CEU Weathers Latest Round Of Statewide Budget Reductions

By Sun Advocate

When the Utah Legislature met about budget cuts last week, all state agencies expected the worst.
But the final results could have been considerably worse for several state agencies, particularly for College of Eastern Utah.
CEU managed to weather the situation because of the unique situation the college has been placed in.
CEU’s enrollment is growing, but revenues in the state are down. It is the same scenario many of the public schools along the Wasatch Front are facing.
In addition, CEU has to pay back a deficit incurred by a prior administration. The factors are like a vise pushing sideways and down on the college.
“We are fortunate that state government, particularly those in higher education, understand our dilemma,” pointed out Brad King last Friday.
King currently occupies the District 69 seat in the Utah House of Representatives and serves as CEU’s vice president for institutional advancement-auxiliaries.
“The cuts that CEU would have to normally absorb after last week’s session are being absorbed by the rest of the higher educations institutions in the state,” continued the college vice president. “They agreed to do that as long as we paid $60,000 of our debt off during the next six months. That means some small adjustments to budgets, but nothing like it could have been had we had to absorb the cuts as well as pay on the shortfall.”
The total cuts approved last week amounted to about $73 million. The figure registered considerably higher than the $47.5 million recommended by the governor.
Utah lawmakers had originally proposed starting with an overall budget reduction of $102 million.
Even with the lower cuts, state agencies face substantial reductions to budgets and anticipate having to eliminate an estimated 220 positions to handle the lower funding levels.
Developing budgets for the state is a difficult process, particularly when revenues are down. And the state’s revenues are down significantly from what was projected.
Projections are important in state government.
The regular Utah Legislature approves the budget for the following year based on projections of what revenues will be for the state.
In the event the actual revenues fail to meet the projections, the lawmakers convene at a special session in the spring to adjust the budget based on real numbers.
That is the financial position the state currently faces. And if the economy doesn’t improve in the next six months, the picture could be much bleaker next January when Utah’s governing body meets during the 2003 regular legislative session.
But for now, the holes in the state’s financial boat have been plugged.
“We were able to use some one time money to plug some of the holes,” explained King. “But if things don’t get better by January, there will be few choices to solve the problems that we would have.”
The one time revenues King referred to involved a number of sources, particularly money received from the tobacco settlement reserves and from the road funds. However, the state certainly cannot continue to count on similar funds.
For the long-term, Utah lawmakers must develop permanent solutions to the problem, particularly if the economy doesn’t improve.
Most legislators realize that, if the financial situation fails to improve, Utah lawmakers will have to take drastic actions regarding the budget when they meet in January 2003.
Basically it boils down to three options. Cut state budgets even deeper, increase taxes or a combination of measures.
According to the results of an informal poll on the Sun Advocate’s website last week, readers who responded favored, by a large percentage, making more cuts over increasing taxes.
On Monday morning, the poll showed 46 percent of respondents wanted to see larger cuts in state budgets while only 22 percent felt that a tax increase was the answer. However, 32 percent felt that both options should be exercised to balance the budget.
“The problem is that many people don’t consider education a state agency. But in terms of both public and higher education they are,” pointed out King.
“In fact, even some education employees are surprised when they begin to think of themselves as state employees. Many do not consider themselves such, but they are,” continued the Utah representative and CEU vice president
For the most part, the large budget cuts that took place last year affected almost every agency in the state. Another reduction would ultimately cut much closer to the bone and the public could expect some major decreases in services or programs if it happens.
The second alternative, increasing taxes, could come in many ways.
When most people think of hikes, they usually think of state income tax increase. But there are other taxes that could be changed as well as loopholes that may be eliminated to increase revenues.
For instance, the gas tax could be increased so that the road funds could be more directly funded by user fees.
Right now, a great deal of the money for roads comes out of the state’s general fund rather than coming directly from the present motor fuel tax. Increasing the gas tax would ease some of the financial burden faced by the state.
Another example of a change that could come is the elimination of many exemptions rather than a direct tax increase.
When state taxes are reviewed, it turns out that Utah could bring in $400 million more a year by eliminating many of the existing exemptions.
Example range from the state exempting ski resorts from paying sales tax on power to operate resorts to no sales tax being paid on tickets for high school or college athletic events.
Other examples include among the dozens granted over the years include no sales tax on vending machines, no sales tax on items purchased by churches and the fact that newspaper and magazine subscriptions are tax exempt.
But according to King, Utah lawmakers are not talking about tax changes right now.
Obviously, the matter is an unpopular issue and it is an election year.
“The problem with cutting state services is a two-edged sword,” indicated King. “When people get laid off, they stop providing state services and begin using them.”
“All the services that kick in when someone becomes unemployed go into effect. Meanwhile, they are no longer paying the taxes they once were, either,” added King.
Collections are also a problem for the state. Personal income tax collections mostly take place at one time.
But corporate taxes are paid quarterly and the assessments make up the biggest revenue stream for the state. When corporate taxes are down, the situation exerts a major negative impact on Utah’s budget.
One thing that could help is to have self-employed workers in the state pay taxes on a quarterly basis to the state. But that could prove to be an unpopular move most legislators want to avoid.
“There is about $10 million left in the rainy day fund, but that isn’t much considering what we are facing,” said King. “We will need to restore that as soon as things improve.”
Most Utah lawmakers are positive about what will happen. The state’s economy is growing annually, but not at the 8percent to 10 percent rate posted during the 1990s.
“One good thing is that bond companies still like Utah a lot,” stated King. “If we were the only ones having these troubles, it wouldn’t be good for our rating.”
“But we have always been conservative about our finances and, this past year, 46 states have had to cut their budgets just like us. And the only reason the other four in the union haven’t is that they only open up their budgets once every two years instead of every year. They will be cutting, too,” concluded King.