Most Utahns probably think the Utah Constitution prohibits the governor from sending a budget to the Legislature where expenditures exceed incoming revenues. I couldn't find such a constitutional prohibition. There is a statute that reads:
"The total appropriations requested for expenditures authorized by the budget may not exceed the estimated revenues from taxes, fees and all other sources for the next ensuing fiscal year."
But this is on the front end of the budgeting process — the appropriations end. It does not say that the state may not end the year in a deficit.
This loophole allowed the governor to let transportation projects put the state in the red for the past five fiscal years. Spending has exceeded revenues in five of the last five years according to the Comprehensive Annual Financial Report for fiscal year 2012. Most Utahns, and even most legislators, probably think we have been in balance during that entire period. The state of Utah has not had a structurally balanced budget, where actual revenues exceeded expenditures, since the boom year of fiscal year 2007.
How can we be the "best" managed state if we continually run deficits every year? Only if we include receipts from the almost $3 billion of general obligation debt with revenues will the sum of the two exceed expenditures. Even with general obligation debt, we ran red ink in fiscal years 2008 and 2009. And not by trivial amounts — deficits in those two years were, respectively, -$236 million and -$460 million.
Do you remember the governor or the Republican-led legislators coming clean with these deficits at the close of the fiscal years? All we heard was the legislative fiscal analyst admitting they were in a "structural deficit" during those years. In fact, those deficits were not necessary — the transportation projects, which propelled us into these deficits, could have been scaled back or postponed. That would have been a true "fiscally conservative" approach.
Under these procedures, Utah's general obligation debt has soared. According to the latest Comprehensive Annual Financial Report, "Go" debt has increased from $75 million in fiscal year 2008 to $499 million, $1.08 billion, $982 million and $567 million respectively during fiscal years 2009 through 2012. This governor and Legislature are willing to put the state's AAA bond rating at risk for road projects, as witnessed by the increase in Utah's constitutional legal debt margin from 36.74 percent in 2007 to 88.79 percent in 2012.
These are not the actions of a "fiscal conservative" governor. They are more closely aligned to the budget policies of "liberal" Keynesians. Spending on roads has increasingly put the state's finances at greater risk, and at the very least will take $200 million to $300 million off the table for future spending to pay the debt service.
At a recent luncheon in Salt Lake City, members of the governor's staff touted that they were "fiscal conservatives" two or three times. It came off as, "the lady protest too much, methinks."
At some point, the "borrow and spend" policies of this Keynesian governor may become fertile ground for some disgruntled delegates in Utah County Republican caucuses.
Doug Macdonald owns an economic consulting firm.