by Howard Stephenson
The Utah Legislature ended its 2004 session at midnight on Wednesday, March 3, after 45 grueling days of debate. The best news is that despite three years of stagnating state revenues, Utah Taxpayers dodged the general tax increase bullet again this year while essential government services received funding increases. This is a lot different from the economic downturn of the mid 1980s when the legislature solved similar budget problems with $180 million in general tax increases. Back in those days $180 million was a lot of money.
Here is a recap of some of the important legislation considered by the legislature this year.
Victories – Good bills that passed
HB66 – Rep. Greg Hughes (R-Draper)
Due to Utah’s highest-in-the-nation birth rates, K-12 education funding will always be a challenge. Rep. Hughes’ bill was one of three bills introduced this year that directly addressed the issue of Utah’s high state and local tax burdens and low per student spending. HB66 is an attempt to increase public education spending by redirecting existing state expenditures towards education instead of raising taxes. Previous attempts to increase public education have nearly always involved raising taxes instead of shifting or reprioritizing existing state spending.
HB66 restricts general fund expenditures to inflation and population growth. Exempted from this restriction are Uniform School Fund expenditures for public education and general fund expenditures for public education, transportation, and rainy day fund. By restricting most non-education expenditures to inflation and population growth, more funds will be available for public education.
HB66 is similar to Colorado’s Taxpayer Bill of Rights (TABOR) except that HB66 restricts expenditure growth and TABOR restricts revenue growth.
SB115 – Sen. Curt Bramble (R-Provo)
Local governments have traditionally avoided November general elections when seeking voter approval for bonds, mainly in order to minimize voter turnout. Lower voter turnout, typically 10% or less in special elections, increases the probability of bond approval since government employees and special interest groups that benefit from bond approval are very likely to vote.
Opponents of SB115 argued that local governments need flexibility in order to take advantage of low interest rates. However, an analysis of bond election dates and interest rates over the past ten years indicated that there was very little if any correlation between bond election timing and interest rates. Besides, timing interest rate fluctuations are difficult due to the time lags between the decision to bond and the actual signing of the bond contract. Moreover, since urban school districts have been seeking approval for very large bonds that are issued over a several year period, election timing is not an issue since interest rates are determined by the date of bond issuance and not the date of the election.
SB115 restricts bond elections to the November general election and to the fourth Tuesday in June which is frequently a primary election date. This ensures high voter turnout. Since the state constitution mandates voter approval of general obligation bonds, local governments should hold bond elections when voter turnout is highest.
HB273 – Rep. Wayne Harper (R-West Jordan)
HB273 addresses several technical issues associated with the Streamlined Sales Tax (SST). SST is intended to create tax equity by imposing sales taxes on remote purchases such as internet sales and mail order catalog sales.
HB273 contains a taxpayer-friendly provision that escrows any additional revenues above $7 million into a restricted account. Ultimately, SST revenues above the $7 million threshold will be used to reduce taxes once an accurate estimate of SST revenues is known.
SB 154 – Howard Stephenson (R-Draper)
SB154 is the second bill that addresses the issue of high tax burdens and large class sizes. SB 154 establishes a task force to find ways of reducing costs of new school buildings to prevent tax increases resulting from housing 140,000 new students expected to enter Utah’s public school system over the next ten years. Based on Utah’s current methods of constructing school buildings, these new students will require as many as 140 more buildings costing more than $1.5 billion. The task force will study less costly methods of school construction such as those used by Alhambra School District in Arizona and by Utah’s charter schools.
HB115 – Rep. Morgan Philpot (R-Midvale)
Pending Gov. Walker’s approval, Utah will finally have an education voucher system. This bill allows education scholarships for special needs students such as autistic students attending the Carmen Pringree school in Salt Lake City. The teachers union fought the bill vigorously and and are expected to urge the governor to veto the measure, simply because they feel it is a camel’s nose under the tent toward full blown tuition tax credits. It’s apparent there are many in Utah who are more determined to protect bureaucracies and government systems than children.
