Earmarks reform is unfinished business of legislative session

08 March 2016 Written by  

This op-ed by Matthew Weinstein of Voices for Utah Children was originally published in the Salt Lake Tribune on March 5, 2016.

As the Legislature comes down to its final days, quite a few issues remain to be resolved. Many are controversial and attract considerable public and media attention, such as medical marijuana and the death penalty. But few are as consequential to the state's future fiscal health as the decision the Legislature will make regarding earmarks.

For over a decade, as the Legislature has identified a long list of new public investment needs, particularly in the area of transportation, it has been loathe to also identify new revenue sources to finance them or even to permit existing revenue sources to keep up with inflation. (Last year's 5 cent per gallon gas tax increase, which went into effect January 1 and was hardly noticed amid falling gas prices, restored less than half the value lost to inflation since that tax had last been raised in 1997.)

This fiscal paralysis led the state's leaders to turn in a new and not very healthy direction — earmarks. Earmarks are permanent diversions of existing revenue sources to finance the newly identified needs that legislators are hesitant to raise taxes to pay for. Many call it "robbing Peter to pay Paul" because it means taking funds away from the areas that were previously being financed by those diverted dollars – education, aid to the needy and disabled, health care, criminal justice, etc. Those areas have suffered greatly as earmarks have grown from under $50 million a decade ago to $600 million a year today:

• Utah remains in 50th place in per pupil K-12 education investment.

• Public university tuition has tripled since 2000.

• The share of Utahns attending high-quality public preschool programs remains less than half the national average.

• Underfunding of drug and mental health treatment has contributed to rising recidivism rates.

• Utah's uninsured rate for Hispanic children is the worst in the nation.

And there are many other examples, too many to list here.

The most common justification for the transportation earmarks has been the argument that 17 percent of all sales tax revenue is generated by transportation-related sales, therefore it is only fair to make those revenues available for transportation investment purposes. Never mind that these earmarks have actually reached 22 percent of all sales tax revenues this year and still rising. The fact is that this justification has no basis in any accepted principle of public budgeting.

Imagine if such a principle did exist. Would we then expect to slice up the sales tax revenue pie by spending technology-related sales tax revenues only on STEM education and health care related revenues only on Medicaid and so forth? No other state even attempts to budget by such convoluted reasoning. Moreover, applying this non-existent principle actively undermines the application of the bona fide public budgeting principle known as the user fee that should be the primary financing mechanism for transportation infrastructure, through the gas tax and motor vehicle registration and related fees.

Simply put, the 17 percent rule is a convenient rationalization, not a legitimate rationale.

Last year the Legislature convened the Tax Review Commission for the first time in five years to examine the question of earmarking. From April through November, the state's leading tax experts heard testimony, developed a set of objective criteria for evaluating earmarks, and reached the conclusion that there was no legitimate justification for any of the earmarks save for one small one. They called on the Legislature to repeal the rest immediately, effective July 1, 2016.

Sadly, no legislative committee has embraced the Commission's report, and no legislation has been introduced to enact its full recommendations. However, we do have House Bill 296, a much more modest but still meaningful proposal to cut back the earmarks by $10 million annually over five years, reaching $50 million in year five and amounting to a $400 million reduction in earmarks over the next decade. This legislation, sponsored by House and Senate Transportation Committee chairs Johnny Anderson and Alvin Jackson, represents a sincere (if limited) effort to begin the process of reducing our excessive earmarks and restoring revenues to the General Fund.

As the 2016 Legislative Session reaches its final days, let us all hope that its legacy will include taking at least modest steps to reduce earmarks and restore a more well-considered approach to fiscal management.

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Matthew Weinstein 300Matthew Weinstein, State Priorities Partnership Director, joined the organization in 2014. As State Fiscal Policy Director, he conducts analysis and advocacy focused on the state budget from the perspective of what's best for Utah's children. He holds a Master of Public Policy degree from Georgetown University and a B.A. in Political Science from Amherst College.