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Thursday, October 29, 2009 4:10 AM


Budget Bloodbath In Utah


Hard decisions are in store for state and local governments in Utah as Government budgets worse than anticipated.

The state's bleak finances appear to be even worse than previously thought. The revenue figures for the last three months show the economy is hammering government budgets.

Bob Springmeyer is the president of Bonneville Research. He has been doing economic analysis and planning for local government since 1976. When he saw the quarterly tax revenue numbers for the first three months -- July through September of this fiscal year -- he was stunned.

He said, "This is the first time I've seen this kind of dramatic drop across the board."

No one expected good news, but the real numbers were worse than projected. Taxes in numerous broad categories, for both state and local governments, were down. Springmeyer said, "I think we're going to have a budget bloodbath this next legislative session."

Overall, revenues fell 16 percent, totaling $275 million. Sales and use taxes, which fund general government and higher education, slumped 23 percent, nearly $100 million. Income taxes, which pay for public schools, slid downward $40 million.
Taxes on corporations, the franchise tax, were in free fall, plummeting 73 percent.

He said, "That's one that I think is probably the most scary. That means that businesses are way down, that means employment is going to be down."

It was the same story for local governments. Revenues from public transit, for instance, dipped $11 million. The transient room tax, which supports the Salt Palace and Convention and Visitors Bureau, was off 25 percent.

"Local governments and state government are going to have to make some really hard decisions," he said. "Are we going to raise taxes, or are we going to cut services?
The scary thing is not that tax revenues are plunging but rather the attitudes over what to do about it.

Springmeyer asks "Are we going to bond and do some of the capital improvements, build some of the schools, rebuild some of the capital things we need to get people back to work and get the economy churning again?"

The economy is NOT going to get churning again by spending more money than cities have. Building schools is not the answer when the cost of education is too high already. Building a school creates jobs one time. Everyone has to pay through the nose for it for years to come in staffing and administration costs in addition to paying back the bondholders with interest for the upfront money to build the schools.

Such proposals are economic madness. So are tax increases. Yet .....

Salt Lake City Mayor Corroon proposes property tax increase.
Salt Lake County's mayor is now asking for a $13.4 million property tax increase, despite nixing a similar proposal from the county council months ago. Peter Corroon said the county simply can't cut anymore after trimming jobs, wages, 401(k) contributions, open days at county outdoor pools and Sundays at 10 county recreation centers.

"At some point you have to say there are things we won't sacrifice," Corroon told KSL Newsradio in an interview Wednesday. "I said I won't sacrifice public safety and I won't sacrifice programs for our seniors and our children, so that's where we drew the line."

In prepared remarks to the county council on the budget, Corroon said Salt lake County is now "in the eye of the storm" when it comes to the economic downturn. The 2009 county budget was $801 million. The proposed 2010 budget stands at $638 million.

Corroon said he did not believe the county can cut any further "without harming the essential services" the county has to provide.

Nearly four months ago, Corroon said no to a $5 million tax "shift" proposed by the county council. Corroon says this is also considered a tax "shift" -- switching revenue sources from declining sales tax revenues to a property tax increase voters have already approved.
Mayor Corroon voted against a $5 million property tax increase earlier now wants a $13.4 million increase. Before anyone votes for any tax hikes the city (and its citizens) need to know where the money is going and what they are getting for their tax dollars.

How much in the hole is Salt Lake City anyway? After all, close analysis shows that City of Houston is Bankrupt (So are California, Oregon, and Pension Plans in General).

Could Salt Lake City be in a similar predicament? What about the state? If so, raising taxes sure is not the answer.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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