Any organization that provides services to vulnerable Utahns can attest to the difficulties posed by the Great Recession on the one hand, and state budget cutbacks on the other. But you may not know that the economic crisis was not the only reason for state revenue shortfalls. Our recent report, “What’s Eating Utah’s General Fund?” identifies nearly $1 billion in state resources that escape scrutiny each year thanks to exceptions written into the tax code for certain economic activities. These exceptions are known as tax expenditures, because the decision to grant them is the fiscal equivalent of spending on a state program.
Our report also finds a massive increase—900% since 2005—in the amount of state revenue that is restricted to specific purposes. These “earmarks” drain away resources from elsewhere in the budget, no matter what other problems the state may be facing.
Many other states nationwide are becoming conscious of the need to identify limitations like tax expenditures and earmarks on state revenue. Annual tax expenditure reports, mandatory “sunset” dates, and systematic evaluation of the costs and benefits of existing legislation, are just some of the techniques used. The objective is to ensure greater transparency, so that lawmakers have all the information required to carefully weigh each tax expenditure and earmark against other pressing budget needs. These techniques also help voters hold lawmakers accountable for their decisions.
You can learn more about these issues by downloading the full report “What’s Eating Utah’s General Fund?” at www.utahchildren.org.
Allison Rowland is director of research and budget at Voices for Utah Children.