Leavitt explains recommendations to alleviate Utah's budget shortfall
The $117 million dollar budget shortfall the state is facing for 2003 is a reality that no one can hide their head from. But how to solve that problem, without almost destroying some cherished institutions in the state is a point of debate that will be taken up by the legislature when they meet in special session later this week.
Monday morning, Governor Mike Leavitt gave his detailed ideas on how to handle the shortfall, and those ideas stated directly what he has been saying ever since he found out he needed to call out the lawmakers for an extra session. The state needs to protect education from any further financial deterioration.
"This is a very difficult process, unlike anything that we have had to do since the late 1980s," the governor told a group of reporters at the state capitol and on line. "The last time we faced anything like this, I wonder if any of the present legislators were even here."
Reporters in the room and on the phone named two or three, but could come up with no more.
"This is a whole new world for those that have known nothing but growth and prosperity in both business and government," he stated.
The rhetoric has been going on for weeks, with some members of the legislature proposing that a three and a half percent cut across the board might be the best answer to cut the money needed out of the states near triple billion dollar budget. However the governor sees that as the easy way out for lawmakers, not the right way.
"It would be much more convenient for them to cut that way, but it certainly wouldn't be right," the governor stated. "We are presently $700 below what the 49th state in the union is spending on education per child. We are $2500 below the average funding level. I am not one to equate a good education with how much money a state spends, but we must still have the basics in place. Funding has a substantial impact on the quality of education. You can cut, but it can get down to the point where cuts are affecting everything. We have cut all we can out of public and higher education."
So how does the governor think the problem should be solved?
"I think we can look at this situation in one of three ways," says Leavitt. "We can continue to cut education and build roads. That is one way. Or we can raise taxes to keep building roads without cutting education. Finally we can defer building or rebuilding a lot of roads, and use the money to shore up the rest of the state government."
The governor handed out a document detailing the road projects he would like to see deferred. He would keep most of the maintenance projects and of course, roads that were already contracted out. But he would defer projects that affect many in the state, including work on the Price to Interstate 70 projects that have not been started or completed. However, the projects over Price and Spanish Fork Canyon would not be affected by his proposal.
Others affected in the area would be SR 191, Crescent Junction to Moab, and on the same highway, Blanding to Moab.
Two of the projects he is deferring are already at a standstill because of court orders. That includes not only the much publicized Legacy Highway but also the 11400 South interchange and road work near Interstate 15.
While many people think that roads are almost fully paid for by gasoline taxes and federal funds, the governor says few understand the dramatic change that has taken place in the last five years when it comes to building new roads.
"Since 1997, the state has taken $1 billion from the general tax fund to build new roads," explained Leavitt. "This was an unprecedented move that we made to improve the highways. But now we need to go back to where we were, not using that money for roads, but for other services where it came from. Our roads are dramatically better today than 10 years ago because of aggressive investment by the state. We must continue to build the roads currently under construction and maintain the rest. But we need to take a pause on new construction until we can afford it."
But not all of the money needed can come from the road list. The other major change he wants to make is to eliminate the 1/16 cent sales tax that goes to water districts in the state and use the money to supplement the tax shortage. This would bring in another 20 million annually for other state expeditures.
"We have to have expanded resources for water in the state," he said. "We have enough developed to meet our needs for the next 15 years and that needs ongoing funding. The fact is that most people really don't know how much they pay for water. I would venture to guess that no one in this room really has an idea of what they pay. You may see your water bill, but that isn't the actual cost."
The governor pointed out that much of the cost of water comes from unseen places. He said that 14 percent of funding comes from property taxes, 23 percent from federal taxes, and 59 percent is all that is actually paid by water rates. The sales tax generates only 4 percent of the money.
"This money goes into a revolving fund that is used to fund water projects," stated Phil Palmer, Price River Water Improvement Districts manager. "The sales tax generates between 18 and 20 million per year. It is with that and other money that small rural districts are able to fund water projects. The governor actually took 10 million of that last year for the shortfall then and he said he wouldn't touch it this year. But it looks like he wants all of it this time around."
Palmer was pleased that the governor was not going after the property tax supports, but he also said he knew the opposition to that would be very great. Those revenues would be hard to take away at this juncture, largely because so many water companies and districts use that money as the basis for their credit for bonding for big projects.
It is a stable source of money which they would otherwise not have and credit would be impossible to obtain without them or some other type of steady revenue support.
But Leavitt did lay out what he thinks should be done in the long run, including eliminating the sales tax for water development, to issue transition bonds to take care of critical projects, to be more selective on which types and kinds of companies and districts money is loaned to for projects, and implement new efficiencies and a conservation based funding mechanism for water.
"Utah has the second highest per capita use of water and the third lowest price for it," said the governor. "I realize the use is a function of living in the second driest desert, but I believe water ought to be treated as a market commodity. We certainly can't defend a lot of the water loans we have given out over the years. We need to be more selective as to why and who we loan money to for projects."
Speaking to the commodity angle, he pointed out one instance that he sees as an example of the problem.
In 1980 the state lent a Grantsville water company $8.1 million to improve a water system. At that time, the water was selling for $280 per share. The loan was for around two percent annual interest. Today that company, that has been making it's payments, still owes the original $8.1 million, but the shares have increased in value to $2800 per share.
"I just don't think the state should be competing with the banks for loans on these projects," he stated.
The bottom line in the news conference was that Leavitt intended to hold both public and higher education harmless. However he did point out that about $8 million of the money to plug the hole the state has will come from a contingency fund the school districts have that they use to refund monies that they have to pay out due to property tax challenges around the state each year. That will be about $8 million in that fund to handle the situations.
The governor intended to present the same package to legislators on Monday evening. District 69 representative Brad King had not had a chance to see any of the details when the Sun Advocate contacted him on Monday afternoon.
"I was just going to walk out the door to go to Salt Lake for the meeting at 4 p.m." he said on his cell phone. "I can better make up my mind when I see in detail what he is proposing."
The real fight for what will happen begins on Wednesday morning when the state house and senate begin their special budget session.