SALT LAKE CITY — Utah legislative leaders received a largely positive prognosis Tuesday for the state’s financial health amid the ongoing COVID-19 pandemic but were warned a second wave of the deadly virus “could throw the economy into a tailspin.”
The Executive Appropriations Committee, made up of state House and Senate leaders from both parties, also heard they’ll need to come up with another $28 million for what’s likely to be Utah’s worst-ever wildfire season on top of the $12 million already budgeted.
After multiple special sessions since the 2020 Legislature ended in March, just as the novel coronavirus outbreak hit the United States, Utah lawmakers have managed to balance the state budget and see a rebound in employment and revenues.
“Utah is doing very well” on a national ranking of economic well-being, racking up the fourth highest increases in key employment indicators from May through July, Andrea Wilko, the legislative fiscal analyst office’s chief economist, told the committee.
The Federal Reserve Bank of Philadelphia index showed Utah jumped 17.3% in the combination of wages, nonfarm payroll jobs, hours worked in manufacturing and unemployment. Utah’s 4.5% unemployment rate is currently the nation’s lowest, Wilko said.
“It’s still above where it was but we’re actually making progress,” she said, predicting the state won’t return to pre-pandemic levels before the end of the year despite seeing a decline in job losses from 7.3% in April to 1.8% in July, a loss of some 27,500 jobs compared to the same month in 2019.
New weekly claims for unemployment benefits have also dropped, to just over 4,500 from a peak in April of more than 33,000, Wilko said. There were a total of 127,532 Utahns seeking benefits in April, a number that’s down to less than 55,000, but compared to the historic baseline of 8,856 claims, “we still have a ways to go,” she said.
Hardest hit has been the leisure and hospitality industries, falling 19% with a loss of 30,000 jobs, according to her presentation, but construction is doing better than any other sector, rising 7% with the addition of nearly 8,000 new positions.
Construction is “a bright spot” in the economy, Wilko said, with median home prices increasing about 8.6% from 2019. Through June, there have been 13,792 housing construction permits in Utah, the highest number on record, she said.
Utahns are continuing to spend, with taxable sales remaining strong overall compared to last year. There are, however, decreases in tax collections at gas stations, hotels and restaurants as well as for arts, entertainment and recreation as many people are staying put during the health crisis.
But Utahns are buying, including furniture, building supplies, garden equipment and sporting goods, and shopping online. Motor vehicle sales “have shown some significant growth lately,” Wilko said, up more than 25% in both May and June and 13% in July after a 19% decline in March.
Senate Budget Chairman Jerry Stevenson, R-Layton, questioned whether the spending was driven by the $1,200 federal stimulus checks Americans received earlier this year, suggesting revenues could drop off once that money is gone.
Wilko said there could be a decline in sales tax revenues in the final quarter of the year as increased unemployment benefits — a recently expired $600 weekly boost followed by an additional $300 — end. Still, she said she expects revenues to be “positive enough” to end 2020 with some growth.
The best-case scenario for the state, she said, is a more rapid recovery for retail sales and job growth, accompanied by a steeper drop in continuing unemployment claims so “we could come out of this a little bit faster than we’re expecting.”
Still, there are downside risks to be considered, Wilko said, especially if the virus forces officials once again to shut down all but essential services. The number of Utah cases has been creeping back up as some businesses and schools reopen, despite calls for social distancing and wearing masks.
“This recession could continue to be sluggish,” she said, leading to persistent unemployment and less consumer spending, as well as “the possibility of a second wave of lockdowns, which could throw the economy into a tailspin.”
The committee took no action Tuesday on a report by State Forester Brian Cottam about the need for more wildfire-fighting funds. Cottam said the estimated cost of battling blazes to date has reached $36 million but is “growing daily” as several large fires continue to burn.
Already, there is a 50% increase in the number of wildfires over last year’s total, he said, the same number as occurred in 2018, which he described as arguably Utah’s worst fire season ever.
The state’s share of that amount is $20 million, he said, projecting that will increase to $25 million before fire season ends with an additional $3 million needed for post-fire rehabilitation. COVID-19 is adding to the cost as firefighters are using more air support, “hitting everything as hard and as fast as possible,” Cottam said.
The virus may also be to blame for humans causing a record 75% of this year’s fires because “COVID has pushed a lot of folks outdoors that otherwise might not have been out,” Cottam said, and don’t know what to do to avoid sparking a blaze. Usually, natural causes like lightning strikes start about half of all wildfires.
He said the $12 million in the state budget for wildfire suppression will pay for last season’s blazes and that it usually takes a year or so to settle the split in expenses with the federal government. The money he is seeking is for the current season.
“I apologize for the bad news,” he told the committee. “But this has been a tough year.”