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SALT LAKE CITY — The Utah Legislature acted swiftly Tuesday to repeal the unpopular tax reform package it passed just last month in a special session, voting shortly after state elections officials reported that a citizens referendum reached the signature threshold to get the changes on the November ballot.
The House voted 70-1 for the repeal bill, HB185, with little debate. In the Senate, the vote was 27-0 after a lengthy explanation of what tax reform would have meant to Utahns and a few questions.
Gov. Gary Herbert signed the bill late Tuesday afternoon.
“I commend the many legislators and people of Utah who participated so fully in this process. I remain hopeful that working together we will be able to modernize our tax code and provide long-term stability to fund education, Medicaid, and other essential services,” Herbert said in a prepared statement.
“There were quite a lot of good things” in the tax reform package that reduced income taxes while raising sales taxes on food, gas and some services, House Majority Leader Francis Gibson, R-Mapleton, the sponsor of the repeal bill, told House members.
But Gibson, who served as the House chairman of the Legislature’s tax reform task force that came up with the package, acknowledged many Utahns did not agree. However, he also took a jab at what he said was a misperception that tax reform was rushed, saying he would fiercely defend the process.
“We will be back. It is inevitable,” Gibson said of the need to deal with the state’s lagging growth in sales tax revenues. “Let me be really clear. ... We do not have a money problem in the state of Utah. We have a distribution problem.”
The majority leader said he appreciated the referendum process, calling it “a check on what we do” when support is gathered “based on truth.” Gibson wrapped up his brief comments by labeling the tax reform package “the second-largest tax cut in the history of the state of Utah.”
Only one other lawmaker spoke on the repeal bill before a move was made to end debate in the House, Rep. Joel Briscoe, D-Salt Lake City, one of only two Democrats on the tax reform task force. Briscoe said he hopes lawmakers remember the people are sovereign.
The sole lawmaker in either chamber voting against repealing tax reform was Rep. Keven Stratton, R-Orem.
Stratton told KSL his vote was not a “swipe” at the referendum, but rather a call to “not throw in the towel.” He said lawmakers should consider at least portions of the tax reform package again this session, such as increasing the state income tax dependent exemption and removing income taxes on Social Security benefits.
Legislative leaders have made it clear they want to wait until the 2021 Legislature before tackling tax reform again.
Senators spent more time on the repeal bill, with Sen. Lyle Hillyard, the Senate chairman of the tax reform task force, first detailing what the bill would have done before referring to “a lot of fervor and uproar” that emerged from the public.
He said repealing the action will give everyone the chance to answer a simple question: “What would you do? It’s easy to criticize what we chose to do.” Hillyard said the state continues to face what he termed a crisis in the state’s general fund, which largely depends on sales tax revenues.
Senate Minority Whip Luz Escamilla, D-Salt Lake City, asked whether it was clear whether the referendum would still be on the ballot in November if the repeal goes forward. Senate President Stuart Adams, R-Layton, said while that was probably a moot point, it could be raised.
State Elections Director Justin Lee has said the law is not clear about what happens when a law is repealed at this point in the referendum process. He said the lieutenant governor’s office, which oversees elections, is asking lawmakers to spell out what’s next.
“If the law is repealed there is nothing to refer to the people, but we’ll see if the Legislature provides any additional clarity,” Lee said. In the meantime, he said the office intends to continue updating the verification totals through the county clerk’s Feb. 4 deadline.
Salt Lake County Clerk Sherrie Swensen said she plans to keep verifying signatures until the county total reaches the needed threshold there, likely no later than Thursday. Swensen said because referendum supporters turned in some 40,000 more signatures than needed, it wouldn’t be fiscally responsible to verify them all.
“I know there’s a lot of people out there that wanted us to continue and count all of them. But honestly, it’s very laborious. It would take a lot of county resources to do that,” she said. “I applaud them for their work and for their organizational efforts and everything they did. ... I hope they’ll be satisfied with that.”
A total of 117,154 verified referendum signatures was posted to vote.utah.gov as of 7:40 a.m., more than the nearly 116,000 required. By 5 p.m., the total was up to 130,470. Former Republican lawmaker Fred Cox, who organized the referendum, said more than 152,000 signatures were turned in to county clerks by the Jan. 21 deadline.
Cox said Tuesday he feels “pretty good” about reaching the signature requirement.
“Hopefully, the Legislature is listening,” Cox said. But he raised concerns about House Speaker Brad Wilson, R-Kaysville, telling representatives Monday that “legislation by referendum, while part of the political process, can be divisive, and many times, be short of facts,” as well as comments made by Gibson.
“For them to somehow minimize that or think that the people don’t understand, I don’t think they understand the problems with the bill,” Cox said.
The tax reform package approved in December was subject to a referendum because it failed to get at least a two-thirds majority in the House and Senate. Republican legislative leaders, along with the governor, announced last Thursday that tax reform would be repealed.
House Democrats got an update on the impact of tax reform in their first caucus of the session midday Tuesday.
“We’re back to where we started,” legislative fiscal analyst Jonathan Ball told the minority party members. He said while the repeal of tax reform meant a little extra work, it was not as confusing as dealing with the impact of the referendum on the budgeting process.
Not only would lawmakers have had to wait until November to know whether tax reform was repealed or retained by voters, some parts of the law would have taken effect for about a month because of a new provision in the referendum law giving signers additional time to remove their names.
But Ball said lawmakers are fast approaching the point where there won’t be enough growth in sales tax revenues to keep up with general fund needs. Utah is the only state that constitutional earmarks all income taxes for education, meaning the rest of the budget is largely funded through sales taxes.
Long-term structural issues, Ball said, “will force you to make some hard choices.”
Some revenues have already been allocated, including to pay for growth in Utah schools. Ball said for the budget year beginning July 1, a shortfall in sales tax revenues means there will only be $80 million in the general fund left to spend compared to about $300 million available in the education fund.
Just three proposed expenditures would use up all of that money, he said, covering anticipated growth in traditional Medicaid, giving state workers a 2.5% pay increase and restoring a budget cut made last year in the state’s tourism marketing performance fund.
“Those three alone and you’re done on the general fund side. That’s without housing. That’s without air quality. That’s without youth aging out of custody. That’s without mental health services. That’s without substance abuse services,” Ball said. “That’s where the hard decisions start to come into play.”
Contributing: Katie McKellar, KSL