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SALT LAKE CITY — Restoring the sales tax on food is being quietly pushed as an option to ensure there's enough money to fund growth in public education this legislative session.
Lawmakers are scheduled Tuesday to receive new state revenue estimates that will be used to finalize the budget for the fiscal year that begins July 1.
But there's concern that there might not be enough money available to cover the $75 million cost of new students expected to enroll in Utah schools.
That's especially since lawmakers are under pressure to restore most, if not all, of the 7 percent cuts they've made to state agencies in their preliminary base budget.
All of us are sensitive to taxpayers and tax loads. But I think we're all sensitive about maintaining excellence in our educational institutions.
–Rep. Kay McIff
Lawmakers are already planning on $215 million in additional revenues in the new budget year, the first sign of an economic upswing in years.
Those watching the budget closely, however, say that's only about half of what's needed to restore the cuts and fund growth in public education and other programs.
The state may end up with another $50 million to $100 million anticipated in revenue growth in the next budget year, meaning something will have to give.
So even though no one wants to talk about tax hikes, there's some suggestion they may be willing to consider changes that will generate extra money, at least in the short term.
Putting the state sales tax back on food purchases is one of the options for additional revenue that legislative leaders say has any real chance of being considered.
There are at least three bills circulating to restore the state sales tax on food, now at 1.75 percent, and lower the general sales tax rate by the same amount — meaning the legislation would be revenue neutral.
Rep. Kay McIff, R-Richfield, is ready, however, to amend his bill, HB282, to delay the drop in the general sales tax rate for six months if money is needed to fund growth in public education.
"All of us are sensitive to taxpayers and tax loads," McIff said. "But I think we're all sensitive about maintaining excellence in our educational institutions."
He said waiting six months to lower the general sales tax rate by about .28 percent — the amount needed to offset the increase on food — would collect an additional $75 million.
McIff has tried for several years to get the sales tax back on food, arguing that it would add stability and simplicity to the tax base. Using the change to raise revenue temporarily may well attract new interest.
His first choice for coming up with funds for school growth, though, isn't his bill. He'd rather see lawmakers adopt a proposal included in Gov. Gary Herbert's $11.9 billion budget.
That proposal, to make self-employed Utahns pay their income taxes on a quarterly rather than annual basis, would result in an additional one-time collection of $130 million next budget year.
It's barely been acknowledged by lawmakers, who say the change would hurt small businesses already struggling to overcome the effects of the economic downturn.
The governor, though, believes it will get a second look.
"I think it's got some momentum up there," Herbert said. "You've got to look at your set of options and say which one is the least onerous."
Putting the sales tax back on food is also something he'd like to see considered, even though he served as lieutenant governor under former Gov. Jon Huntsman, Jr., the driving force behind removing it.
"That went contrary to my belief in good tax policy, that of broadening the base and lowering the rate," Herbert said. "But I'm a team player. I understand how the system works."
The state sales tax on food was reduced to 1.75 percent over the 2006 and 2007 legislative sessions, less than half the current 4.7 percent rate on other purchases.
Now that Herbert is governor, though, he's willing to take another look.
"I'm not advocating that but I certainly will entertain and look at other proposals that are out there," he said. "If, in fact, it's broadening the base and lowering the rate, which gives tax savings to everybody across the state, I would take a hard look and consider that."
Legislative leaders say McIff's plan to raise the sales tax on food is starting to be discussed, along with the governor's quarterly income tax payment proposal.
Both may become more appealing if Tuesday's numbers fall short. Still, GOP legislators have taken a firm stand against tax increases this session.
House Majority Whip Greg Hughes, R-Draper, said lawmakers are running out of places to look for money after several tough economic years. Last session, they even went so far as to raise tobacco taxes.
"When do you want to whet people's appetites with a funding source? I still think there is a lot of resistance," Hughes said. "I think we'll be careful not to raise taxes this year."
The other option for lawmakers, though, may be just as tough — giving up their effort to fix the so-called $315 million structural imbalance in the budget, resulting from an end to federal stimulus funds and other one-time monies.
The governor has insisted continued economic growth will take care of the problem over the next year or two. Republicans in the Legislature, though, want to eliminate all of it this session and so came up with the plan to cut 7 percent from the budget.
Herbert said it's still too soon to suggest which way lawmakers will go.
"As they put this budget together, they're going to say, 'as we skin this cat, which one is going to keep this cat alive," the governor said. "Is the cat going to be able to limp along or be dead?"
E-mail: lisa@desnews.com
