August Legislative Interim Summary

Business, Economic Development, & Labor Appropriations Subcommittee

Utah’s 5.1% unemployment rate is the second lowest in the nation, but the state still has 71,000 fewer jobs than it did in February, when the unemployment rate was at its lowest, Andrea Wilko, PhD, told the Legislature’s Business, Economic Development and Labor Appropriations Subcommittee on Aug. 17.

Wilko, chief economist in the Legislative Fiscal Analysts’ Office, said new unemployment claims have fallen by 28% in the past two weeks. Before the pandemic, Utah had an unemployment rate of about 3% and the goal is to return to that rate within the year.

Wilko also discussed tax revenue, telling lawmakers that both income taxes, which feed the Education Fund, and sales taxes, which feed the General Fund, are projected to meet their revenue estimate goals for FY21.

Extra unemployment benefits and other federal stimulus payments, as well as online sales tax revenue that has increased during the pandemic, likely bolstered sales tax revenue. She warned that sales tax collections could experience volatility as the year goes on if the pandemic worsens or if economic shutdowns occur.  Additionally, the extra $600 weekly unemployment benefit expired on July 31, and the uncertainty of further federal stimulus actions may affect FY21 sales tax collections.

However, as of now, revenue projections coupled with legislative budget cuts are keeping the General Fund stable.

Infrastructure & General Government Appropriations Subcommittee

The director of the Department of Administrative Services on Aug. 17 thanked members of the Infrastructure & General Government Appropriations Subcommittee for allowing the agencies to decide how best to implement budget cuts imposed during a legislative special session.

Tani Pack Downing told lawmakers agencies are grateful that the cuts did not require them to terminate any employees, but, “all of the agencies felt the impact of the removal of the cost-of-living adjustment (COLA) and the pain of the pandemic,” she said.

These actions meant agencies were unable to use incentive awards and salary increases to retain high-performing employees. “Growing compensation imbalances have caused high turnover and near impossible recruiting options,” she said, creating challenges in recruiting and retaining qualified employees.

Retirement & Independent Entities Interim Subcommittee

Dan Anderson of Utah Retirement Systems (URS), had mixed news for the Retirement & Independent Entities Subcommittee when he presented to the group on Aug. 14.

“The good news is that the calculated actuarial rate is basically the same as it was, which means that we are not worried about the actual retirement funds,” Anderson said. “However, the bad news is that [URS] will likely not reach the 6.95% return on investment”.

While a lower rate of return raises some concern, Anderson reminded lawmakers that URS sets its return on investment lower than the national average each year in case there is a period of market volatility. Experts predict that returns on investment will only be about 1.5% lower, which “is not great, but not as bad as it could be thanks to the smart investing of URS and the fiscal guidance of the Legislature,” he said.

Sen. Gene Davis, D-South Salt Lake, asked about the status of URS’s unfunded liability and questioned whether the pandemic has slowed the time it will take for URS to reach fully funded status. Anderson explained that any decrease in return on investment will ultimately delay the achievement of full funding. However, Utah is still about a decade away the date it targeted to reach full funding.

Dee Larsen of URS told lawmakers it would cost the state $20 million to move all public safety officers and firefighters under the Tier 1 retirement system, a goal discussed during previous meetings.  Over 15 years, the cost would exceed $677 million, he said.

“We would prefer that everyone be treated the same retirement-wise, but it does pose significant cost to make the playing field entirely equal, said Sen. Wayne Harper, R-Taylorsville”

Larsen added that employees also would be affected because they also would pay more toward Tier 1 retirement.

Davis suggested that the issue should be addressed at a future meeting with all stakeholders, and colleagues agreed.

Social Services Appropriations Subcommittee

Before the COVID-19 pandemic began, 20% of Department of Health (DOH) employees had been approved for telework through a pilot program, officials told the Social Services Appropriations Subcommittee on Aug. 17. However, , 80% of DOH employees switched to telework as a result of the pandemic.

A preliminary survey of employees showed that 52% of employees expressed interest in continuing to telework after the state moves to the “green” risk phase, but executive management believes that up to 70% of employees may continue to telework even after some return to the office.

The telework savings analysis showed that there is potential for cost saving with the implementation of teleworking on a larger scale indefinitely. Quantifying the savings at this stage of the process is difficult due to all of the one-time costs associated with a large conversion of employees to teleworking. It is anticipated that the greatest cost savings from teleworking would be from the reduction of leased building space.

For the Department of Workforce Services (DWS), 344 employees, or 17% of the department’s full-time equivalent workforce, were working remotely on a regular basis before March 12. Since then, the department has been able to temporarily expand routine telework opportunities to approximately 1,059 additional employees.  This action was taken to safeguard the health and well‐being of the workforce and to support Gov. Gary Herbert’s directive “to enable employees to work from home as a first option.”

The total number of employees currently working remotely represents approximately 69% of the department’s full‐time equivalent workforce. The department is still evaluating the extent to which these teleworking opportunities will become permanent after the pandemic and they anticipate the estimate will change over time.

DWS also found the potential for ongoing savings by permanently vacating facility space; however, the savings will be offset by related one‐time and ongoing expenses including remodeling, relocation expenses, internet and phone reimbursement for employees who work remotely, and information security costs.