Salt Lake City, UT—September 24, 2008—As part of the ongoing mission of Sutherland Institute to help make Utah an example of good government, the Institute has submitted the following recommendations to the Executive Appropriations Committee as they prepare for a special legislative session on Thursday to address the projected $272 million budget shortfall.
Sutherland recommends a reduction in spending of $274.5 million.
Limited government is good government. As a result, Sutherland believes decreases in government spending should be the primary avenue to deal with the budget deficit, and that tax increases and the issuance of debt should be avoided if possible.
1. In concurrence with the Governor Jon Huntsman, Jr., Sutherland recommends a three percent “across-the-board” reduction in the fiscal year 2008-09 budget, while holding public education harmless. The three percent cut would cover approximately 57 percent, or $156 million, of the $272.4 million shortfall.
2. Sutherland recommends an additional 4.85 percent reduction in capital projects. The State Legislature should direct capital project managers to discern between needs and wants. This suggestion is not only prudent, but should result in significant savings: an additional $52.3 million.
3. Sutherland recommends that the State Legislature require agency directors to also reduce their administrative budgets by 4.85 percent.
4. Sutherland recommends reducing funding for several programs. Some of these reductions could simply be delays of funding going to programs that do not constitute critical needs in the current fiscal situation:
• $25 million in general fund revenues to help fund the new Utah Museum of Natural History building at the University of Utah. While construction of the museum has already begun, it will not open until 2011. Perhaps this one-time appropriation could be broken into three smaller appropriations over the life of the construction project, saving the state $16.7 million in the current fiscal year.
• $11.3 million appropriated for three transportation studies and a storage facility, as well as $2.5 million appropriated for USTAR’s research and commericalization efforts—investments that may be wiser when the state has more funds available for non-essential projects.
• $12.5 million in general-fund revenues appropriated to help promote tourism in the state and to provide incentives for motion-picture studios. Given the current national economic downturn, it is unlikely that investment in tourism marketing will result in large returns.
These additional sources of funding represent $43 million of potential savings to the state, and do not exhaust the possible sources of non-essential funding that could be removed from the FY 2008-09 budget.
Sutherland does NOT recommend raising taxes; using education set-aside funds or rainy-day funds, as these will likely be needed during future fiscal years; or, using bonds for transportation and capital projects to cover a large portion of the deficit. In this case, bonding is comparable to a family going to the bank for a loan in order to pay their monthly bills. The more prudent choice is to first reduce spending before agreeing to such long-term financial obligations. The state treasurer’s office has estimated that for a 15-year, $150 million bond with level amortization and a 4.25% interest rate, the state would end up paying $56 million (27 percent of the total expense) in interest over the life of the bond.