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State revenue estimate drops by $36M due to tax increases, budget cuts

By Dennis Romboy and Lisa Riley Roche, | Posted - Feb 25th, 2013 @ 11:39am



SALT LAKE CITY — New revenue estimates for the state are all headed down, the Legislature's budget chairman announced Monday, dropping from $300 million to $264 million.

The numbers dipped from previous forecasts, due to tax increases and expected budget cuts from Washington, D.C., but also reflect Utah’s healthy economic environment, legislative budget leaders said.

"Notice how many are bracketed. That means they're all reductions," House Budget Chairman Mel Brown, R-Coalville, told representatives as they examined a sheet with the numbers agreed to by both lawmakers and Gov. Gary Herbert.

State revenues dropped in all areas but one-time funds for education, said Senate Budget Chairman Lyle Hillyard, R-Logan.

The estimate for one-time revenue went up $40 million to $161 million, most of which goes to the state's public education fund. General fund revenues dropped $9 million from the previous revenue forecast, while public education funds increased $49 million.

"I don't know if there's been a more difficult year than this year in putting together the figures," Hillyard said.

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The economy, impacted by the ongoing stalemate in Washington over the federal budget, is showing "downward trends," Brown said. He said the new revenue estimates take into account the automatic cuts in the federal budget set to take effect Friday. 

Those federal spending cuts, known as sequestration, will slash about $40 million directly from the state budget, Brown said.

There are also likely to be hits to income and sales tax collections as a result of civilian personnel at Hill Air Force Base and other military installations being placed on unpaid furloughs. 

Lawmakers, Hillyard said, have not planned any money to plug holes created by sequestration.

"We will be watching the figures very closely," he said.

Herbert blamed Washington for having a "chilling effect" on Utah's economic recovery.

"We would be seeing even greater growth were it not for the backdrop of federal uncertainty and a fragile national economic recovery," the governor said in a prepared statement. "It's good news that the state economy is largely resilient, but we are not immune to national economic dynamics."

Despite federal uncertainty, Herbert said, education remains his top budget priority.

Legislative leaders weren't expecting to be surprised by the new revenue estimates. The $300 million in revenue growth forecast last fall was already anticipated to drop by about $100 million, thanks to Congress' decision on New Year's Day to raise taxes on the wealthy to avoid the so-called fiscal cliff. 

House Speaker Becky Lockhart, R-Provo, said Friday that lawmakers need about $200 million just "to maintain the budget as it is today" by funding increases in enrollment in public schools, Medicaid and other areas of the budget.

“We can now build a budget,” said Senate President Wayne Niederhauser, R-Sandy.

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