male announcer: Funding for "The Hinckley Report" is made possible in part by Merit Medical and by contributions to PBS Utah from viewers like you.

Thank you.

Jason Perry: Tonight on "The Hinckley Report," join our expert panelists as we take a deep dive into Utah's budgeting process.

How will leaders determine where to spend the state's dollars?

What priorities will rise to the top and what may be cut?

♪♪♪ Jason Perry: Good evening, and welcome to "The Hinckley Report," I'm Jason Perry, Director of the Hinckley Institute of Politics.

Covering the week we have Sophia DiCaro, Executive Director of the Governor's Office of Planning and Budget; Representative Angela Romero, a Democrat from Salt Lake City and House minority leader; and Senator Jerry Stevenson, a Republican from Davis County and chair of the Executive Appropriations Committee.

So glad to have you on this episode of "The Hinckley Report," we're going to talk about the budget and this is a very important time for the state of Utah.

We're getting ready for the session to come, the governor--with you, Sophia, this week just released his budget, and now a lot of the negotiations start, even now.

And so, so glad to have you all here.

Senator Stevenson, so I wanna start with you a bit, with your role as the Executive Appropriations Committee.

I always appreciate it, because you always give us a tone for the year.

Last year, if I recall it was a socks and underwear year, is how you refer to the budget, what is it this year?

Jerry Stevenson: Well, some years it's been--the Mercedes keys have been under the Christmas tree, but this year, I think it's still socks and underwear.

We're just hoping we can deliver them clean and new.

Jason Perry: Thank you for that, that sounds really-- Jerry: There's been a little bit of a change in--the governor--well, we came to consensus with the tax commission, the governor's office, and our legislative fiscal analysts.

And we have found that, we've seen some real changes in the last 30 days that, well, maybe we've got a little bit of exuberance in the budget that we're not expecting.

Not much exuberance, but maybe a little more disappointment than we think there is.

We've seen a cut, we're not sure whether--or a decrease in spending, I guess if you will, or decrease in taxes.

We're not sure if that's related, or could be related to, maybe there will be some lifting with the election, the outcome of the election.

Maybe we'll see a little more excitement and a little more spending.

But right now we think that it's a little bit less than we anticipated, even 30 days ago.

Jason Perry: Let's talk about how we get to those.

The budget the governor just released was $30.6 billion, the biggest budget in the history of our state of Utah of course.

How do we get to those numbers, Sophia, you're largely responsible for, at this stage, helping us to get there.

How do we figure out what the budget is for this legislative session?

Sophia DiCaro: Yeah, we have a consensus process where our economists get together with the legislative fiscal analyst office, as well as the tax commission.

They all look at every single revenue source and economic indicators, they track all of those.

We come to the table, we debate, and end up averaging what everyone thinks will be for each individual revenue source.

And it's a robust process, it's one that I think is healthy because it enables us to build a budget using the same number that the legislature will use as they go into the session, and then every quarter, we're looking at those revenue levels.

But as the senator mentioned, we had a lot of uncertainty with economic indicators.

Previous to the pandemic, we were a lot more certain, then the pandemic happened, which introduced a lot of uncertainty to some of those traditional indicators.

We are seeing a normalization of those indicators, so we have a little more confidence than we had before, but we're still looking at things as they normalize.

Jason Perry: You can tell what people in the state prioritize by what they fund, which is how we look at some of these things.

So Representative, let's start with you about how we go through this process of setting the priorities.

You represent such an important part of the House as the leader, how are you deciding the "priorities" in what you're going to advocate for, and maybe what a couple of them are?

Angela Romero: Our caucus is always setting priorities and one of our priorities is definitely air quality and the air we breath, as we've all been experiencing now, the air is horrible, so that really reflects on what energy sources we're using.

And we saw the governor propose some sources, but we haven't--I didn't hear renewables as part of those conversations, and that's very clean--that's the cleanest energy, just like nuclear.

And so my hope is that we do that.

My also--biggest fear is what we're going to do to education with this budget, whether it be higher education or public education.

So I want us to really--the community to really look at that and look at what we're doing, and share their concerns because at the end of the day, the governor can propose his budget, but we as a legislature decide what that budget is going to be.

Jason Perry: Yeah, maybe talk about that for a second, Senator, because that is one of those realities.

Governor spends a lot of time, Sophia, you spend a lot of time with the governor and the agencies establishing a recommendation from the governor's office.

It's presented to you, Senator, and then talk about that process, because you control the purse as it says.

Jerry: Well, that's a wonderful thought, and if I did, things would be just a little different but not much.

We have opportunity to meet during the session on a weekly basis with the governor's office.

And so we--there's a lot of cooperation and we're able to pick tones or pick parts of the budget that we think there's going to be a question on.

