Utah budget: Lawmakers finalize record $29 billion budget

Spenser Heaps, Deseret News

With hours to spare before its midnight deadline, the Utah Legislature officially buttoned up the state’s massive budget, one that legislative leaders paraded as full of “record” investments all around.

The grand total for the fiscal year 2024 budget, after legislative leaders added $1.8 billion on top of the over $5.1 billion the Executive Appropriations Committee recommended last week in new spending requests and tax cuts, comes to a whopping $29 billion, the largest in state history.

First the Senate, then the House voted to put their stamp of approval on SB3, also known as the “bill of bills,” to finalize the budget before 6 p.m.

“It’s been a phenomenal session,” Senate President Stuart Adams, R-Layton, told reporters earlier Friday. “Historic. When you look at what we’ve done, in every regard I think it is probably a record-breaking session. ... Record breaking in every regard.”

Gov. Spencer Cox, in an interview with the Deseret News, also applauded the budget as one that will be felt for decades as Utah grapples with its drought, a shrinking Great Salt Lake, and a housing affordability crisis.

“This is one of the sessions we’ll look back on years from now where we’ll be able to show a huge impact, a positive impact on the people of Utah and an impact for generations to come,” Cox said.

“We wanted historic tax cuts and we got historic tax cuts,” Cox continued. “We wanted historic education spending, and we got historic education spending. We asked for equal amounts of water conservation and infrastructure money, and it looks like we’re getting a little more than that, another $500-plus million. So all-in-all, this has been maybe my favorite budget that I’ve ever been a part of.”

Water

In total, lawmakers allocated about $500 million for statewide water needs, according to fiscal analysts, including but not limited to $200 million for agricultural water optimization, $50 million for water reuse reservoir and desalination outlined in SB277, $50 million for Wasatch Front “aqueduct resilience,” $50 million for water infrastructure projects, $20 million for agricultural water optimization loans for matching requirements, $25 million for dam safety upgrades, and $17 million for secondary water meters.

Housing

Lawmakers this year appropriated over $200 million for various housing and homelessness programs, including $52.5 million for the Utah Low-Income Housing Tax Credit, $40 million for a first-time homebuyer program, $50 million for deeply affordable housing, $15 million for teen centers for students experiencing homelessness, $12 million for homeless services and $10 million for the Utah Housing Preservation Fund.

Infrastructure

In total, lawmakers allocated over $2 billion toward infrastructure and transportation improvements, including $800 million for Utah Department of Transportation enhancements, $775 million to pay down debt, $200 million for commuter rail improvements, $108 million for the Point of the Mountain and $100 million for Cottonwood canyons transportation.

Tax cuts

In total, Adams said Utahns were getting some $850 million back in total tax relief when combining the $400 million tax cut package, plus another roughly $239 million in various tax decreases, including $32.7 million to lower the state tax on gas by 2 cents per gallon, $51 million in a low-income housing tax credit, and $146 million to maintain the decreases of the basic property tax levy freeze.

“Unbelievable tax cuts,” Adams said.

That $850 million total estimate, however, also includes about $211 million for the contingent repeal of the state’s portion of sales tax on food — only if voters approve removal of the constitutional earmark for income tax revenue during the 2024 election. If voters approve that amendment, that tax cut wouldn’t be realized until 2025.

Lawmakers didn’t fund, however, any one-time rebates that Cox proposed in his budget recommendation. That’s “one I would have liked to have seen,” he said, but he noted he didn’t include the repeal of the food tax in the budget recommendation “because I didn’t know if we’d be able to negotiate this year or have to wait until next year.”

“So I’m willing to give up the rebates to get the tax off food,” Cox said. “And I suspect that the voters don’t love that tax, so I’m feeling pretty good about things.”

Aside from the future $211 million for the potential removal of the state’s sales tax on food, the nearly $408 million tax cut package outlined in HB54 includes:

• About $380 million to reduce the state’s income tax rate from 4.85% to 4.65%.
• Almost $23 million to expand the Social Security tax credit eligibility to individuals earning up to $75,000 per year.
• About $1.2 million to increase the earned income tax credit from 15% to 20% of the federal tax credit.
• About $3.5 million to provide a tax benefit for pregnant women by allowing a double dependent exemption for children in the year of their birth.

Lawmakers also passed another bill, HB170, to allow a double dependent exemption for children 1 to 3 years old, a $9.6 million reduction, as well as HB130 to enact an income tax credit for expenses related to the adoption of a child, a $2.6 million tax credit.

