By Lyle Hillyard
Senate Chair of the Executive Appropriations Committee
One of the most difficult and important jobs of the legislature is predicting future revenue amounts so we can craft a balanced state budget.
There is usually some discrepancy between what we expect and what we actually collect. For the fiscal year that ended June 30, 2005 (FY05), we had a surplus. After the automatic statutory withdrawals (including deposits to the industrial assistance fund, economic development fund, debt service and rainy day funds), it looks like we have $24.7 million of General Fund money and $80.1 million of Uniform School Fund money which, of course, is very good news. It’s a known quantity and that money is in the bank. This surplus is considered one-time money for future needs.
The primary source for the Uniform School Fund is income taxes. I am particularly gratified when that amount increases because it means more people are employed and being paid more for the work they do.
The current balance in our Rainy Day Funds is about $146 Million - 106 million in the general rainy day fund and $40 million in the Education Budget Reserve Account.
We are now in the middle of Fiscal Year ’06. Our Fiscal Analyst Office works diligently to form an accurate independent revenue projection. Then we meet with the Governor’s Office to come to a consensus on a final figure. This process requires careful examination of the economic factors impacting our state economy over the next six months. Once we know what our actual income for the year will be, we can determine if we need to make any immediate adjustments to the budget we set last year – or whether there might be a surplus.
The FY 05 surplus + the anticipated FY 06 surplus will be used as our projected one-time money in the upcoming session.
Then comes the really tough challenge: predicting what the economy will do between July 1, 2006 and June 30, 2007 (FY 07). That projection will become the principal figure used to build the budgets and discuss tax cuts during the upcoming session.
As I was driving home from Provo last Friday, I listened to the radio reports on the incoming winter storms and was glad to hear some of the ski resorts may finally be able to open. I have seen an early opening of the ski resorts result in over $50 million in increased tax revenue for the state.
People can become very excited about the initial revenue estimates with which we begin the session. Then, around mid-February when the post-Christmas tax collection reports arrive, people are disappointed if estimates are adjusted downward, even slightly. I hope we can avoid that this year – first, because the disappointment can impact confidence in the local economy, and second because of how it alters the legislative discussion.
Let’s say, for example, we projected having around $200 million in new revenue. Then, in mid-February, that projection drops to $150 million. I will suddenly start to hear a great cry that we have to cut budgets or we need to raise taxes to save all the endangered programs. It has always escaped me how spending an additional $150 million is a budget cut. I would advise a more restrained, patient approach.
One day in the grocery store a lady came up to me and voiced her concern about the need for more funding for public education. My question to her was, “Where are we going to get that money?”
She said, “Well, that’s your problem, just get us more money.”
Later the same day, a man talked to me about his business, family and work situation. He told me we have to cut taxes. I asked him what we should quit funding. His answer was the same: That is your problem, not mine.
Our challenge is to address both priorities at the same time.
Government doesn’t generate money. Government can only spend money it takes away from someone, either by taxation or reallocation of expenditures in state programs.
So, if you are advocating for a tax cut or increased funding for a particular program – remember all of these competing priorities must be carefully weighed against each other with the big picture in mind.
New budget numbers will be out this week. Governor Huntsman will announce his on Friday. Our Executive Appropriations Committee will take action next Tuesday