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Thursday, December 15, 2005

Courage and Foresight

By Greg Bell
State Senator, District 22

As we begin work with the state budget surplus, first a word of gratitude that our citizens are employed, creating businesses and jobs and profits. We realize that tax revenues don’t just appear; they’re paid by hard-working people. We feel it a great trust, a fiduciary duty, to handle these monies wisely.

What principles should guide us as we deal with them?

I’m glad past legislatures have largely adhered to a pay-as-you-go philosophy. Our AAA credit rating is evidence of historically good management. The economy and tax revenues seem to swing so quickly and dramatically nowadays that excess debt can be a huge problem. Still, when one sees the incredible increases (30% and higher) in the stuff used to build roads and buildings (asphalt, cement, steel) one wonders whether some bonding wouldn’t be intelligent. Legacy Highway’s cost increased almost $250 million (more than 50%) in four years–at a time when we could have bonded at about 2% per annum. UVSC’s library has increased in cost from $36M to $47M in one year. Interest at 3% interest over 7 years (with no principal amortization) would only be $7.5M.

A college president recently told me that it used to take 2-3 years to get a needed building through the Regents, Building Board and Legislature. It now takes about five years, and is moving toward ten years. That’s too long to delay critical educational infrastructure needs.

The traffic jam for higher ed funding is nothing compared to transportation needs. Almost every section of the State is begging for more and better roads. I-15 in north Utah County, I-15 in north Weber County, Legacy North, and Highway 6 between Spanish Fork and Helper are just a few of the burning priorities, not to speak of sorely needed corridor preservation. We need to invest billions of dollars to keep our economy from stagnating.

Conservative legislators justly fear that we will “grow government”. When governments are funded too much they grow unnecessarily and tend to pursue inessential things. Fraud, waste and abuse rear their ugly heads. New and expanded programs create constituent groups of employees and recipients, which become self-perpetuating lobbies for the eternal life of the programs and ever more expenditures.

Here are some touchstones for what I think are legitimate considerations for applying surpluses.

1. We have to remember that a tax cut is ongoing. If you cut a tax rate in good times from 7% to 6% and the revenue from 6% will sustain legitimate government operations, well, you’ve accomplished your mission. However, in a contracting economy that 6% rate may only yield 3/4ths of the revenue it did in better times. In the next recession, without the tax cut the State would have had the extra revenue from 7% to work with. But in tough times you just don’t restore the tax rate to prior levels. Tax revenues can’t be adjusted as needed like a stove temperature. When you lower a rate it tends to stay there. No one wants to see these huge surpluses going forward, but we also need to avoid adopting tax rates which won’t sustain us through the hard times which will surely come.

2. There has to be a time of catching up from the effects of the economic storm earlier in this decade. Yes, we have surpluses, but
• Utah is still 51st in K-12 education funding.

• Teachers start at $12.50/hr.

• Child welfare workers make $25,000/yr. to begin.

• Attorneys in the AG’s office start at 40% of what SL firms pay.

• Highway Patrol troopers make 75-80% of their peers in cities and counties.

• 27,000 income-eligible children are barred by funding limits from obtaining
health insurance coverage under CHIPS or Medicaid.

• Notwithstanding significant improvements, at least 12 people have been killed on Highway 6 this year.

• Most dentists refuse Medicaid because of low reimbursement rates.

• Only 50% of those in need of mental health services can be handled by SL
County’s mental health contractor, with similar numbers in almost every county in the State.

• Tuition at our colleges and universities is becoming unaffordable to many of our citizens, especially those of low and moderate income who need a college education to break the cycle of their poverty.

• 50% of Utah’s Hispanic students drop out of high school.

• Utah has fallen from 12th to 34th in the nation in the number of citizens ages 24-34 with a 4-year college degree.
3. We should shore up our rainy day funds, build one-time projects such as roads and critical state buildings, fund the USTAR technology initiative: These don’t appreciably grow government.

4. Our citizens understand or should be educated about the HUGE needs for roads, schools, water development, and restoration of aging dams and bridges. The people I talk to don’t want a tax reduction that amounts to a token to them at the cost of improving our schools and roads. Every poll I have seen about tax refunds versus education funding goes in favor of the latter.

5. Increased State spending doesn’t automatically equate to “growing government.”
• Simple inflation and rapid population growth account for much of the needed revenue demand.

• Adding 15,000 new pupils a year to our K-12 system will cost $32M in additional WPU’s alone.

• Increases in natural gas alone will cost the State and its schools, colleges and universities tens of millions of dollars.
6. Notwithstanding all of the above, the populace at large sees the headlines that the State is awash in surplus revenue, and they rightfully expect that we will reduce the tax rates which produce outsized surpluses.

As in all things, our budget deliberations must be guided by wisdom, courage and foresight.

1 Comments:

Blogger Kevin said...

On the subject of budget...

Utah is an energy producer. The 2005 spike in gas prices led to a spike in energy investments.

I am curious about how much of this current increase in state revenue is a direct result of the energy boom? If a large portion of the increased revenue is the result of a spike, then it seems to me that Utah needs to be extra cautious about using the spike to justify any long term increases in entitlement spending.

As for Utah public workers being underpaid, I think we need to analyze their pay in relation to wages in Utah as a whole. My experience is that Utah workers get paid less than workers in most all industries. Public service wages need to be judged in context both with other states and with other workers in Utah. If all Utah wages are 80% of national averages, then the fact that public worker's wage is 80% of national average is expected.

12/15/2005 1:44 PM  

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