Utah's Budget

Governor Huntsman has called the Utah Legislature into a special session this Thursday, to pare the State budget to match the economy. Every February, based on economic projections, the Legislature creates a budget for the next July-June fiscal year. When we budget, we use conservative projections, to try to undershoot the revenues that we actually bring in later; that is why Utah typically runs a “surplus” – meaning that actual revenues simply exceed the amount that we conservatively projected and appropriated. We typically spend those surpluses on one-time expenditures (e.g., books, roads, buildings, pilot projects).

This year, though, we overshot actual revenues by $300 million – so far. (Before anyone gets too partisan about it, though, it should be noted that we project our revenues on a non-partisan basis and, then, adopt those revenue projections on a bipartisan basis.).

Here we are, 3 months into the fiscal year, and we’re telling agencies that they will get less than they budgeted. For the most part, they’ll get more than last year, but less than anticipated. That creates a difficult situation. Our revenues come from Utahns (through taxes, of course). Our shrinking revenues simply reflect the fact that the people’s incomes are shrinking and, likewise, their spending is down. Hopefully, Utahns will appreciate that we don’t go about our task lightly. As they tighten their belts, it seems they should expect us to tighten ours. As I wrote last week, the point is to make sure that state government continues to backstop the efforts of our people.

Fortunately, the Legislature used conservative numbers to set the budget (or so we thought) and, even then, we squirreled away money in various rainy-day funds. But, as Robert Gehrke points out, “The problem is that those pots of money will not be replenished. Once the money is spent, it is gone, so they can only provide a one-year patch to a budget hole.” Using that money to shore up on-going balance-sheet problems would be a huge gamble. Were revenues to continue sliding after this year, we’d have to, later, make deeper cuts that could disrupt the economy further.

People logically ask, “What’s the value of a rainy-day fund, if it isn’t spent?” First off, my prediction is that we will spend most of it by the end of the next General Session. But, I’ll do my best to fight against that, and I’ll tell you why.

The money serves several valuable roles sitting in the rainy-day fund: (1) it is there, as opposed to, well, not there; like a family in a pinch, we don’t know how deep this downturn will be; though we think we need the money now, we might really need it later; let’s keep a cushion; (2) credit-rating agencies value rainy-day funds; Utah’s AAA bond rating saves us tens of millions every year when we build roads and buildings; let’s protect that bond rating; (3) tapping the easy money is undisciplined; it’s like a family in a pinch immediately draining the savings, instead of cutting back expenditures; and (4) there is fat in government; we won’t ferret it out, if we simply tap the rainy-day funds.

As we go through this exercise of sound fiscal management, I’d suggest recognition of 2 things. First, Governor Huntsman gets kudos. To spot the problem and, immediately, invite the Legislature in to deal with it, is brave. It is a showing of the extremely good working relationship that he and Legislative leadership have crafted. Of course, President Valentine and Speaker Curtis share credit for that favorable situation. It should go without saying that our people are counting on us to work together to find effective solutions. We will.

Second, the Legislature’s commitment to public education cannot be legitimately questioned. Though the UEA is in full campaign mode, and – as a functional arm of the Democratic Party – will have nothing nice to say about Republican leadership whatever we do, the budget adjustments would be simple to make – were we not absolutely committed to public education. In the past 3 years, we have increased public education funding more than $1,000,000,000 – over 40%. However, we won’t touch any of that money that ends up in the classroom; that’s half of our budget – meaning that cuts to all other areas of the budget will be double what they would be, if education funds were on the table. Believe me, other agencies and state employees notice that fact; but, somehow, the UEA never does. Such is life. We have worked hard to increase public education funding. And, we will work even harder to shore up those gains.