Taxation, Appropriations, Efficiencies (and Domestic Horse Disposal)
Jim Nielson, AIA, is a Senior Principal with CRSA and a Utah State Representative. First, Do No Harm is a series of posts about how what happens on Utah’s Capitol Hill affects public, business, and personal budgets. This segment continues to look at new legislation and analyzes its consequences on both our business and personal pocketbooks.
Missed a Part?
Revenue and Taxation
In a more traditional sense, actions by government affect both sides of the public ledger. Some policy decisions, such as taxation and appropriations, modify the ledger directly; others such as economic development incentives and mandates (as discussed in my last post) change things indirectly.
Tax increases, for instance, can and often do bring in more revenue. Depending on many factors, increased taxation can also discourage economic growth and private investment, leading to reduced revenues. Although it did nothing monumental, the legislature did tinker with taxes, user fees, registrations, and licensing requirements in 2014. These actions included:
- Tax-neutral policy changes for
- Property tax (1st Sub. S.B. 180) and
- Local-option sales tax (1st Sub. S.B. 188)
- Tax or fee reductions:
- Over $1.5 million in financial institution fee reductions (H.B. 316 & 1st Sub. S.B. 124) and
- More than $100,000 in eliminated professional licensing fees in two bills.
- Tax or fee increases:
- About $4 million in added fees, licensing costs, and certificates in at least ten bills.
The effect of appropriations can also be difficult to predict because many types of expenditures affect economic growth significantly. The most notable is education. We spend almost two-thirds of our state’s revenues on public and higher education combined. Public education accounts for 48%. And an educated workforce is a prerequisite for prosperity. In general terms, investing as much of the state’s available money in education as possible yields rewards in terms of economic development and growth in future years.
Recognizing this nexus, the 2014 legislature gave an increase of more than $180 million (of the $400 million in new money available) to public education. It also increased public education appropriations by more than 11%. Yes, Utah’s public education funding per-capita is last in the nation. Key factors influencing this funding situation include our inability to tax almost two-thirds of the property in our state (because it is owned by the Federal Government), the modest average household incomes, and larger families than the national average. For perspective, Utah is in the top five states for the percentage of state tax revenues devoted to education.
Regarding the 2014 increase, almost $30 million of that came in the form of legislative earmarks for specific programs. Earmarks afford local school districts little flexibility in how to use the money. The funds flow to contracts and projects related to leadership, inter-generational poverty intervention, concurrent education at a single college, a STEM action center, school construction standards, and other line item earmarks.
Many of these appropriations go to private vendors, third-party contracts, or to investors in public private partnerships that front the money for certain programs with the anticipation of getting a return on their investment if the programs lead to other cost-avoidances. As far as I know, this private investment approach to public funding, a key part of the Utah School Readiness Initiative (H.B. 96), is untested in Utah. State costs to pay off investors for this initiative alone are expected to reach $16.5 million by 2017. At this point no corresponding cost-avoidances related to the initiative have been identified.
Other appropriations approved in 2014 include hundreds of thousands of dollars for suicide prevention programs, $2.7 million annually to house state inmates in county jails, and $3.5 million for the next steps necessary to relocate the state prison. Ultimately, relocating the prison will cost hundreds of millions of dollars.
Importantly, the legislature appropriated $750,000 to help homeowners, whose sole source of heat was a wood-burning stove, convert to natural gas or propane furnaces. Gas furnaces reduce emissions to a fraction of one percent of wood burning stove emissions.
Efficiencies and Accounting Changes
One way to juice the bottom line is to make government run better. In 2014, the legislature found savings through aggressive use of the Medicaid Inspector General, through turning programs over to agencies better equipped to handle them, through better coordination between juvenile and adult detention facilities, and through eliminating unused programs. Total savings of these measures are estimated in excess of $1.5 million.
Among other things, the legislature modified the State Money Management Act (H.B. 103), modified School and Institutional Trust Lands Administration investment practices (2nd Sub. H.B. 168), directed an upgrade to the Utah Public Finance Website, and began the process of dealing with the state’s unfunded liability associated with employee annual leave (1st Sub. S.B. 269). Investment improvements will yield hundreds of thousands of dollars annually. Upgrading the finance website will cost over half a million dollars a year. Erasing the annual leave liability will cost over $100,000 the first year and then about $40,000 for the next several years before ultimately declining to zero in 25 years.
Also consider a policy with the potential for a substantive impact on Utah’s economy in years to come: 4th Sub. H.B. 44 provides a mechanism—when state regulators consider applications for interstate transmission lines crossing though but not serving Utah consumers or energy producers—for local power suppliers to hitch a ride. With ever diminishing transmission corridors, considering needs for local suppliers to find a way to market probably makes sense.
Domestic Horse Disposal
As mentioned in the first post of this series, if you need to bury a horse on your own property, in certain instances you will now be allowed to do so (2nd Sub. H.B. 26). That could benefit a farmer, or at least keep him out of trouble. This is just one of a broad range of bills in many different categories with the potential to impact someone’s budget. Others include:
- H.B. 25, which states that local jurisdictions may no longer use their powers of eminent domain for beet sugar pipelines & log-floating channels. (OK, that might not affect anything, but it’s interesting that those uses were still on the books.)
- H.B. 19, which makes it clear that just because a business charges customers a small fee to use a plug-in hybrid charging station, that’s not the same as reselling power and doesn’t make the business a regulated public utility.
- 1st Sub. S.B. 21, which exempts a road-side fruit stand from certain building code requirements.
- H.B. 80, which allows further expansion of 80 MPH zones. Does time really equal money?
- 9th Sub. H.B. 105, which legalizes a certain type of hemp oil (which, we understand, helps with seizures).
- H.B. 101, which makes it illegal on busy roadways for pedestrians to encumber the right-of-way designed for vehicles for any purpose. A recent newspaper article suggested this would cut into panhandling proceeds.
- H.B. 197, which authorizes a study to discuss whether and how Daylight Savings Time affects Utah’s economy. (Ask a family dealing with autism or a parent of a student that waits for a bus in the dark; then ask a golf pro or someone who makes a living selling outdoor recreational products.)