Scott G Winterton, Deseret News
Move could let income tax money be spent on other programs besides education
SALT LAKE CITY — As part of what they say is their “last option” to fix Utah’s revenue imbalance between income tax and sales tax, lawmakers are looking to propose a constitutional amendment to expand how income taxes can be used.
Utah House Republican leaders told reporters Wednesday morning they’re planning on running a bill this session to put a constitutional amendment on the ballot to allow the education earmark for income taxes to be expanded so it can be used for children and the disabled.
The move, House legislative leaders argue, would be part of an effort to bring more “stability” in education funding. But it would also provide more flexibility in how income tax dollars are spent.
“This is really about shoring up education funding,” said House Majority Leader Francis Gibson, R-Mapleton, noting income tax has been “historically very unstable” and pointing to the 2008 economic downturn as an example.
“No one’s ever said we do not want to fund education,” Gibson said, pointing to increases in education funding over the past nine years. “It does show we’re dedicated to protecting school education.”
Under the Utah Constitution, income taxes must be used for education, while the state’s other major revenue source, sales taxes, pays for much of the rest of the budget. But income tax growth has outpaced sales tax growth as the economy changes — an issue legislators sought to address with tax reform. Though last year’s tax reform package would have given Utahns an overall income tax cut of $160 million, the effort failed amid public outrage over legislators’ proposal to raise sales tax on food.
The reform bill in December came after legislative leaders pushed during the 2019 session to expand sales taxes on services, but they scrapped that bill after opposition from the business community.
House Majority Whip Mike Schultz, R-Hooper, said this proposal to amend the Utah Constitution is a last resort to solve Utah’s funding imbalance before it runs out of spending flexibility.
“We have one to two years left after this year before we hit the fiscal cliff,” Schultz said. “We heard loud and clear the public does not like taxes on services. So then we went and tried the sales tax on food. We heard loud and clear that does not fly.”
Now, “this is basically our last option,” Schultz said, and one that he said “has to be done” this year, an election year, as time runs out.
The prospect of a possible constitutional amendment to alter how income taxes can be spent is likely to raise concerns about whether lawmakers will prioritize education.
But to “give comfort that public education funds are still constitutionally protected,” Schultz said lawmakers are looking to move base education money into the Uniform School Fund, a constitutionally protected fund for K-12 priorities.
“Now what will happen in the future, as we get increases, the Legislature will take that money and the increases and appropriate it into the Uniform School Fund,” Schultz said.
Gibson said any perception that the constitutional amendment would not help education would be “shortsighted.”
“This is creating a guarantee for education,” he said. “There is no guarantee now.”
Schultz said lawmakers plan to set up a “public education stabilization and expansion account,” aiming to create a $100 million nest egg for education in the event of economic downturns. He said education advocates have complained the Great Recession “killed us,” and any recent raises lawmakers have given education funding have only “got us back to where we should have been.”
“The idea is to take the dips and valleys out of it, the high times-bad times, and keep a more stable steady trend that grows public education over time,” Schultz said. That “sends a clear message that we’re serious about this and we want to fund education going into the future.”
Gibson said they aim to run a bill this year and ask the question on the November ballot.
“The plan is to ask the question this year and run a bill and say, ‘Hey, we think this is the best way to shore up education funding and to make sure that people feel at ease with that,’” Gibson said. “It’s going to be a two part process. Do you support adding children and the disabled into this? And if you do, then this is the guaranteed protection.”
Senate President Stuart Adams, R-Layton, told reporters later Wednesday lawmakers in both the House and Senate have been working together.
”Looking at the structural imbalance and thinking about what might be palatable, trying to actually shift some of the income tax money so it can be used for CHIP and other children’s health services seemed to be a natural event. It seemed to be logical,” he said, along with people with disabilities.
”The two of them combined are something we’ve been talking about. The challenge is when you do that, there’s probably some question about the education funding,” Adams said.
Children may be added to the constitutional areas where income tax dollars can be spent, he said, because “a lot of people have commented it’s pretty hard for a child to do well in school (if they) don’t have good health care.”
Adams said money is continually being moved between the education fund and the general fund, so income taxes “doesn’t seem to be the warm blanket of stability that the education community needs.”
“So we’re actually suggesting we put in place in statute” commitments that state lawmakers will fund student growth and an annual inflationary adjustment that would take effect if voters approve the constitutional amendment, along with a $100 million or more education rainy day fund, he said.
There would also be new flexibility for school districts to use existing property taxes for operations, the Senate president said.
Senate Budget Chairman Jerry Stevenson, R-Layton, said lawmakers are “at the front end of negotiations” and talking about details in the news media makes it more difficult.
Stevenson said the proposed changes would be a fix for the increasing imbalance only “for a period of time. But we don’t know what that is.”
House Democrats were frustrated that they learned of the proposal so late in the session — and increasingly frustrated when Schultz, who was expected to come to their caucus meeting Wednesday, didn’t show.
“What I am incensed with is expecting us to vote on this between now and the end of the session when it is sprung — not too harsh a word — on the 40th, what 38th day? Whatever the day is,” House Majority Leader Brian King, D-Salt Lake City, said. “Not cool.”
Chase Clyde, director of government relations and political actions for the Utah Education Association, told House Democrats the UEA has not taken a position yet on the proposal, noting negotiations are ongoing.
“We are still in conversations,” he said.
A proposed constitutional amendment would need to pass both the House and the Senate with a two-thirds supermajority vote to make it to the ballot. Then it would need approval from a majority of Utah voters.
Contributing: Sahalie Donaldson
from Deseret News https://ift.tt/2vDQ2yd
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