Utah

State Fiscal Briefs

April 2021

Looking for Utah data related to the pandemic? We have health, economic, and fiscal data on our new tool, How the COVID-19 Pandemic is Transforming State Budgets.

Utah’s budget basics

According to the National Association of State Budget Officers (NASBO), Utah’s total expenditures in fiscal year (FY) 2020 were $19.9 billion, including general funds, other state funds, bonds, and federal funds. NASBO reported that total expenditures across all states in FY 2020 were $2.3 trillion, ranging from $4.7 billion in Wyoming to $337.7 billion in California.

Each state allocates spending and taxes differently among different levels of governments, and local governments often administer programs with state funds, so combined state and local government data show a more complete picture of individual benefits and contributions when comparing states.

Per the US Census Bureau, Utah’s combined state and local direct general expenditures were $28.0 billion in FY 2018 (the most recent year census data were available), or $8,872 per capita. (Census data exclude “business-like” activities such as utilities and transfers between state and local governments.) National per capita direct general expenditures were $9,801.

Utah’s largest spending areas per capita were elementary and secondary education ($1,723) and higher education ($1,528). The Census Bureau includes most Medicaid spending in public welfare but also allocates some of it to public hospitals. Per capita spending is useful for state comparisons but is an incomplete metric because it doesn’t provide any information about a state’s demographics, policy decisions, administrative procedures, or residents’ choices.

Utah’s combined state and local general revenues were $27.6 billion in FY 2018, or $8,749 per capita. National per capita general revenues were $10,071. Utah uses all major state and local taxes. Utah’s largest sources of per capita revenue were charges ($2,194), such as state university tuition and highway tolls, and federal transfers ($1,675).

Utah’s politics

Governor Spencer Cox, a Republican, was elected in 2020 with 64 percent of the vote. The next gubernatorial election is in 2024.

Republicans control both the House of Representatives (58 Republicans to 17 Democrats) and Senate (23 Republicans to 6 Democrats), with veto-proof majorities in both houses. Control of the governor’s mansion and each house of the legislature gives Republicans a trifecta in Utah. All Utah House seats are on the ballot in 2022 because representatives serve two-year terms. Senators serve four-year terms; roughly half the senatorial seats are on the ballot in 2022, and the other half will be up for election in 2024.

Utah’s budget institutions, rules, and constraints

Utah uses an annual budget. The legislature must pass a balanced budget, but it can carry a deficit over into the following year. Utah also limits spending growth with a budget rule based on the state’s growth in population, personal income, and inflation. The rule is binding and requires a legislative supermajority or vote of the people to override it. Utah also limits total authorized debt and debt service incurred by the state.

(Note: Some states have informal budget institutions that constrain overall spending growth or a specific expenditure’s growth.)

Utah’s recent fiscal debates

  • Utah passed major tax reform at the end of 2019 after several attempts. The enacted legislation made several changes to Utah’s tax system: it reduced Utah’s flat individual income tax rate from 4.95 percent to 4.66 percent; increased the state’s dependent exemption from $565 to $2,500; created a refundable earned income tax credit (EITC) that is 10 percent of the federal EITC; increased the state’s general sales tax on groceries from 1.75 percent to 4.85 percent (and created a new grocery tax credit); and broadened the state’s general sales tax base to include more purchases, including gasoline, electricity for ski lifts, college athletic tickets, textbooks, newspaper subscriptions, car washes, daycare services, and transportation services. The state estimated the income tax cuts would reduce annual revenue by $630 million, the sales tax changes would increase revenue by $475 million, and overall the legislation would reduce tax revenue by roughly $160 million. The legislation passed in a special session, was based in part on the recommendations of the state’s Tax Restructuring and Equalization Task Force, and succeeded only after several similar bills had failed. However, after a referendum to repeal the reforms gathered enough signatures to make the November 2020 ballot, the legislature announced in January 2020 that it would repeal the legislation on its own. The governor said he will wait until 2021 to try again on tax reform.
  • In 2018, Utah voters approved Proposition 3, which accepted federal funds for expanding Medicaid eligibility created by the Affordable Care Act. The ballot initiative also proposed paying for the state’s additional Medicaid spending by increasing the state’s general sales tax rate from 4.7 percent to 4.85 percent. In 2019, however, the legislature passed legislation that repealed the ballot initiative and replaced it with a more limited Medicaid eligibility expansion, extending eligibility only to individuals at or below the federal poverty level instead of the 138 percent threshold provided by the Affordable Care Act (and approved by voters). The sales tax rate hike still went into effect. The governor and Republican legislators argued that new forecasts showed the tax hike would not fully cover expansion and leave a $10 million shortfall. However, the Centers for Medicare and Medicaid Services denied federal funding for Utah’s partial expansion. The state and federal government eventually agreed on the original full Medicaid expansion in December 2019. As part of the deal, Utah added work requirements to its eligibility rules, but courts have repeatedly struck down similar rules in other states.

Utah’s current budget

Former Governor Herbert released his FY 2021 budget proposal in January 2020. The budget proposed $8.3 billion in combined general fund and education fund spending (5 percent increase over FY 2020) and $20.0 billion in total spending (5 percent increase over FY 2020). Utah and Alabama are the only states with separate education and general fund budgets.

Utah enacted its FY 2021 budget in March 2020. The enacted budget included $8.6 billion in combined general fund and education fund spending, a $300 million increase over the proposal, and $20.3 billion in total spending. In June, the legislature reconvened and passed a revised budget that decreased general and education fund spending to $7.3 billion. This included budget cuts for higher education and canceling planned employee pay raises. However, the revised budget increased total fund spending because of the infusion of federal CARES Act funds. The state also used $680 million in reserve funds to balance the budget.

Governor Cox, who assumed office in January 2021, released his FY 2022 budget proposal and gave his State of the State address that month. The governor’s proposed combined general fund and education spending is $9.0 billion and total spending is $21.7 billion. Both totals are higher than enacted FY 2021 spending and nearly 9 percent above what his predecessor proposed before the pandemic. In his speech, the governor also proposed expanding a tax credit for Social Security income and increasing the state’s exemption provided to filers with dependents. In part, Governor Cox was able to propose both spending increases and tax cuts because Utah’s economy and revenue collections are both performing far better than most states.

For more on Utah’s budget, see