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35 |
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| USA |
10 |
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| NED |
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Utah's economic recovery slow
Games didn't help as much as hoped, tax official reports
By Bob Bernick Jr.
Deseret News political editor
Utah's economy is recovering from two quarters of recession, but it's slow going, and the Olympics didn't help as much as some economists hoped, state legislators were told Wednesday.
Doug Macdonald, chief economist for the Utah Tax Commission, told legislators that while the sales tax from March to April — including the two weeks in February during the Winter Games — was up 9.2 percent, "we had hoped for 10 percent to 15 percent increases during February."
"As you know, some downtown businesses and the ski resorts" didn't see the business they had hoped for, Macdonald told the Legislature's Revenue and Taxation Interim Study Committee meeting in the Capitol.
Downtown businesses outside the core Olympic area complained that crowds didn't visit their establishments and their usual Utah customers stayed away because of lack of parking, crowds and so on.
"The Olympics did help us a bit in sales tax. But those revenues didn't offset the drop in corporate" income taxes lost, Macdonald said. Those corporate losses, down 41 percent from a year ago, had more to do with the general recession than with the Olympics.
State lawmakers thought they had solved the state's budget woes when they cut more than $250 million from current year's budget in March.
But revenues continue to lag, Macdonald said. His latest report shows an additional $30.55 million shortfall in the state's two main funds, the General Fund and the Uniform School Fund. Add that to $18 million lost to the state coffers because of new federal depreciation rules part of the new federal economic stimulus package, and the state faces a new $50 million deficit.
House Speaker Marty Stephens, R-Farr West, has suggested that when legislators come into a May special session needed to fix a budget-bill foul-up, lawmakers should again look at trimming millions of dollars from next year's budget, which starts July 1. The state could end the current fiscal year spending $95 million out of its $120 million Rainy Day surplus fund to balance out, he warned.
"If you look at just employment, we've been in recession the last two quarters," said Macdonald. "And it's going to be slow going getting out; people are digging in for the long haul." That is not what Gov. Mike Leavitt wants to hear. He predicted in December that by September or October 2002 Utah's economy would be bouncing back, state revenues growing again.
"We only see inflation at 1.8 percent next year," said Macdonald. That may sound good, but low inflation depresses wage growth. "We're predicting just 2.5 percent wage growth on zero percent employment increases." Utah's 20,000 state workers, for example, get no cost of living raise next fiscal year.
He added that if state and local government spending hadn't been up by 4.5 percent over the past fiscal year, "our recession would have been deeper, real" across the economic board.
Sen. Curt Bramble, R-Provo, said he didn't like the idea that government spending was keeping Utah out of a deeper recession. Is that proper, he wondered.
"Well, it depends on if you are spending it wisely, on something good," said Macdonald. For example, in 1941 federal spending made up just 10 percent of the nation's Gross National Product, but it quickly rose to 50 percent as America geared up to fight World War II, he said.
Some of the tough times for state revenues could be lessened quickly if income taxes jump as hundreds of thousands of income tax returns are processed, Macdonald added.
Early numbers show that state refunds, on average, increased $43 to $446. But the average income tax payment is also up, from around $600 to $844.
Still, individual income tax revenue is down $36.5 million for the year, said Macdonald. Taking in returns through April 17, Macdonald said "income tax revenue is not what it should be."
He guesses construction will be down 10 percent next fiscal year, which starts July 1, even though the state issued a record number of bonds for its own construction, much of it on college and university campuses.
Even facing a $300 million revenue shortfall this fiscal year, Utah is doing better than its neighboring states.
California's income tax revenue is down 17 percent. "That is huge," said Macdonald. Utah's income tax revenue is down just 2 percent, he added. Arizona's income tax is down 5 percent, and Idaho's is down 11 percent. Nevada and Wyoming don't have state income taxes, but other revenues in those states are down, also.
E-MAIL: bbjr@desnews.com
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April 25, 2002
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