Budgeting Basics
This year, the State will receive $200 million more than it expected. Next year, the State is anticipated to receive $300 million more than is budgeted this year. Some questions and answers regarding the surplus are:
Why not pay down the debt we have racked up recently? This is my preferred place to start the budgeting process. Utah weathered the recent recession better than most other states, because it had been using cash, not credit, to pay for much of its infrastructure (building and roads). When revenue went south, the State made some cuts and, then, pulled cash out of those projects and replaced it with bonds. Other states that already had tapped their credit had fewer options. Economic cycles are not dead. Now is when we prepare ourselves for the next downturn. The best way to do that is to pay down credit and to resist building programs.
Why not put the money into the rainy-day fund? We should put some money into the rainy-day fund. Credit-rating agencies like to see it there. However, it is questionable whether government should take its citizens’ money to build its own reserves above certain levels. Also, it is a misperception that the rainy-day fund “saved” us in the recent downturn. (See the explanation immediately above; cash spending for roads and buildings saved us.) It is prudent to have rainy-day money, but that money can only be used once, and then it’s gone. On-going money allocated (and put to work) for infrastructure – instead of on-going programs – is there every year, in case a recession lingers.
Why not refund the money to taxpayers? Quite simply – there aren’t the votes in the House, Senate, and Governor’s office to do it. Therefore, the feasible way to “refund” tax money is to not take it in the first place. By adhering to sound fiscal policies (especially in good years, like this one), we will be able to drop our tax burden from the current high level, which is hurting economic development. If you’re in favor of not increasing the tax burden, root for us to pick option one above.
Why not use the money to satisfy pressing needs? My first session up here, we put a chunk of money in the rainy-day fund (shortly before the bottom dropped out of the economy, by the way). One representative (who now wants to raise taxes) asked how we could do such a thing when so much need existed. It hit me like a ton of bricks. “Need” will always be there, probably at levels many times more than the entire budget. Our people are seriously over-taxed, and they do not want government to take more of their money. They expect us to make the hard decisions, pick the highest priorities and take steps to build the economy.
Why not put the money toward education? Most of the money will go to education. It would be nearly impossible to argue education is not our highest priority. It receives half our state budget and half the local property tax -- and all other areas of state government take a distant second. I think education needs some reform. But I also think it does need more money. The key, though, is to expand the State’s economy, not to take more money from our people (which tends to shrink the economy and, as a result, shrink the amount of tax revenues and, thus, decrease the amount of money ultimately available to education).
The legislature will end up striking a balance between these options and many others. Stay tuned, and give us your input.
Why not pay down the debt we have racked up recently? This is my preferred place to start the budgeting process. Utah weathered the recent recession better than most other states, because it had been using cash, not credit, to pay for much of its infrastructure (building and roads). When revenue went south, the State made some cuts and, then, pulled cash out of those projects and replaced it with bonds. Other states that already had tapped their credit had fewer options. Economic cycles are not dead. Now is when we prepare ourselves for the next downturn. The best way to do that is to pay down credit and to resist building programs.
Why not put the money into the rainy-day fund? We should put some money into the rainy-day fund. Credit-rating agencies like to see it there. However, it is questionable whether government should take its citizens’ money to build its own reserves above certain levels. Also, it is a misperception that the rainy-day fund “saved” us in the recent downturn. (See the explanation immediately above; cash spending for roads and buildings saved us.) It is prudent to have rainy-day money, but that money can only be used once, and then it’s gone. On-going money allocated (and put to work) for infrastructure – instead of on-going programs – is there every year, in case a recession lingers.
Why not refund the money to taxpayers? Quite simply – there aren’t the votes in the House, Senate, and Governor’s office to do it. Therefore, the feasible way to “refund” tax money is to not take it in the first place. By adhering to sound fiscal policies (especially in good years, like this one), we will be able to drop our tax burden from the current high level, which is hurting economic development. If you’re in favor of not increasing the tax burden, root for us to pick option one above.
Why not use the money to satisfy pressing needs? My first session up here, we put a chunk of money in the rainy-day fund (shortly before the bottom dropped out of the economy, by the way). One representative (who now wants to raise taxes) asked how we could do such a thing when so much need existed. It hit me like a ton of bricks. “Need” will always be there, probably at levels many times more than the entire budget. Our people are seriously over-taxed, and they do not want government to take more of their money. They expect us to make the hard decisions, pick the highest priorities and take steps to build the economy.
Why not put the money toward education? Most of the money will go to education. It would be nearly impossible to argue education is not our highest priority. It receives half our state budget and half the local property tax -- and all other areas of state government take a distant second. I think education needs some reform. But I also think it does need more money. The key, though, is to expand the State’s economy, not to take more money from our people (which tends to shrink the economy and, as a result, shrink the amount of tax revenues and, thus, decrease the amount of money ultimately available to education).
The legislature will end up striking a balance between these options and many others. Stay tuned, and give us your input.
posted by steve u. at 1/27/2005
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1 Comments:
Good article. I only wish there were enough intestinal fortitude among our elected officials to make a tax refund the first option rather than the third. Getting the money back to the overtaxed taxpayers is the best way to achieve an increase in revenue. In the absence of this option, I agree with paying down debt.
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