There is no need for a 19% budget reduction

The Utah Legislature is poised to cut FY 2010 (July 1, 2009 – June 30, 2010) budgets at unprecedented levels on January 26 when they reconvene in general session. Legislative leadership and fiscal analysts have told state agencies (including all colleges and universities) to prepare for a 15% budget reduction, which is in addition to the 4% already cut in special session last September. The combined cut for next year is approximately 19%. These budget cuts are proposed for most areas of state government including colleges and universities, prisons, services for the poor and mentally ill, state parks, courts, economic development and etc.

I understand the current economic realities in this recession. However, a decision to cut higher education and other essential services by 19% is completely unnecessary. It is a choice that will lead to layoffs of thousands of public employees in Utah, which further hurts the economy. It is also a choice to reduce access to quality education programs. A good education helps people raise their income and builds the economy more than any other single thing. Of the alternatives to the 19% budget cut, let me illustrate two options, either of which would minimize the massive budget cuts proposed, and preserve quality programs for our citizens.

1. Rainy Day Fund. Like many families and businesses in Utah, the state has a savings account, called the rainy day fund, to help us get through tough times. Prior to the terrorist attacks on September 11, 2001 the Legislature had built up the rainy day fund to $120 million. In the aftermath of the attacks, the legislature spent the fund down to below $30 million in order to moderate the impact of the revenue shortfalls that came with the economic downturn after 9/11. Since 2003 the fund has been built back up to approximately $400 million yet the Legislature is reluctant to use it. The fund was designed to grow during good times and be used during hard times; up and down, to moderate fluctuations in the economy and state revenues. As we approach the bottom of this economic cycle we should be using the rainy day fund as it was intended—to soften the blow of the present economic downturn.

2. Transportation Funds. When I was serving in the Legislature we put a considerable amount of money into road construction. Huge transportation funds and revenue streams were built up and massive projects undertaken, all good. But every time legislators proposed increasing fund balances and revenue streams for roads, they told us the money would serve two separate purposes: first, to build necessary roads, and second, in the event of an economic decline, as a second rainy day fund. And they pointed to the successes in 2001 and 2002 when transportation funds were pulled from roads to moderate the impact of declining state revenues in the aftermath of 9/11. Unfortunately, while we see significant declining revenues this year, there appears to be great resistance to using the funds as promised—to moderate the impact of declining state revenues.

The projected state budget shortfall for FY 2010 is $450 million; it is likely to continue to grow a bit before the economy hits bottom. Using the rainy day fund and delaying or bonding road construction projects could reduce or completely eliminate the current budget shortfall. I would suggest bonding for construction projects because the cost of construction is low right now and construction projects put people to work and help pick up the economy.