The 2019 Legislative Session was a roller coaster seeing a record breaking 574 bills passed. UPA’s bill tracking list included 101 items – plus one that we managed to preempt from making it to the list. We took positions on 51 of those items, and a high-profile support or oppose on 11 bills.
Of the 3 high profile support bills, 2 were successfully enrolled (HB 358 which reinstated crude and petroleum pipelines as “utilities” and set out UDOT cost sharing principals in the case of relocations and SCR 008 which supports exports of Utah natural gas to international markets). One high profile support item made it out of committee but was circled on the senate floor (SB 201 which would have extended sales tax relief to oil and gas exploration, production, and crude transport) due to the combination of the bills’ fiscal note and this sessions’ restricted budget. Of the 8 high profile oppose, all 8 failed to make it through the process or were modified to address our concerns, although some issues are highly likely to resurface for consideration through the summer.
The session also included a late breaking tax overhaul proposal that inflamed multiple interests and in its original form would have been particularly damaging to the oil and gas industry. Tax reform is needed to address a “structural imbalance” that stems from Utah Constitutional requirements. Income tax is required to be funneled solely to the Education Fund, which provides for public education, while sales tax flows to the general fund, providing financing for the rest of state government. The decline in sales tax, driven by a shift in consumption from goods (to which sales tax is applied) to services (most of which are not taxed) has resulted in an unsustainable imbalance. The result is a paltry ~$187M surplus in the General Fund (technically overdrawn by $64M after the Medicaid expansion and new prison construction) but a ~$900M surplus in the Education Fund.
HB 441 intended to add a tax on services in order to correct this imbalance and modernize Utah’s tax policy. However, HB 441 included sweeping changes, was nearly 300 pages long, came out late in the session, and without an opportunity for stakeholders to engage and provide accurate data. Many groups, UPA included, raised serious concerns about tax pyramiding and taxing business inputs and mandates. The Senate made clear that they would not pass HB 441, “killing” the bill – at least for now.
A legislative tax task force (10 from the House, 10 from the Senate, each appointing 2 non-legislative, non-voting members) will report interim findings in June and a final report in August. It has not yet been confirmed if there will be a fall special session on reforming the state’s tax structure or if this effort will wait until the regular 2020 general session. The task Force will look at “everything”, including, but not limited to:
- Pursuing a revised, but fundamentally similar SB 441
- Restoring sales tax on unprepared food
- Statewide Property tax
- Constitutional amendments allowing income tax to be used to fund more than just public and higher education – possibly social services
- A road user transportation tax (to free up the $600 million in sales tax currently supplementing the Transportation Fund, which is supposed to be self-sufficient)
Related, and after several “deal” blowouts and much consternation, the late breaking budget funded more than $300 million in ongoing obligations with one-time money, which gives legislators leverage to bring parties back to the table to fix the structural imbalance and tax issues. The final $349 million “Bill of Bills” includes about $30 million for air quality projects, significantly less than the $100M proposed by the Governor.
A few general interest highlights:
- After more than a decade, lawmakers also adopted a strong “hate crime” bill providing longer sentences for attacks on victims belong to a protected class, including LGBTQ.
- The 5 year debate over Medicaid expansion finally resulted in a compromise measure – although different than the Prop 3 ballot initiative approved in 2018 – it funds at 100% of the poverty level. Private subsidized insurance will be available for those at 101-138% of the poverty line.
- Further adjustments were also made to Prop 2, the medical marijuana initiative that passed on the ballet in 2018 and was adopted in compromise form in a December 2018 special session.
- 4% alcohol beer will soon be available in grocery stores. The current level is 3.2%, but many national brewers are stopping production of this low alcohol level product. 90% of national brewers make a 4% alcohol content product, solving a growing retail sales problem.
- And last but certainly not least, the final bill of the 2019 session named an official state reptile — the Gila monster!