Legislators Debate Funding Issues for Government Services

During the final week of the 2019 Legislature, House and Senate Republican leaders were at a stalemate regarding the budget.  The House proposed a scaled-back version, while the Senate wanted to pass a more robust budget, and neither side was willing to negotiate.

Because the tax reform bill broke down, the House pulled back all new funding requests and considered funding only current essential services.  Lawmakers tried to make the point that the current practice of replenishing the General Fund with retail sales tax was not sustainable. They wanted a tax on services added to enable the state to perform the functions of government.

By the end of the session, House and Senate Republican leaders agreed to fully fund the state budget and address the state’s revenue dilemma.  However, about $300 million of the approved funding is one-time money and next year some items may not be funded.

One of the most important items funded with ongoing money is a 2.5 percent “labor-market” increase for state employees. A labor-market adjustment is administered like a cost-of-living adjustment (COLA).  All employees, including those with longevity, will receive the increase. Legislators also funded the 4.3 percent health insurance premium increase. However, targeted compensation increases that aim to help salaries for some hard-to-fill positions achieve market parity were not funded this year.

Legislators can convert the one-time funding into ongoing funding if they choose to hold a special session to address the revenue issues.

“We are very frustrated by the tactic of holding hostage the need to increase services in order to change the tax structure and model,” said Todd Losser, executive director of the Utah Public Employees’ Association (UPEA).  “We thought we were going to end this legislative session in a stalemate, with the House and Senate refusing to back away from their positions about the budget.”

“This was unchartered territory as it rarely gets this acrimonious between the two bodies this late in the session,” he added. “These disagreements usually [occur] much earlier in the session.”

Over the past few years, Utah has transformed from a goods-based economy to a service-based economy. Due to this structural change, experts advise a re-examination of the current tax framework. Income from sales tax has declined and will continue to do so, leading to future budgetary issues. Due to this problem, a task force has been established to study this matter and determine the best course of action. For the time being, there are no changes to Utah’s tax structure, but UPEA anticipates adjustments to the current tax code and will keep members apprised of further developments.

If a special session is called, UPEA will continue its conversations with legislative leaders to make the case for public employee compensation.