars are needed for water development and conservation incentives. Putting $160 million each year into a water fund would be more helpful than a tiny tax cut.

Another bright idea: GOP legislative leaders are rightly concerned about federal overreach and the imbalance in the federal system. Many federal mandates require obedience at the threat of loss of federal funding. Putting $160 million a year into a “state freedom fund” would make the state less vulnerable to some unreasonable federal decrees.

I would like to see the state engage in a “laboratory of democracy” experiment with the federal government in a few carefully selected programs. The state would retain the federal tax money Utah citizens currently send to the federal government for those programs, allowing the state to administer those programs without federal oversight and without additional federal money. Having $160 million a year to make up for reduced federal contributions to those programs would ensure sufficient funding and more freedom for the state.