Surplus poses problem
Spending caps limit how legislators can use it
But legislators could find themselves hamstrung in their freedom to spend the cash any way they wish because of various spending limitation caps now being hit as the state becomes flush with hundreds of millions of dollars.
"This all creates the perfect storm for more tax reform, more tax cuts," says Rep. Greg Hughes, R-Draper. "We can't sustain the kind of government growth" that spending all the new cash will bring, he adds.
Two new reports show just how robust tax revenue growth is for Utah and surrounding Western states.
The state's Finance Department has announced that Utah's two so-called "Rainy Day" surplus funds have completely rebounded from the revenue-short days of the early 2000s.
The two funds have topped out, and any additional tax surpluses can only flow into them as next year's budget is increased by lawmakers. Without legislators voting to lift the caps, none of the current tax surpluses can go into the Rainy Day funds.
And the National Conference of State Legislatures has compiled a nationwide accounting of tax revenue surpluses state-by-state, which shows healthy revenue growth in the American West.
But the NCSL report shows that surrounding states — Nevada, Wyoming, Idaho, New Mexico — are running revenue increases of between $132 million and $150 million.
Montana is seeing a whopping $552 million in additional revenue, Oregon an additional $490 million, the NCSL report shows.
The Deseret Morning News has reported that former Utah State Tax Commission chief economist Doug Macdonald, recently retired from the commission, estimates that Utah is running a $150 million tax surplus through the first four months of the state's fiscal year. If tax revenues continue to come in at such a high rate, the state will have a $450 million surplus at the end of the fiscal year, July 2007.
"There is a 6 percent cap" on the Rainy Day funds, says John Massey, director of the Legislature's budget office. That means that the Rainy Day funds attached to the state's General Fund and the Uniform School Fund can only grow to 6 percent of those funds — limits that have been reached.
The General Funds surplus account is topped out at $132 million. The surplus fund for the USF, the main fund for public and higher education, is topped out at $123 million. So the state has a quarter of a billion dollars sitting in those accounts.
The Rainy Day funds are used just as the name says — to help the state get by when tax revenues fall short of expectations. In the early 2000s, when the state faced a $700 million shortfall over several years in anticipated revenues, the funds were drawn down to just $19 million. State lawmakers cut back on building projects, trimmed programs and spent the Rainy Day funds to get by.
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