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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 continuing to fund those expenses when the upcoming budget year ends on June 30, 2020. By then, lawmakers hope to have passed a fix to the structural imbalance in the budget.
Also included in the agreement is $75 million for a future tax cut.
The announcement by House Speaker Brad Wilson, R-Kaysville, and Senate President Stuart Adams, R-Layton, ends the divide over a House plan to withhold $400 million of the $19 billion budget until tax reform is passed in a special session.
It comes as lawmakers are wrapping up their 45-day session that ends at midnight Thursday.
"Every line item is funded," Adams told KSL, 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 a new task force works to create a new tax reform plan that could include restoring the full sales tax on food.
Adams said increasing the state sales tax on food from 1.75 percent to 4.7 percent would raise some $227 million in new revenues to bolster the lagging growth in sales taxes compared to income tax revenues.
He 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 will have to consider long-term solutions like expanding the sales tax base.
House Majority Whip Mike Schultz, R-Hooper, received permission Tuesday morning to open a bill file "to create a task force to study and come up with recommendations to fix our budget and tax structure problem."
House and Senate Republicans each held closed-door meetings midday and in the afternoon to talk about resolving the budget situation. Afterward, Schultz said "all options are on the table," including looking at putting the sales tax back on food.
"To ask if House leadership is supportive of that, we really haven’t even had those types of discussions at this point," the House majority whip said." But I think that’s one of the things that will probably be looked at in the task force."
Schultz spent much of the morning shuttling between the House and Senate with a handful of spreadsheets. The House and Senate have been divided over a plan from Wilson to withhold $400 million from the budget.
The House speaker announced the plan to the House Republican caucus on Friday, the day after he, along with Gov. Gary Herbert and the senate president, pulled the plug on the House tax reform bill, HB441.
The bill would have expanded the state sales tax base to include services, as well as lowered sales and income tax rates to address the growing 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 has sparked 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 tax while 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."
