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From Governing’s
So it shouldn’t shock anyone that school funding is by far the most critical issue for Utah’s revenue system. The state’s entire income tax is constitutionally designated for the purpose of funding education, and 53 percent of all property tax revenue goes to the schools as well. Because there is a cap on the amount of money that can be raised from the property tax, the disparity between richer and poorer districts isn’t too bad, so Utah has been able to avoid the school funding equity litigation that has beset so many other states. And until recently, there was more than enough to pay for the programs.
Now, however, the national economy has hit the income tax hard, even as the state is predicting a dramatic increase in the number of students entering school. It seems almost inevitable that Utah will have to consider raising the income tax, although a conservative Republican contingent in the legislature continues to argue that tax increases won’t be needed (except perhaps on gasoline) if the state can figure out a way to cut its school expenses. They advocate saving money by creating voucher-supported private schools. But it will be years before private schools can possibly make a significant fiscal contribution, and even if schools are built less expensively, they still have to cost something. So the problem is not going to go away — if anything, the argument will grow more intense in the next few years. ”The major theme of the Utah legislature over the past 10 years has been no tax increases, with little thought beyond that,” says state Representative Brad King. “So any move in that direction will meet with stiff opposition. On the other hand the kids are coming. And no debate is going to stop that.” Barry Conover, deputy executive director of the Utah Tax Commission, sums it up concisely: “There comes a point where they have to do something,” Conover says. “And I think the logical thing is to raise some kind of tax.” But which tax? The property tax has a constitutional ceiling, so it’s not a strong contender. The sales tax has been a declining source of money in relative terms. The state is roughly in the middle of the pack in terms of the number of services it taxes — which means it doesn’t go after the really big ones. Unfortunately, although the legislature has made efforts to eliminate some dubious exemptions, it hasn’t had much success. ”We had a sales tax exemption for car washes,” says William Asplund, assistant director of Utah’s Office of Legislative Research. “And we did a study that showed we should eliminate it. And at the public hearing, you had every car wash owner in Utah in that room. So, legislators looked around and said, ’Do we want to make these 85 people angry at us?’ ” One major instrument remains for those who want to raise substantial funds: the state income tax. “My best guess is that there will be the most pressure on the income tax,” says John L. Valentine, the Senate majority whip. It’s hard to argue with his prediction. The income tax is, after all, the one that’s devoted entirely to education, and education is the area in which expenses are going up. There may be a few other moderately helpful possibilities. One way the state could pick up a little extra cash would be to alter the current practice of using tax dollars to subsidize water costs. One-sixteenth of a cent of the sales tax — or about $20 million a year — goes to keep the cost of water low. “We’re about the second driest state in the nation,” says Lynne Ward, the state’s budget director. “But we also have the lowest water rates.” Governor Mike Leavitt is pushing for reform and has established a water task force to move in that direction. “Our state oversubsidizes water,” Leavitt says, “and undersupports education. This seems irrational to me.” Despite the long-term questions about how to pay for education, Utah’s immediate budget situation isn’t one of the more serious ones in the country. The state has legitimate worries about how it will educate its young people a decade from now, but at least it has the luxury of thinking about the future. It isn’t trying to fill a chasm in the 2003 budget. What Utah does need to do is improve its ability to collect the taxes it has chosen to levy. The tax department, although working with a bare-bones budget, is a part of the state’s tradition of excellent management and has used a combination of technology and targeted efforts to produce good results. The big problem — more than in most places — comes from people who simply deny the notion that they have to pay taxes altogether. “Just last week,” says Tax Commissioner Pam Hendrickson, “we had a person who put full-page ads in the newspaper for a seminar. He promised people who attended that they wouldn’t have to pay taxes. And they tell them it’s legal. We have a lot of people who believe that, and pay for their kits and really believe they can get out of paying any tax if they follow the steps.” Copyright © 2003, Congressional Quarterly, Inc. Reproduction in any form without the written permission of the publisher is prohibited. Governing, City & State and Governing.com are registered trademarks of Congressional Quarterly, Inc. |
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tah has the highest birth rate and the largest average family size in the country. With fully one-third of its population under 18, there are 40 school-age children for every 100 adults, compared with a national average of 30.