By the time you read this, the legislature will have been in session for perhaps two, maybe three, days. We will have completed the formalities and will be dealing with the major task of considering the adoption of a "base budget".
During recent years there has developed a practice of adopting a base budget early in the session. It is based on the preceding year's revenue. Once that is adopted, the focus shifts to allocation of additional revenue from what has been a growing economy. The assumption has been that using last year's numbers is a conservation approach that will assure we have something in place if we are in a "stand-off" as the session winds down.
This year the process is turned upside down because the current fiscal year's revenue is some 7.5 percent below what was projected and budgeted. Moreover, the projections for fiscal year 2010 which begins on the first of July will be down another approximately 12 percent.
Instead of allocating additional revenue, we must now consider and debate how to allocate budget cuts. That is a whole lot more difficult and the end product perhaps less helpful as we move through the varying circumstances of the many state agencies or departments, including education which remains our "biggest ticket" item. vIn our efforts to be frugal we must be careful that we do not sustain ourselves by eating the "seed corn." Both the legislature and the governor are wrestling with these issues and will continue to do so for some weeks. If we do adopt a base budget early in the session it will not be cast in concrete and will remain fluid until close to the end of the 45 day session.
The Governor has given a green light for UDOT to gear-up many of the road construction projects put on hold when the economic crunch took hold last fall. That's good news for Utah. The downtime has actually proven beneficial. It allowed us to catch our collective breaths and resulted in some advantage to the state in pricing.
We have lost little productive time in the winter and should get more bang for our bucks. UDOT will be spending some $1.2 billion over the next four years, including projects on Highways 6, 10, and 89.
The overall budget picture remains very challenging. Early in the week, ending Jan. 30, we agreed to cut the current budget by an additional 7.5 percent, but then to backfill approximately half of that with "one-time" money. This is money earmarked for other uses that have not yet required the funds. It's somewhat like setting money aside for a new snowmobile and then before winter arrives deciding the money is needed to meet ongoing expenses.
As the week drew to a close, we tentatively agreed on the formula and the dollars for the 2009 budget. It will be down an additional 3.7 percent, along with the 4 percent cut made last September. That is still a lot, but somewhat better than appeared possible. Public education was held harmless last September, but not now. Higher education experienced both cuts.
Agriculture faired well this time. The war on cheat-grass, the rangeland improvement fund, and soil conservation were among the budgets that were not cut. However, some water development funds were used to supplement other areas and will need to be replaced.
There are two other contingencies that could ultimately influence the final budget numbers for both 2009 and 2010. Around mid-February, we will receive updated revenue projections from the legislative fiscal analyst. Also before the session ends, we will probably know what Congress is going to do with its "bailout" proposal.
At present, some of that money is earmarked for state government. That could supplement state revenue, though we must be careful not to develop a reliance on what may also be "one-time" money.
Budgets. Early in the week we cut the 2009 budget by another $365 million and then restored $190 million with one-time funds. The net result is a reduction of $175 million plus the cuts we made in September. It is a bitter pill. The 2010 budget is still in formulation.
Federal payments protected. In 1976, Congress approved payments to counties in lieu of taxes not assessable on federal land. In 2000, Congress adopted the Secure Rural Schools and Community Development Act to offset losses in revenue from a reduction in the harvesting of forest products on federal land. These are two important sources of revenue for rural Utah.
A glitch in the law rendered the revenue from one source subject to reduction because of revenue from the other. The problem was remedied by House Bill 149 sponsored by Rep. Mike Noel. Hats off to Mike. It will protect some $16 million for counties throughout the state including substantial sums for Emery, Sanpete, and Sevier.
Abortion bills. These bring bigger headlines than their ability to impact the law which has largely been preempted at the national level. Even though the bills passed, we will have to continue to rely primarily on the moral fiber of the people. A personal reverence for life remains the only sure protection.
Cigarette tax. A proposed increase of $1.30 per pack went down to defeat in the Senate. If adopted, it was billed as producing some $30 million; that is if it didn't stimulate black market purchases in surrounding states. Frankly, this would not have gone very far to addressing the $450 million shortfall for fiscal year 2010.
Applied technology education. For the last several years there has been an ongoing debate about where best to fit Utah's applied technology schools. Under House Bill 15 they are now separated from Utah's higher education institutions and statutorily forbidden to even study the issue of students receiving college credit. This "gag-order" is out of character for any college and I personally consider it short-sighted.
I voted for the measure only because it was a compromise agreed to by both sides. I am grateful our students at Snow and the College of Eastern Utah have the broader options.