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SALT LAKE CITY — The Our Schools Now initiative to raise both income and sales taxes to bring in some $700 million for education was filed Tuesday with the lieutenant governor's office, the first step to getting on the 2018 ballot.
"This is such an important issue the people in the state of Utah deserve a voice in the decision whether we should fund education more," Zions Bank President and CEO Scott Anderson said at a news conference at the state Capitol.
Anderson said he is convinced that voters "will overwhelmingly say yes" to the initiative, which would boost the state income tax rate from 5 percent to 5.5 percent and the state sales tax rate from 4.7 percent to 5.2 percent by 2021.
"Failing to significantly invest in education will jeopardize our state's economy, its vitality and the quality of life we enjoy here for generations," he said, because a strong workforce is necessary to stay competitive.
Finding more money for schools is "Utah's current economic challenge," said Anderson, a chairman of the initiative campaign along with Utah Jazz owner Gail Miller and retired Questar Chairman and CEO Ron Jibson.
Information provided by initiative supporters said the increase would mean a median household in Utah would see a $416 tax increase annually — $102 in additional sales taxes and $314 more in income taxes.
The money raised is estimated to be about $450 million from income taxes and $250 million from sales taxes. The bulk of the new revenue, 85 percent, would go to K-12 public schools, and 15 percent to higher education.
Nolan Karras, a former Utah House speaker and a member of the initiative's steering committee, said studies have shown tax changes over the past two decades reduced revenues for schools by $1.2 billion annually.
He said more than half of Utah students lack proficiency in basic subjects and the state's graduation rate trails the national average, but the state can't afford the solutions, including early intervention and additional resources for teachers.
Karras said funding increases have only kept up with inflation and enrollment growth, leaving Utah "still dead last in per-pupil spending, which we seem to wear as a badge of honor in this state. We seem to think that's a proud moment for us."
Utah Education Association President Heidi Matthews called the initiative "an essential first step toward assuring a permanent, long-term funding solution for education in Utah."
Matthews, who was joined at the news conference by a number of teachers, said Our Schools Now is also an opportunity for Utahns "to give voice to their values. We Utahns hold education in high regard."
She said the recent salary increases for teachers approved by a number of school districts in the state "vividly demonstrates" that regard, as communities recognize the need to invest in classrooms and are willing to pay for it.
But not all school districts can afford to solve the current teacher shortage by raising starting pay to $40,000 or more, Matthews said, leaving disparities that the initiative can help address.
Originally, the initiative was proposed as a 7/8th of 1 percent increase in the income tax rate and would have generated $700 million a year. As reported last week, backers decided to scale that back and added a boost in sales taxes.
Anderson said after the news conference that initiative backers were encouraged by Gov. Gary Herbert and GOP legislative leaders to look at raising the sales tax instead because an income tax increase could hurt economic development.
The bank executive, however, said that's not been his experience.
"As I've visited with companies and individuals who are looking to move to Utah, none of them, especially the businesses, have said, 'We're not going to come because your income tax is too high,'" he said.
What they are worried about is that Utah schools aren't "turning out sufficiently trained people" for them to hire, Anderson said. "If the income tax is 5 ½ percent, that won't hurt economic development, so I'm willing to support it."
The governor said in a statement he appreciates the effort by Our Schools Now.
"We all agree that Utah’s students deserve a world class education. I will continue to support an expanded tax base for education by aggressively promoting economic growth and engaging in meaningful tax reform that closes outdated loopholes," he said.
But if attempts to expand the tax base fall short, Herbert said the initiative "preserves the option for Utah voters to choose to increase education funding via petition initiative."
Lawmakers tried unsuccessfully last session to put together a tax increase package that included restoring the sales tax on food in the hopes of halting the initiative. Anderson said he believes lawmakers are still serious about tax reform.
"We're tried to work with them so what we're doing compliments what they're doing and in the end, we end up with more money for education," Anderson said. He said Our Schools Now polling showed voters prefer raising both sales and income taxes.
Former Democratic state senator Pat Jones, also a member of the Our Schools Now steering committee, said voters have long made it clear they're willing to pay higher taxes if the additional revenue ends up in the classroom.
The Legislature should be paying attention, she said. "I think if they ignore it, it will be at their own peril. I really do. Because this is the No. 1 issue. … People realize we have to invest in our kids."
Several groups are lining up to oppose the initiative because it calls for a tax increase, including the Utah chapter of Americans for Prosperity, a group affiliated with the nationally influential billionaire Koch brothers.
State Director Evelyn Everton said the group will be mounting a campaign that could include TV commercials and telephone calls to urge Utahns not to support the initiative.
"I think that people are going to have a harder time giving that money to the government," Everton said, warning that a tax increase could drive away business and hurt the state's economy.
The Utah Taxpayers Association is also raising concerns about increasing taxes when the state is already putting billions of dollars a year into the public education system.
The Libertarian-leaning Libertas Institute's Michael Melendez said the state's "corporate elite" are relying on "the same worn-out, disproven tax hike Band-Aid" instead of coming up with a real change in education philosophy.
Tuesday's filing kicks off a lengthy process that starts with a review of the initiative's constitutionality and fiscal impact. Then, Our Schools Now backers will have to hold at least seven public hearings around the state.
They are expected to begin gathering voters' signatures on the initiative petitions in August. It will take more than 113,000 voter signatures from at least 26 of Utah's 29 state Senate districts to qualify for the November 2018 ballot.
Contributing: Ladd Egan