Remember a lot of that budget is pretty spent, I mean, there's a lot of it--we don't have a lot of control over where we were last year, we have a lot of new money that will come on that we will have opportunity to move forward.

The new money is what we tack a lot of times for projects, buildings on campuses, and so forth.

We're very proud of where the state of Utah is right now because we haven't had the bond for a building for a long time, except the prison.

But we actually have the money in reserve to make the payments on the prison bond.

If we have a real downturn, we will just exercise or use the prison money, the bonded money we have and hold those payments and use them in other places in the budget.

Let me just speak real quick on education.

We have treated, I think, education very, very well the last eight or ten years, and in that process, we have ended up with--actually US News and World Report recognize the state of Utah, I think, in their August edition as the second best education system in the country.

That's quite an achievement when you consider what we've looked at for several years now.

So we're really proud of where we're at, we will continue to find education, I think, when we put together the priorities for the centers, we came up--they were--education was number three ahead of, or behind energy and under water situation.

Jason Perry: Go ahead, you're working on these also.

Angela: And yeah--in regards to education, though, we can do things in the budget, but how do our teachers feel, how do our families feel about the investment of Utah in education?

And we saw that with Amendment A, we--I don't think that amendment would have passed if it would have been on the ballot, and so we saw the frustration from the community on how we as the Utah legislature prioritize things.

And so I think we need to do a check as legislators and think about, are we really doing the budget the way that's going to focus on the community when it comes to our housing crisis and addressing homelessness?

Because that's a state issue, not just a Salt Lake City issue.

Are we gonna make sure that we're spending our money on the right energy, the clean energy, the energy that's gonna help us preserve the Great Salt Lake.

And are we going to have people who wanna teach in our schools and ensure that families have the right access to education?

Because you--if we're giving away taxpayer money to vouchers and to homeschooling, I have some concerns.

Jason Perry: I wanna break up a couple of these pieces if that's all right, Sophia, but let's first talk about this Amendment A a little bit, because it's connected to two of the primary sources of funding for the state: income tax, sales tax.

Maybe describe what that amendment was a little bit, and the discussions we're having right now about what seems to be, you know, are income taxes is going up, our sales tax is not, and so there's an effort maybe to broaden the use of those income tax dollars.

Sophia: Sure, so as you describe, there's an earmark right now that exists, it is a constitutional earmark that requires all income taxes to go toward education.

And the general fund of course, is generated by sales tax, that's more broadly used.

The amendment was contingent upon removing the earmark, ensuring however, that education gets continued resources, but removing the earmark, and then taking off sales tax on food, which hits the general fund.

Because that did not move forward, the legislature did have that revenue set aside, so the budget that the governor is launched, suggests to look at the income tax side but do it in a way that benefit seniors by removing the Social Security tax benefits, the state tax that's collected off of that.

So if we eliminate all of that, that takes some of that, set aside that was for that purpose.

The legislature is not able to entertain another constitutional amendment to remove the earmark, for example, for another couple of years.

So this enables us to preserve the legislative process that said, tax relief was important, and gives us an opportunity to continue to provide that relief.

Jason Perry: So, Senator, this is--Senator, this issue has not gone away necessarily.

What concerns do you have, if any, about the current status of these two, you know, primary funding sources?

Are you gonna need to do something this session?

Jerry: Well, I--what is happening is, first of all, income tax is growing faster than anything else in our system.

As far as income, there's nothing even that compares with it and it's growing actually too fast.

That's why you've seen the reduction in income tax in the last couple of years.

And that's why we're able to talk about a Social Security reduction without causing angst with the citizens.

But that--the Social Security tax, income tax will come out of education also.

So, what we need to do is we need to determine where our balance is.

Our problem is, is that we have other portions of our budget that we're having problem funding.

And some of that is involved in social services and children.

That being the case, we need some money in those--in that pocket somehow.

Another way that we could get it is we could continually reduce income tax.

That seems to stimulate growth in the state of Utah.

And then as we reduce that, we would have to find another tax to tax to compensate in those areas that we're deficient in right now.

Jason Perry: Let's talk about this Social Security proposal a little bit.

I wanna show a clip, but maybe tee this up for us a little bit because this was a, you know, a cornerstone of the budget--for the release by the governor this week, so what are we gonna see?

And then I wanna hear what the governor is going to say about it.

Sophia: Yeah, we we've done a lot.

You know, the legislature, I have to give a lot of credit to the legislature.

We've done a lot to take care of young families, to take care of middle income earners, low income earners, and targeted segments of the population.

This budget really tries to take care of the aging population of Utah.

We know that the--if you look at the national demographics, we are aging as a nation.

And we have proposed a budget that's forward thinking in trying to proactively address what we know is coming, which is a growing share of our population that's aging.

And so that's kind of the idea of this, is letting older folks keep more of their hard-earned income, and let them age in place and support some programs that enable them to do that.

