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Legislature concludes 2005 session with tax cuts, expenditure increases

The Utah Legislature concluded the 2005 session by increasing state expenditures by $592 million and cutting taxes by $8 million.

The 2005 session was the first since 2001 that state lawmakers did not have to deal with revenue shortfalls, pointed out the Utah Taxpayers Association.

Utah's rainy day fund will reach $109 million in 2006, with $37 million earmarked for education and $72 million for general government operations.

The fund peaked at $120 million in 2001 and dropped to $20 million in 2002.

Public education's share of Utah's uniform school and general fund revenues will be 46.3 percent, with the weighted pupil unit climbing 4.5 percent from $2,182 in 2005 to $2,280 in 2006.

The ratio varies from district to district, but registers at roughly 1.3 to 1 and a WPU amount of $2,280 translates into $2,964 per student.

Moreover, the weighted pupil unit represents only a portion of the total education spending per student in Utah.

The WPU does not include below the line items like Social Security and retirement costs or block grants.

When facility construction, debt service and locally funded costs are included, the WPU represents slightly less than 50 percent of all public education spending per student.

Utah lawmakers balanced the state's budget during the recent recession by raiding transportation spending.

But the 2005 Utah Legislature allocated $120 million in additional general fund revenues for transportation.

The 2006 general fund appropriation is less than the $146 million the state spent in 2002 for highways before the recession.

Officially, the 2005 Utah Legislature did not increase individual income taxes.

But due to the lack of indexing on brackets for inflation, Utahns will be paying an additional $4 million in income taxes next year, indicated the association.

Utah's fiscal 2006 budget does not rely on bonding for capital projects.

The association highlighted several tax-related bills adopted by the 2005 Utah Legislature, including:

•Senate Bill 13. The legislation provides a 2005 tax benefit for Utah National Guard members and reservists called to active duty.

The measure provides for subtraction of $2,200 of taxable income, which amounts to a total one-year tax cut of $1.1 million.

•Senate Bill 8. The legislation allows counties to impose a $10 per year motor vehicle registration fee earmarked for transportation corridor preservation.

If all Utah counties impose the fee, total impact to taxpayers will be about $17 million per year.

•Redevelopment agency reforms. Restrictions enacted by the 2005 Utah Legislature prohibit redevelopment agency time or size extensions and impose a one-year moratorium on new retail RDAs.

Agencies where blight studies were authorized before Feb. 15 are exempt from the moratorium. In addition, the legislative reforms prohibit RDAs from using eminent domain and earmarking redevelopment funding for stadiums, convention centers or cultural facilities.

•House Bill 214. This legislation changes how state employees convert accrued sick leave at retirement.The current law allows retiring state employees to convert eight hours of accrued sick leave into one month of health insurance coverage. Pursuant to HB-213, 25 percent of accrued sick leave will be transferred into an employee's 401(k) plan based on hourly wage. The remaining hours, after 480 hour and cash out deductions, will be distributed to a medical savings account. Deductions will be phased out after 2012.

The conversion of accrued sick leave to health insurance coverage cost the state $8.8 million in 2001. Related expenditures are expected to jump by a 16.7 percent annualized rate to $16.3 million in 2005, indicated the taxpayers association. The rapid growth is being driven by inflation in health care costs and increasing numbers of state employees retiring.

HB-213 allows sick leave accrued prior to Dec. 31, 2005 to be converted under the existing formula, with minor changes due to United States Internal Revenue Service mandates, noted the association. Sick leave accrued after Jan. 1, 2006 will be transferred to 401(k) and medical savings accounts based on the employees' ending rate of pay.

State employees will continue to receive 104 hours of sick leave per year, concluded the Utah Taxpayers Association..

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