February 2, 2009

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The Big Squeeze

Utah’s economy has long been The Little Engine That Could—merrily puffing alo...Read More

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Special Report
2009 Utah Legislative Update

A Rose By Any Other Name


2009 Utah Legislative Update

Larry Warren

February 2, 2009

What a difference a year makes. When Utah lawmakers met a year ago, budget projections indicated a $1 billion surplus in state revenues. Now, legislators have already cut more than $175 million from the budget. And, with new home construction stalled, big box retailers like Circuit City liquidating, small businesses going under and unemployment steadily rising, the budget is likely to be slashed by a lot more. The state budget can’t be finalized until new revenue estimates come out late in the session, but the argument today is where to cut spending, where to spend to stimulate the economy and what taxes to raise and lower. Business Priorities Spelled Out “We’ve got to do more with less and still not lose our momentum as one of the most innovative states in the nation,” says Lane Beattie, a former state senate leader who now is president and CEO of the Salt Lake Chamber of Commerce. Prior to the session, the chamber laid out its business agenda in meetings with key legislators. The chamber’s agenda to keep up Utah’s economic momentum consists of stimulating the construction sector, tapping into the Rainy Day Fund, bonding and continuation of economic stimulus initiatives already in place. It also supports health care reform and higher education programs that produce graduates with the kind of skills that Utah employers want. “This is a very stressful time in the economy,” adds Howard Headlee, president of the Utah Banker’s Association. “Jobs are the most important issue right now and every job you can create in the next six months will have an effect on the length and depth of the recession.” The priorities of the business com-munity line up with those of Governor Jon Huntsman, who is promoting an economic stimulus package heavy on road and building construction and health care reform. “We seek urgent action on funding projects that can be spade ready in the next six months,” Beattie said as the session began. Though most road construction projects were frozen, including the re-build of Interstate 15 in Utah County, Huntsman quickly moved to get the projects rolling again. The Huntsman stimulus package calls for funding critical spade ready projects now with part of the $400 million in the Rainy Day Fund, combined with bonding using Utah’s vaunted AAA bond rating and the Obama Administration’s promised federal stimulus, which will funnel infrastructure funding to the states if approved by Congress. Beatty points out other projects that could use help from the stimulus to restore Utah’s construction workforce. Such projects include the David Eccles School of Business Building at the University of Utah along with the Skaggs Pharmacy Building, and a new business building at Utah State University—all projects that can be leveraged against already raised private funds. Questar CEO Keith Raddie puts forth another method for paying for immediate transportation projects—an increase in the gasoline tax. Raddie says he’s pleased that the legislature restored transportation projects that were put on hold, pointing out that the gas tax has not increased in a long time, and that with prices down as much as $2.50 per gallon, it is a good time to raise transportation fees from those who will use the roads. Huntsman is proposing increased vehicle registration fees as another way to raise money to get road construction underway. The chamber estimates that a $400 million construction bond could generate 6,400 jobs for Utahns, earning them $322 million in paychecks, which would ripple through Main Street economies. Preserving Education Gains Raddie says the type of funding mechanism for construction job creation saves sales tax revenue for other needs—especially preserving universities, which he describes as “the true engines of economic growth.” Richard Nelson couldn’t agree more. Nelson, who is CEO and president of the Utah Technology Association (UTC), representing Utah’s tech and biotechnology businesses, says education is key. “We have insured the engineering initiative started by Governor Leavitt goes forward, and not dismantle the work already done.” The initiative as doubled and in some cases tripled the number of engineering graduates coming out of Utah’s universities. “We’re the envy of most states in engineering because of our pipeline,” Nelson says. The UTC will also be asking legislators to not cut budgets associated with the current initiatives to enhance science, technology, engineering and math classes, nicknamed the STEM classes at the high school level. “The high paying jobs are geared around STEM,” Nelson says, adding that even in the current economy there are still shortages in computer science and engineering positions. Nelson predicts high tech