Utah lawmakers reach deal to resolve budget impasse

This article originally appeared in the Deseret News. Read it in its entirety here.

SALT LAKE CITY — The budget impasse between the House and the Senate is resolved, with Republican legislative leaders agreeing to provide only temporary funding for $320 million in government services.

What that means is there will be no committment to fund those services when the upcoming budget year ends on June 30, 2020. By then, lawmakers hope to have passed a fix to a structural imbalance in the budget.

Also included in the agreement is setting aside $75 million for a future tax cut. The deal comes as lawmakers are wrapping up their 45-day session that ends at midnight Thursday.

Recommendations for a hoped-for special session this summer to address the issue of lagging growth in the state’s sales tax revenues compared to income tax collections will come from a 20-member legislative task force.

The task force, led by House Majority Whip Mike Schultz, R-Hooper, and made up of both House and Senate members, is set to report to legislative leaders in June with a final report expected no later than August.

Among the options the task force will consider is restoring the full state sales tax on food as well as extending sales taxes to services, as a stalled House bill that sparked the split over the budget attempted to do.

An announcement Tuesday by House Speaker Brad Wilson, R-Kaysville, and Senate President Stuart Adams, R-Layton, ended the divide over a previous House GOP plan to withhold $400 million of the $19 billion budget until tax reform is passed.

Only an hour or so after the deal was announced, the House passed SB2, a massive budget bill that adds to the base budgets already approved earlier in the session, after making changes to reflect the sources of revenues for a number of programs.

House Democrats tried and failed to amend portions of the bill before it was approved 74-0. The Senate voted 26-0 to concur with the changes without debate and the bill now goes to Gov. Gary Herbert for his action.

The governor, who called for a $220 million cut in the sales tax rate while broadening the base to include services, was expected to meet Tuesday evening with legislative leaders about the budget resolution.

“Every line item is funded,” Adams told the Deseret News, referring to the budget agreed to last week by House and Senate Republican majority leaders. “Every dollar is being spent this year.”

The Senate president said the deal reached after days of negotiations puts some state spending “basically on probation,” while the task force works to create a new tax reform plan.

Senate and House leadership held a rushed press conference to announce their agreement.

“This year’s had some interesting twists and and turns,” Wilson said, but credited Adams for working in good faith to reach a resolution. Now, the speaker said, “we’re in a very good place.”

“We’ve had a few ups and downs,” Adams acknowledged, suggesting the shift from using ongoing revenues to one-time funds for some government services should be seen as “motivation” to finish tax reform.

The list of budget items impacted include $1 million for the Inland Port Authority, $500,000 for sexual assault kit processing, $1.3 million for Operation Rio Grande and $200,000 to expand tuition assistance for Utah National Guard soldiers

Earlier Tuesday, Senate Republicans said they’d been considering adding back the full state sales tax on food, boosting the rate from 1.75 percent to 4.7 percent to raise some $227 million in new revenues.

Adams said the increase should be combined with a grocery tax credit to help offset the impact on low-income Utahns, but would mean tourists as well as better-off Utahns would pay higher taxes when they shop for food.

“That should be something that’s on the table,” Senate Majority Whip Dan Hemmert, R-Orem, said. The money that would be brought in would equal what was expected from the stalled House tax reform bill extending sales taxes to services.

“It all depends on what you dislike more,” Hemmert said.

But both Adams and Hemmert said while taxing food at the full sales tax rate was a short-term fix, the new task force also will have to consider long-term solutions like expanding the sales tax base.

Schultz said “all options are on the table,” for the task force.

Wilson agreed that the task force “will look at all options,” and that if there’s interest in considering restoring the full sales tax on food, that is something “we can discuss and debate.”

Schultz spent much of the morning shuttling between the House and Senate with a handful of spreadsheets. Both House and Senate Republicans held closed-door caucuses midday and later in the afternoon about the budget.

The drama began Friday, when the House speaker announced his plan to withhold $400 million to the House Republican caucus. A dy earlier, Wilson, along with the governor and the senate president, pulled the plug on the House tax reform bill.

HB441 would have expanded the state sales tax base to include services, as well as lowered sales and income tax rates to address the escalating imbalance between revenue growth in sales and income taxes.

The House plan to hold money back despite an earlier agreement with Senate GOP leadership on a $19 billion budget fueled discussions about alternatives to taxing services.

Monday night, the Senate substituted a resolution so it would amend the Utah Constitution to allow income taxes to be used for social service needs in addition to education.

The Senate apparently considered also passing a bill restoring the sales tax on food, an issue that has long divided the House and Senate. The tax rate for food purchases was lowered as part of former Gov. Jon Huntsman Jr.’s tax reform efforts.

House Budget Chairman Brad Last, R-Hurricane, said adding back the full sales tax on food would still face a challenge in the House.

“Maybe the House members would go along with it if it were part of an entire strategy,” Last said. “To just plunk that down on the House and expect us to support that, I don’t know that that’s going to fly.”

The sponsor of this year’s tax reform effort, Rep. Tim Quinn, has long advocated taking sales tax off food. Last year, his bill removing the state food taxwhile raising the overall rate to 4.92 percent passed the House but failed in a Senate committee.

Quinn, R-Heber City, said then that, “when it involves food, to me it’s not an economic issue. It’s a moral issue.” He said Tuesday he would oppose any attempt to raise the tax on food.

“If the goal was just to bring in more sales tax revenue, we would just raise the rate,” Quinn said. “The goal is to bring more people into the sales tax base and lower the rate. This doesn’t bring anybody else into the base and it raises the rate.”

Advocates for the poor expressed outrage Tuesday that lawmakers would consider raising the food tax at all, let alone just before the end of the session.

Gina Cornia, executive director of Utahns Against Hunger, called it “really, really inappropriate” and a “sneaky move.”

“My initial thoughts are shame on them. There needs to be a full and open public discussion about raising the sales tax on food. It’s bad,” she said.

Crossroads Urban Center Executive Director Glenn Bailey called the prospect of raising the food tax “troubling.”

“We are very opposed to raising this tax. In fact, it would be nice if ‘tax reform’ included eliminating this unjust tax once and for all,” he said.

Both Bailey and Cornia said a grocery tax credit doesn’t make the idea any more palatable.

The tax already targets the most vulnerable and those who can least afford groceries. Many of them don’t earn enough money to file tax returns, they said.

Bailey said it doesn’t make any sense to raise the tax and then come up with a “convoluted” process to give money back to people.

“The food sales tax is a regressive tax,” said Chase Thomas, executive director of the Alliance for a Better Utah.

The state’s general fund should bolstered on the shoulders of the most in need, but that’s what would happen if this food sales tax passes, he said.

“The Legislature should stop trying to fix our budget issues by placing disproportionate burdens on low-income Utahns who are just trying to feed their families,” Thomas said.

This article originally appeared in the Deseret News. Read it in its entirety here.

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