Controversial Tax Bill Changes How Education Funding Is Handled

Dec 20, 2019

Credit Utah State

Governor Gary Herbert signed a controversial tax reform bill Thursday that changes the state’s tax code and cuts overall taxes by about $160 million. Utah sales taxes will go up, and the state income tax rate, which, by state constitution, funds education, will go down.

About $4.5 billion in income tax revenues annually are constitutionally allocated to public and higher education in Utah.

The Utah legislature is proposing a new section in the state constitution meant to assure educators that public school funding is protected for the future, even though lawmakers hope to remove the current constitutional requirement that income tax revenues fund public education. Park City School District Business Administrator Todd Hauber says it’s too early to say if it’s better or worse for public education.

“I think that’s the question that's being proposed by USBA leadership. They’re actually wanting the presentations like we had on Tuesday night to talk about this proposed language for the constitution. And in your judgment, board members, do you think this is a superior or a better constitutional provision than what we have currently? Or are we better off with current language?”

Utah constitutional amendments can be proposed by either the House of Representatives or the Senate. They require a two-thirds vote in the legislature, followed by a majority approval by Utah voters at the ballot box.

While Utah’s general fund ran a deficit of $50 million last year, the state carried a surplus of $120 million from income tax revenues. Because income tax revenues are constitutionally restricted to funding public and higher education, the surplus could not be used to pay down the deficit in the general fund. Hauber says the recent bill is meant to solve a short-term deficit problem for the state.

“That’s what it was intended to do. Fix that problem immediately and you move forward and there still is money for growth costs in public education. There's money available for growth needs on the general fund side as well for the state. So, it's in its first step takes care of the worst of the problems. It just doesn't really put a great foundation in place moving forward and that's that debate that needs to happen during the session.”

Hauber says public education isn’t worse off as a result of the governor signing the tax reform bill.

“There is still revenue coming. The income tax reduction didn't take away all of the increase in income tax. There is still money available. So, it feels like any other year where we would have gone in and talked about the needs of public education. We're talking about 200 - 250 million in additional dollars that could have been appropriated as opposed to something that might have been closer to four or 500 million. But it doesn't leave public ed flapping in the wind.”

Hauber will follow the tax reform issue through the 2020 legislative session.

Below is the  letter outlining the proposed constitutional changes to public education funding.  Article XIII, Section 5, Subsection 5, of the Utah Constitution currently reads:

“All revenue from taxes on intangible property or from a tax on income shall be used to support the systems of public education and higher education as defined in Article X, Section 2.”

This language creates a dedicated source for our funding, but does not guarantee an appropriation of those dedicated funds.

Constitutional attorneys, who have extensive experience with the Utah Constitution, have suggested that the following could be inserted as a new Section 6, in Article X of the Utah Constitution:

“In order to ensure that funding for public education grows annually to protect the needs of Utah’s children, and notwithstanding any other provision of this Article X, the Legislature shall appropriate for the support of the State’s public education system, as defined in the first sentence of Article X, section 2 of this constitution, for each fiscal year an amount from all state sources that is not less than the amount appropriated for public education in the prior fiscal year, adjusted for inflation by the United State Consumer Price Index for the current fiscal year, plus enrollment growth.”

This language would create a guaranteed annual appropriation for public education.

We invite you to carefully review this new language. Please understand that this language would establish a rising and compounding baseline of funding and that other appropriations of funds could still be made above the constitutional requirement.

It is likely that USBA will reconvene the Delegate Assembly prior to the 2020 General Session of the Legislature.  The question before that Delegate Assembly will be:

Is a constitutionally guaranteed annual appropriation, as set out in the new language, superior to the constitutional dedication of a revenue source as defined in the current language?

Please take every opportunity to discuss this question with other school board members and stakeholders. The superintendents will discuss this on Monday, December 2nd so feel free to ask them questions. This language will also be discussed at the next USBA board of directors meeting on December 13th. There will also be opportunities for questions and discussions on this matter at our annual conference in January.  Please note, USBA will not change its position on the Utah Constitution without direction from our Delegate Assembly.

We appreciate your engagement and input in this weighty matter.  We appreciate all that you do in the interest of students, your communities, and the future of our state.

Sincerely,

USBA Leadership

Rick Ainge, President - McKay Jensen, President-Elect

Amber Shill, Vice-President - Mary Nielson, Past-President

Richard Stowell, Executive Director - Terry Shoemaker, Associate Executive Director