industries in Utah will con-tinue to grow, even in today’s difficult economic environment. For Mark Bouchard, the senior managing director of CB Richard Ellis, the tough session is all about how budgets are trimmed to fit revenue. “We can be smart about where we cut and where we invest,” he says. “The business community endorses cuts that will have a minimum impact on the classroom. It’s not all about students, though. Bouchard says “Teacher quality is our most urgent education reform issue—we support merit pay for teachers.” Health Care Reform Ranks High The state Health Care Task Force is proposing a suite of health reform bills, which have the backing of Utah businesses. As Chris Redgrave, a broadcaster and chair of the Chamber’s Board of Governor’s puts it, “Prior to this recession, businesses were already challenged, and now we have a challenge on top of a challenge.” Among the health reforms proposals before this legislature is one to create a sort of Travelocity of health care—a first of its kind portal to enable smarter health purchasing decisions by having access to all the information from competing providers at a customer’s fingertips. “Competition and choice reduce prices and improve quality,” Redgrave observes. “Its time to apply these principles to health care.” Another initiative is to create a defined contribution market, where employers provide their workers with a set contribution toward health insurance products, which the employee decides how to allocate. The system provides employers with fixed cost figures as a basis for planning and budgeting. Another component of health care reform before the legislature is the continuing push to move medicine from the clipboard to cutting edge medical information technologies—some of which are being developed by Utah hospitals and IT companies. Business leaders say health care reform is essential, especially now as they head into the toughest times most of them will ever face. “Health insurance premiums exceed all of our other operating expenses,” comments Richter 7 marketing agency partner Peggy Lander in a Chamber publication. “Providing health insurance may become impossible if this unsustainable system isn’t changed.” Being Hospitable Leaders of Utah’s $7 billion tourism industry are fighting in this session to hold as much ground as possible for state tourism promotion efforts, and to push for meaningful reform of Utah’s quirky liquor laws. The Huntsman administration has championed increased funding for Utah’s Office of Tourism. It had $11 million last year to continue the momentum begun four years ago when the state launched its brand “Life Elevated”. This year’s budget cuts tourism promotion to $7 million and those in the business of selling Utah to out of staters are pushing to keep as much in the budget as possible. “You lose market share and it’s really hard to come back,” says Danny Richardson of the Utah Tourism Industry Coalition. “In one year would it kill us? No, but it’s a long term problem if you lose share.” “The Office of Tourism has done so many great things and has so much momentum,” Ski Utah President Nathan Rafferty says. “Its more important now than ever. We’re one of the industries that brings money in—the ski industry itself is now a billion dollar industry.” Aside from the amount spent to advertise, the hospitality business also wants to see liquor law reform. “For us, it’s the private club issue,” says Rafferty. “We’d love to see it changed—we could do so much better in skier days if we were more hospitable.” “It’s the image that you can’t get a drink in Utah,” Richardson observes. “It hurts tourism, hurts the convention business. It’s not that visitors spend less—it’s that they don’t come here at all.” Governor Huntsman is also pushing to rid the state of its unique private club laws, which require the charade of “joining” a private club just to get liquor by the drink. His goal, he told a KUED press conference, is to “bring us into the 21st century.” Other Voices, Similar Views The Economic Development Corporation of Utah (EDCU) is interested in health care reform, the road construction stimulus and other initiatives, and also wants to see more movies made in the state. It supports passage of legislation to strengthen the Motion Picture Incentive Fund by increasing the amount of tax rebate on filmmaker’s in-state expenses. The current rebate is 15 percent and EDCU President and CEO Jeff Edwards says that is one of the lowest percentages in the nation. He wants to see it increased to 20 percent, which may attract more, bigger-budgeted films to the state. Economic models show that every film dollar spent in Utah turns over two and a half times through the hands of Utahns. Utah may have come into the recession late, but it is feeling its effects full bore now. It may be mostly the job of President Obama, the U.S. Congress and the nation’s labor force to dig us out of the deep economic hole, but Utah lawmakers are looking for the right tools to get Utah out of the hole fast.
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