Adams also hinted lawmakers aren’t done and to expect more tax cuts next year.

“Don’t forget, 2023 was the year of the tax cut again, again and again,” Adams said, repeating a phrase he’s echoed repeatedly throughout the session. “And we’re hoping ’24, I don’t want to make predictions, but ’24 may be the year of the tax cut (again).”

Asked if that means another income tax cut reduction is coming again next year, Adams said, “We hope so.”

Education

In total, the Legislature appropriated $15 billion to public education and education programs from all sources, which makes up more than half of the state’s budget. Lawmakers funded an increase to the education budget of $578 million in ongoing revenue and $339 million in one-time funds, a nearly 20% increase. That includes $236 million for a 6% increase to the value of the weighted pupil unit.

Among other priorities, lawmakers also funded $75 million for school safety, and $25 million for optional full-day kindergarten, as well as a $6,000 annual pay raise for educators.

Senate Majority Whip Ann Millner, R-Ogden, called it a “record” year for education funding, saying she’s “never seen” anything like this year’s funding increase in both ongoing and one-time funds.

“We’re building a very strong base for education,” she said. “We can’t miss that this is a record year.”

House Speaker Brad Wilson, R-Kaysville, said lawmakers made “monumental investments” in public education, “more money for public education in (state) history,” as well as the “biggest teacher salary increase in state history.”

“Our teachers for the first time in memory are going to be paid well above the average of teachers across the country,” Wilson said.

Now, lawmakers have also teed up a conversation in 2024 that will shift to voters who will ultimately decide whether to remove restrictions on the uses of income tax revenue.

Currently, the Utah Constitution limits using income tax revenue to public education, state-supported colleges and universities, and programs for children and people with disabilities. But legislative leaders have for years advocated for removal of the earmark to fix a “structural imbalance” between sales tax and income tax revenue in the budget, and they’ve insisted education will continue to be a funding priority.

“You look in the last four or five years, and education has been a big winner in the state, and it hasn’t been because of the constitution,” Adams said. “It’s been because of the legislative effort to try to fund education. And that won’t stop, no matter what happens with the constitutional amendment. I think this points us in the right direction.”

House Majority Leader Mike Schultz, R-Hooper, told reporters it would be “absolutely irresponsible for this Legislature to remove the sales tax on food without addressing the budget constraints we have. It’s not even an option, honestly,” he said.

As the tax package in HB54 and the constitutional amendment to remove the education earmark advanced, House Democrats issued a statement making clear that they voted against both provisions. They said education funding and the removal of the sales tax on food shouldn’t be used as a “bargaining chip,” and called on voters to reject the constitutional amendment in 2024.

House Minority Whip Jen Dailey-Provost, D-Salt Lake City, called the Legislature’s maneuvering around tying together teacher pay raises and the “school choice” scholarship, as well as making the removal of the food tax contingent on removing restrictions on income tax dollars for education, “gamesmanship” bordering on Washington, D.C., politics.

While Dailey-Provost stressed she has the “utmost respect” for Utah’s Republican legislative leaders, she also said she’s concerned this year marked a “deviation” from the state’s typical track record of not “tying complex issues together, the bitter pill version of legislating.”

“This year we have seen a deviation of that stated intent, to not mix and match, to not fall into D.C.-style politics,” she said. “There have been many bills where to get one good thing, there was a bitter pill with it.”

Dailey-Provost also pointed to the decision to lump the contingent removal of the sales tax on food in the larger tax cut package. While she wasn’t supportive of the income tax rate cut, she said she liked the other components of the bill.

“I was willing to stomach the income tax change because I liked” expanding the Social Security threshold and the earned income tax credit, she said. “But now wrapping all of that contingent on getting rid of the earmark, I wouldn’t say it’s full-on D.C. style politics, but it’s certainly towing that line.”

Cox acknowledged the controversy over tying those priorities together, “but I hope people will look in totality at everything that was done. Not only was it a good year for education, it was a historic year.”

“So I’m pretty giddy about the good things that were done for education,” the governor said.

As for criticisms of “gamesmanship,” Cox said it’s how the Legislature works.

“Welcome to the United States. This is how our system has worked since we became a country,” Cox said. “You have to have the votes to get the things done that you want to accomplish, and what I would say is the education community gave up very little and got a lot.”

Cox said guardrails around education funding will still be in place, and he’s “yet to see one time where the Legislature wanted to give less money to education but they felt the constitutional language wouldn’t allow it.”