Jason Perry: I wanna see the governor's response to this and Representative, if you'll to respond to that too, because, of course, this is something you've been talking about for a while now also.

Spencer Cox: We are one of only nine states that tax Social Security benefits.

I think it's an embarrassment that we are one of eight states that still does that.

And we have an opportunity right now to do this, to completely eliminate Social Security taxes in our state.

This will help the most vulnerable in our state, our seniors, especially those living on a fixed income.

This will directly benefit approximately 150,000 seniors in our state.

Jason Perry: Representative.

Angela: Democrats have been talking about this for many, many years, even before I was in the legislature.

And so we're--we are 100% behind the governor when it comes to eliminating this tax.

We're looking at people experiencing homelessness, and we're looking at the population that's experiencing homelessness, and a lot of times we're thinking about who we see in the parks or who have mental illness, but we're not seeing the people behind closed doors, which are our seniors.

And so we wanna make sure that they can maintain their home, that they can have food on the table, and that we as a society are taking care of them, because they took care of all of us.

Jason Perry: Of course, the governor gets to recommend some of these tax changes here, the legislature has to decide what to do.

Put this in context for us, Senator, including some other thoughts you might see--that we might see in this legislative session.

Jerry: Let me just make--I think there's a little bit of a misconception here, is that unless you're making $75,000 a year and filing on $75,000, you're not paying Social Security on your income tax--or not paying income tax on your Social Security.

We took that off a few years ago.

So the lower, the most vulnerable are not paying income tax on their Social Security, only if you're over $75,000.

So, but this would completely eliminate it.

And, I think, you know, that maybe falls in the--we get the push all the time that we're taking care of the rich guys if we eliminate some of these taxes like income tax.

And, but this does the same thing and this, in fact, this is more focused on those that are more wealthy than before, because you have to have over $75,000 income.

Angela: And I understand that, you know, I'm not disputing that, but again, it's our focus and how we focus things.

If we look at people with disabilities, we have waiting lists.

Waiting lists--like he was talking about when we're looking at social services and what do we need to fund, and I understand that, but that shouldn't be at the expense of education.

Education is key for us here in the state of Utah, we have big families and we need to make sure that we're providing those services as well.

So I don't want us to see us turn people against each other, whether we have to help people with disabilities and provide for the social safety net, or whether we're gonna educate our community.

Maybe we don't sue the federal government so much.

I bet we could find a couple, $10 million there.

Sophia: Well, and I'll just add that there's also--we know the direct benefit to seniors through this proposal, but there's also an indirect benefit to young families.

There's a lot of younger families who have to take care of their parents and their aging loved ones, and this enables them to also have that indirect benefit because if their aging parents are having a little more relief, then it also translates down to the families who are taking care of them.

Jason Perry: Let me get to another issue that all of you brought up to some extent here, some of these issues surrounding growth: energy, water, the environment.

Utah has been growing quickly, or as I was just--I was noting that over--it's like over 18.4% over the last decade.

I mean, this is a lot of population growth and Senator, you're responsible for helping to plan for some of this.

One of the things we've been talking about here is our energy portfolio.

Talk about your approach as a legislature to that, and then there's a recommendation from the governor also in that category.

Jerry: When we looked at this and we've asked--we polled the entire Senate, asked them what their priorities for this upcoming session are.

Energy was by far number one.

We are in a energy--we have a problem right now, we have these data centers wanting to come to the state of Utah.

We're a great spot for those, but we can't produce enough energy to take care of them.

There's almost a two year waiting list on some of these facilities to get electricity to them.

We're involved with a project up in--the inland port is involved with the project in Box Elder County right now, that we're actually have--gave them a little bit better deal because they're going to have to build their building with generators because they can't get the electricity delivered that they need.

And this, we're seeing this all over the state, this isn't just a Wasatch Front issue, this is all over the state of Utah.

We need more power and there's places we could get it.

We could certainly--we've got coal powered plants in the state that could be rejuvenated and move forward.

I think the technology is probably a lot better now on those than when they were built.

And we could make them better facilities for producing power.

Maybe in the short run, we'll have to move to something like that.

Jason Perry: One of the items in the governor's budget, Sophia, was--it was called Operation Gigawatt: $24.7 million on this energy production.

And I wanna show this clip, and then you to respond to it, because one of the things that he's talking about and our legislature seems to be talking about as well, is more nuclear power inside the state.

Let's show this clip and get his response.

Spencer: We are proposing $20 million for nuclear energy development in the state, and $4.2 million for geothermal energy production in our state.

These investments, these forward thinking investments will help position Utah with the private sector, attracting those private sector investors to come to Utah to help build those nuclear facilities, to build those geothermal facilities.

We should not only have plenty of low-cost energy for the people who live here in Utah, but we should be able to export that low-cost energy to other states and other nations as well.