SB 190 — Howard Stephenson (R-Draper)
Provides a sales tax exemption on the purchase or lease of equipment used in the film industry. This is intended to turn around the exodus of film makers from Utah. Currently these film makers are being audited by the State Tax Commission for nuisance amounts of sales taxes and consequently, they perceive that Utah is not friendly to their industry.
Victories – Bad bills that failed
HB230 – Rep. Mike Styler (R-Delta)
This would have allowed automatic inflationary increases in the statewide basic property tax rate for education. Those who voted against this measure are expected to be targeted by the teachers union for defeat at the upcoming legislative elections.
SB60 – Sen. Mike Waddoups (R-West Jordan)
Would have imposed a new 1% restaurant tax and 0.5% hotel tax to fund a sports development chapter within the state Department of Community and Economic Development.
SB208 – Sen. Pete Knudson (R-Brigham City)
Would have imposed a new .25% tax on restaurants and hotels to fund tourism promotion. The goal of this bill was a good one, to help brand Utah for tourism, but this promotion should be funded through the general fund, not punitive new taxes.
HJR15- Rep. Ralph Becker (D-Salt Lake City)
Would have placed a non-binding voter referendum on the November ballot to ask for a sales tax increase to create a fund for preserving open space in Utah.
HB 311 — Rep. Stuart Adams (R-Layton)
Would have expanded the types of activities to which cities could have given tax increment fincancing. This would have expanded the $72 million currently given by cities to private developers.
HB352 – Rep Brent Goodfellow (D- West Valley City)
Would have decoupled Utah’s inheritance tax from the federal law. This would have ensured that Utah’s keeps an inheritance tax, even though the federal inheritance is schedlued to be eliminated.
HB45 – Rep. Pat Jones (D-Holladay ) and Rep. Steve Mascaro (R-West Jordan)
Jones and Mascaro earned the distinction of sponsoring this year’s largest tax hike proposal. Had this bill passed, this would have been one of the largest tax increases in state history.
Defeats – Bad Bills that Passed
HB36 – Rep. Brad Dee (R – Ogden)
This imposes another new state wide tax of 16 cents per line per month and allows local governments to increase their tax to 65 cents per line per month to fund new 911 systems throughout the state. While the 911 emergency service upgrades are essential, this tax is based on the “shoot the messenger” philosophy. Rather than taxing the tool people use to make public safety more efficient, these services should be funded through the general fund.
SB66 (amended in House) – Sen. Bill Hickman (R- St. George)
This bill began as a ban on UTOPIA, the 18 cities which want to risk taxpayer dollars to build a fiber-optic network throughout their cities but ended up “grandfathering” these cities from a statewide ban on cities getting into the business of telecommunications services.
HB64 – Rep. Sheryl Allen (R – Bountiful)
Allen’s bill extends the “right” to impose recreation, arts, and parks (RAP) taxes to cities in second class counties. Previously, this tax could only be imposed with voter approval in the county as a whole. The new law allows the tax to be imposed city by city, leaving retailers in some cities at a competitive disadvantage.
SB230 – Sen. James Evans (R – Salt Lake City)
Evans earned the dubious distinction of passing the largest tax increase this year although the Legislature will claim that SB230 is not a tax increase. SB230 appropriates $15 million from the Uniform School Fund to school districts. School districts, however, must appropriate an additional $15 million in matching dollars. To facilitate this, the legislature gave local school districts additional authority to impose higher property taxes by creating a new levy.
SB 250 — Sen. John Valentine (R-Orem)
Curtails the ability of taxpayers to be protected in their right to file class action lawsuits regarding overpayments of fees and taxes.
Defeats – Good bills That Failed
HB271 – Rep. Jim Ferrin (R-Orem)
Tuition Tax Credits are still not a reality in Utah due to the failure of this bill to pass. The senate passed similar legislation last year, but the house refused to allow the bill to be debated on the floor. Governor Walker was poised to veto this legislation, had it passed.