by Howard Stephenson
From the news about Utah’s budget problems, you’d think budgets were being cut. But the fact is, with the recent adoption of the FY2005 spending plan, the state budget has increased 7.0% for the second year in a row.
Total state expenditures will exceed $8 billion for the first time in state history as a result of the recently approved budget for fiscal year 2005. The legislature appropriated $8.27 billion for the upcoming fiscal year, a 7.0% increase over last year’s $7.73 billion. The current year’s appropriation was also 7.0% above the actual expenditures for 2003. State-only funds, which consist primarily of income, sales, and gas taxes, increased 6.5% following last year’s increase of 4.5%.
The state budget hit the $3 billion mark in 1990, $4 billion in 1994, $5 billion in 1997, $6 billion in 1999, $7 billion in 2002 and $8 billion for the FY2005 budget.
One-time money for ongoing expenditures decreased from $43 million in FY2004 to $39 million in FY2005. During good economic times, the state generally avoided using any one-time money for ongoing expenditures.
The state’s Rainy Day Fund balance was increased from $24 million to $36 million.
Taxpayers will be increasing K-12 education funding by 5.7% in FY2005. This increase does not include the $15 million property tax increase that local school districts are expected to impose in order to fund the governor’s reading program. Education funding highlights are as follows.
· $30 million for Gov. Walker’s K-3 reading program. Half of this will be funded by state income taxes and the other half will be funded by local school districts. The legislature created a new special board leeway that allows district to impose an additional 0.000121 property tax.
· $25.8 million for student growth, estimated at 7,162 for fiscal year 2005.
· $20.6 million for an increase in the WPU amount from $2,150 to $2,182.
· A 1% ongoing increase in teachers’ salaries and a one-time 1% bonus.
2004 Interim Tax Study Items
Throughout the legislative session, issues arise that require further clarification before the legislature will act upon them. These issues are assigned as study items to various interim committees, which meet the third Wednesday of each month. The findings are reported to the legislature at the beginning of the next session. Of the 208 items slatted for study, those that are tax related are listed below. The list also includes two bills that require Tax Commission studies to be presented before the Interim Revenue and Taxation Committee.
Alternatives to Individual Income Tax – to study whether to replace the individual income tax with a consumption tax or a flat tax.
Apportionment of Taxable Income Under the State Corporate Income Tax – to study the statutory formula and when taxable income is apportioned under the state corporate income tax.
Central Assessment in Property Tax Rate Calculation – to study how to include changes in the value of centrally assessed firms attributable to inflation in the calculation of the certified property tax calculation.
Clean Air Discounts and Tax Credits – to study the use of corporate franchise and income tax credit and the individual income tax credit for a vehicle manufactured to use clean fuel and the use of a clean fuel loan or grant under certain conditions (S.B. 213).
Corporate Accountability – to study requiring a person that receives certain tax incentives or other financial incentives to prepare an annual public report containing the amount of financial benefit the person receives (S.B. 57).
Education Access to Income Tax Monies – to study a 1996 proposition (which passed) that allowed higher education to access income tax monies versus keeping monies in public education.
Factors in Calculating the Property Tax Rate – to study whether to include redemptions, penalties, and interest from property taxes when calculating the property tax certified rate.
Fee Structure for Motor Homes – to study creating a statewide uniform fee that applies exclusively to motor homes (H.J.R. 11).
Local Option Sales Tax – to study the allocation of local option sales and use taxes.
North American Industrial Classification – to study how to adopt the North American Industrial Classification system in the tax code.
Property Tax System – to study whether to reform the state’s property tax system.
Purchase Price Reduction Coupons – to study the taxability of purchase price reduction coupons.
Review of Tax Credits – to study whether tax credits should have a ten-year sunset date to
require the Legislature to review tax credits and affirmatively renew tax credits if they are still valid.
Sales and Use Taxes – to study whether to change certain sales and use tax exemptions currently in place (S.B. 31).
Severance Tax – to study severance tax issues, including point of assessment or collection, pricing and production in calculating the tax amount, and value fluctuation.
State and Corporate Income Tax – to study the corporate income tax allocation formula, state income tax, and collection procedures.
Tax Treatment by Municipalities of Satellite and Cable Television Services – to study issues related to taxes and fees imposed by municipalities on satellite and cable television
Taxing Income From Military Service – to study the taxing of income received from active duty military service (H.B. 117).
Brine Shrimp Royalties – to study issues related to brine shrimp royalties on the Great Salt Lake.
HB 27 (Harper) – requires the State Tax Commission to conduct a study on any changes to the Federal Income Tax laws and their effect on state revenue and report to the Revenue and Taxation Interim Committee.
SB 191 (B. Evans) – requires the State Tax Commission to conduct a study addressing oil & gas severance taxes affected by SB 191, and report to the Revenue and Taxation Interim Committee and the Utah Tax Review Commission.