Jason Perry: Talk about these discussions here in this this category.

Sophia: Yeah, so we know that nuclear is one of the cleanest forms of energy development as well.

And so it's appropriate to focus on nuclear, we're seeing that, not only nationwide, but we're seeing it globally as well, which is my second point, a little bit of what the senator talked about.

We have a gap right now, we're consuming more than we're producing.

We need to catch up, but not only for Utah's needs, we have a regional need, but also a national need to stay competitive what's happening around globally, in terms of the race for AI, the race for innovation, which a lot of what we're doing in terms of our cars needing to be charged, you know, with electric vehicles and other technologies, we are going into an era where it's going to be a lot more energy intensive, and we need to fill that gap of what we know is coming globally for us to be competitive as a nation.

Jason Perry: Representative, talk about your caucus in this particular area because I know I've talked about this, personally, as well.

So in this proposal, there's some geothermal, there's nuclear, when you start talking about the priorities of your caucus here, it does seem like energy is a core of where--one of the state's concerns, as it grows.

Angela: Definitely energy is a core of what our caucus, and the geothermal is something we definitely support.

I can't tell you where our entire caucus feels about nuclear, because we also have to think, when we're gonna do this, even though we're doing smaller modules, it takes a lot of water, and we have a lack of water.

And so that's something we have to look about.

And we really haven't done a good job of investing in our energy portfolio and diversifying it when it comes to wind and solar.

And we've made it impossible for companies to function to do that.

And I've served on public utilities now for about ten years, and we've known that we've had to upgrade our transmission lines to produce the power that we need.

And we've fought because we don't want to partner with some regional--some area states.

And so we really need to get it together when it comes to, how do we participate in this global society, how do we participate as a state within the United States of America, and work at a regional level with some of these other states?

I mean, we have IPP, IPA, we've been--that's a private company that gives a lot of electricity to Murray City, and to the city of LA, and we've just made their life miserable as a legislature.

And so I think we really need to look at energy, yes, but how do we fall within the United States of America, and how do we work with surrounding states to make sure we're producing the best energy we can, and at what expense?

Jason Perry: One more thing we've touched on a little bit is, the conversations in the paper, even in the governor's, about some--about how we fund educations, public education, and a lot of scrutiny on how we fund higher education.

Maybe we talk about that for just a moment as well, because it seems like that we may have some legislation, and the legislature is already talking about how we might approach reallocations.

Sophia: Yeah, well, it's healthy to reevaluate anything that's receiving public funds.

We have a limited amount of resources that can be allocated, so we're always trying to drive the best investment and use of public resources.

This is similar to that discussion, and the idea is having more of a formalized process and determining how resources are allocated and directed for the higher education space.

Right now, there's a lot of bosses in the room, a lot of cooks in the kitchen, and so the idea is to work together to streamline that a little bit and figure out, how do we maximize the best investment and use?

Jason Perry: The conversations on the hill, when it comes to these areas?

Jerry: Absolutely, well, I think what we're looking at is we were trying to take a look at the jobs, and the jobs of the future, and make sure that we have students trained to fill those jobs.

And as a result, it may cause education to kind of rework itself a little bit, eliminate some of those things that maybe are not producing high jobs.

This will not happen overnight, I think all of us recognize that if a university starts a program, students start, they have an interest in completing what they're starting in.

You know, there's certainly contracts with professors, and all that it takes to build a program, but we need to make sure that that's covered in it, but if we're not producing a student that has a job, we need to rework that, and start looking at the jobs of the future, and that's where we put our money.

Jason Perry: In our last one minute, what happens next?

All right, we've got the governor's budget, we've got the legislature about to meet, what happens next?

And you know, how does this work at the very end of the legislative session?

Someone, just give us a primer.

Jerry: I've joked with several governors now that my job is to fix their budget, so-- Sophia: And I just say, if it ain't broke, don't fix it.

Angela: And I wanna say, let us have more say in that budget, because I think most Utahns would enjoy that.

Jason Perry: Uh-huh, so the negotiation happens through the entire legislative session between the executive branch and the legislative branch.

Sophia: That's right.

Jason Perry: Okay, anything, any surprises we're gonna see?

Jerry: You know, other than--if we don't have the revenue that we've--we think we have right now, that would be quite a surprise that we'll have to work with, and through the session.

Jason Perry: Yeah, we'll watch this one closely, thank you for your great insights.

You made the budget interesting, thank you for this, and thank you for watching "The Hinckley Report."

The show is also available as a podcast on PBSUtah.org, YouTube, or wherever you get your podcasts.

Thank you for being with us, we'll see you next week.

announcer: Funding for "The Hinckley Report" is made possible in part by Merit Medical and by contributions to PBS Utah from viewers like you.

Thank you.

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