by Howard Stephenson
Last week in this column I described how the Utah Legislature in its recent session successfully resolved a $256 million revenue shortfall. Taxpayer-friendly legislators were successful in quashing any serious consideration of general tax increases. Instead, the legislature made significant cuts and began downsizing state government. This is in stark contrast to the legislature’s response to the economic downturn of the eighties when the1987 legislature adopted the largest tax hike in state history, increasing taxes by more than $200 million.
Despite the admirable job of the 2002 legislature, taxpayers aren’t out of the economic woods yet. There’s an even larger fiscal challenge looming over the next eight years as a bubble of 100,000 students crowd into our state public school system. Even budget makers admit this net increase in enrollments will require as much as a billion dollars in revenues annually by 2010 to educate and house these additional students. To put it into perspective, a billion dollars is equal to a 59% increase in state income taxes, and a 71% increase in either state sales taxes or property taxes. But the more likely pressure will be to shift as much as the increased tax load as possible to the business sector rather than awakening the sleeping giant of homeowners and wage-earners.
The Solutions
The Taxpayers Association has been sounding the warning regarding this impending crisis and advancing solutions that will prevent the economic train-wreck that will result if taxes are increased in a state that already has among the highest tax burdens in the nation.
One of the ways we have been working to stop the erosion of scarce education tax dollars is to tighten up the laws regarding local redevelopment agencies (RDA) and economic development agencies (EDA) which took $26 million last year from public education property taxes and gave the money to developers. We have also worked to limit the erosion of school tax dollars from RDAs and EDAs by curtailing the 20% tax increment diversion for affordable housing. Frankly, hard as I try, I cannot find a rational basis for taking school tax dollars in a state which spends less per student than any other and giving that money to subsidize housing projects.
The legislature this year recognized the potential positive economic impact which may result from the recent Winter Olympic Games if we as a state step up and prime the pump through advertising which will prompt more and more visitors to come here and spend their money.
Tourism could be Utah’s best new growth industry, but it’ll take more national and international advertising than we’re used to, to permanently capitalize on the temporary Olympic high. While the Salt Lake Convention and Visitors Bureau has an impressive track record of attracting conventions to Utah, their job will now be even more important in booking more and bigger conventions. While on the convention front we seem to have things pretty much under control, the marketing of Utah tourism to individuals and families has not had similar success. When the Utah Travel Council appeared at the Legislature during the session to discuss their proposed budget, they spoke of airing television ads about Utah to the “drive-able” states that surround Utah and were asking for approximately $800,000 to do so. I suggested that thinking so small would not allow the hundreds of millions of dollars of exposure we received through the Olympics to catapult Utah’s tourism economy to the next level of performance. Consequently, the Legislature provided approximately $7 million in funding to assist with world-wide advertising of Utah as a year-round tourist destination. Tourism and other areas of economic expansion should help to provide additional funding for public education.
In the recent legislative session taxpayers won passage of SJR 6 which directs the Tax Review Commission to study and then draft legislation to tax the growing number of entities which compete head to head with the private sector but don’t pay taxes. It is estimated that these government-owned enterprises such as municipal electric utilities, golf courses, and recreation centers escape hundreds of millions of dollars in sales, income, and property taxes which their private sector counterparts are required to pay. Our first effort is to prevent government from getting into the business of business, but in those areas where government is already competing, it simply must pay the same taxes the rest of us pay.
To escape the projected train-wreck in the funding of public education, the legislature must also pass tuition tax credits. SB69, which would have provided a $2,116 universal tuition tax credit, was passed by the Senate Education Committee but was not placed before the whole Senate for a vote. For every student whose parents choose an alternate provider for education services, approximately $3,000 can be saved while more money will voluntarily be paid for education as parents augment their children’s private or parochial school education costs.
We must also examine areas of waste and inefficiency to make our school system more streamlined and accountable. There are no areas of public education in Utah which are off-limits in the scrutiny which must be given to resolving the challenges ahead.