Will Utah remove food sales tax, constitutional earmark for education?

SALT LAKE CITY — Utah's Republican legislative leaders are moving forward with what's been a yearslong conversation over whether to remove the state's portion of the sales tax on food.

But there's a catch.

That would be contingent on removing the decades-old constitutional earmark that reserves income tax for public education.

Utah lawmakers are slated to consider HB101, a bill that would remove the state's portion of sales tax on food, contingent on removing the constitutional earmark for income tax revenue, as laid out in SJR10. It's scheduled to be heard in the House Revenue and Taxation Committee on Tuesday at 8 a.m., legislative leaders announced Friday.

"Utah is the only state in the nation that has these types of budget constraints," House Majority Leader Mike Schultz, R-Hooper, said in a statement. "We can't remove the sales tax on food and continue to efficiently balance the state budget. I'm excited to give citizens the opportunity to make the final decision at the ballot box next November."

If the Republican-controlled Legislature passes SJR10, Utah voters will decide whether to approve the constitutional amendment to remove the education earmark during the 2024 general election. If lawmakers also approve HB101 — and voters approve the constitutional amendment — it will eliminate the sales tax on food, resulting in a $200 million total tax cut.

The removal of the state's portion of sales tax on food would not take effect if voters opt against removing the education earmark.

"What I've always said is this is what we're going to have to do. We can't take the sales tax off food without taking the earmark off the (state) constitution. That would not be fiscally responsible, OK?" Senate Majority Whip Ann Millner, R-Ogden, told reporters.

"But I think our preference is to make this a win for the flexibility of the Legislature and a win for the education community, and then we're going to really let the voters decide, because this is a constitutional change."

For years, Republican legislative leaders have advocated for loosening the constitutional earmark, arguing it's needed to fix what they've called a "structural imbalance" between sales tax and income tax revenue in the budget. It's something House Speaker Brad Wilson, R-Kaysville, proposed during last year's session amid the debate over whether to end the sales tax on food.

That proposal was put on hold last year, but Millner told reporters Thursday that legislation will likely surface before the end of the 2023 general session to propose a constitutional amendment to remove that earmark.

That resolution, SJR10, was unveiled Friday.

"Education has and will continue to be a priority in our state," Millner said in a prepared statement.

"Over the last few years, we have made historic investments in education, showing our commitment to Utah students and the education community," she added. "Under the current budget structure, sales tax on food helps to fund all state needs, including Medicaid, homeless programs, public safety, courts, parks, etc. To continue funding these needed programs without the sales tax on food, we will need to restructure the budget."

Millner has said she's been engaged in negotiations with education stakeholders, who have adamantly opposed removing the constitutional earmark for education funding.

No compromise has been reached yet as GOP legislative leaders made their announcement.

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Several community groups rallied with a pair of legislators in support of ending the state tax on food.

"It's a work in progress. I'm still working with the education community," Millner told reporters, leaving the door open to changes as negotiations continue. The legislation was unveiled Friday, she said, because "we're very late in the session" and "we had to get these bills moving."

Millner said she's told the education community, "We still want to work with you ... We're going to keep talking and see if we can find the right balance."

Renée Pinkney, president of the Utah Education Association, told the Deseret News the UEA remains opposed and concerned about the effort to remove the constitutional earmark.

"To just remove it all together ... that is unacceptable in this current form," Pinkney said. "UEA and other public education stakeholders have been in conversations in an effort to try and strengthen the constitutional mandate and get acceptable guarantees in terms of fully funding public education, but we aren't there yet."

Pinkney said public education stakeholders remain "hopeful that there can be some kind of a guarantee, an absolute guarantee. We want to see growth in education funding."

Sen. Kathleen Riebe, D-Cottonwood Heights, who is also an educator, said in her talks with teachers, they're feeling the proposal is "a bait and switch." While the Legislature has committed notable amounts of money toward teachers and education, especially over the last several years, it's also "been a tough year" for teachers and "they feel a little hurt."

Early this session, Republican legislators prioritized a "school choice" bill tied with a $6,000 compensation boost for educators.

"When we start thinking about making all these changes in education, a lot of them just feel a little unsteady about this," Riebe said. Superintendents are also feeling "a little nervous."

In 2020, 54% of Utahns voted for Amendment G, which allows income tax to also be used for services for children and those with disabilities.

HB357, companion legislation to the resolution that placed the proposed 2020 constitutional amendment on the ballot, statutorily requires legislators to fund enrollment growth and inflation and provides a safety net to protect education funding during an economic downturn and other unforeseen circumstances. Pinkney said "we'd like to see that continue, obviously."

However, "right now that constitutional mandate is pretty clear," she said. "And for that to simply go away and have, you know, one bank account, if you will, that is at the discretion of the Legislature as to how it's spent without having a constitutional mandate."

Utah ranks 50th in the nation in terms of per-pupil spending, Pinkney noted. "Clearly, we have never had a fully funded public education system," she said.

"We are fighting for the promise of public education," Pinkney said. "We need to make sure that our schools are fully funded."

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