Jan 07, 2003

Subsidy Battle


Utah, like every other state in the nation, continues to be
impacted by the national economic downturn. Governor Mike Leavitt has
implemented a 1,000-Day Economic Plan with the goal of positioning Utah for
prosperity over the long term. He believes that Utah must align the state
budget with its long-term economic strategy and apply wise fiscal practices.

Gov. Leavitt proposed five budget principles for addressing
the FY 2003 budget shortfall and his FY 2004 budget recommendations. One of
these guiding principles is to reduce water subsidies. He proposed to eliminate
the earmarking of sales taxes for water development.

A task force on alternative revenue sources for water
funding was set up this summer after the Utah Governor tried to shift about
$18.5 million from the state water development budget to education. This money
is collected from a 0.0625 percent sales tax. In shifting the money to
education, Gov. Leavitt argued that taxpayers should not be subsidizing water
projects. He also called for increased water conservation.

The Utah Legislature, which has supported large water
development projects in the past, compromised by cutting $2 million in water
subsidies and promising to find water-funding alternatives to introduce to the
2003 Legislature.

The task force (composed of four lawmakers and three
representatives from the Governor's Cabinet) began looking at who should
pay for water and what method to charge for it. Quickly eliminated from
alternative funding proposals were a tax on toilets, a tax on soft drinks, a
surcharge on water rights and a state-sponsored lottery. The latter two plans
actually have been implemented to help water funding in other states.

Still under consideration by the task force are a
combination of taxes or surcharges on excessive water use during the summer;
water and sewer bills; boats and personal water-craft; admissions to state
water parks and golf courses; waterfowl hunting and fishing licenses; metered
water sales; and a statewide property tax for water development. Environmentalists
believe the task force should focus its efforts on revenue sources such as
water-use taxes that encourage conservation. They feel property taxes do not
advocate conservation.

Revenue from the new taxes and surcharges will be used to
pay for an estimated $5 billion in dams, pipelines, water treatment plants and
sewage treatment plants needed during the next 20 years to meet the demands of
Utah's growing population.

In FY02, $41.3 million was provided in loans and grants from
governmental agencies to water/wastewater suppliers in Utah. This was
approximately 22 percent of the funds for drinking water projects in the state.
About 12 percent of the $41.3 million provided came from state sales tax
supported loan funds.

While realizing water projects are vital to Utah's
growth and prosperity, they are striving for greater efficiencies in their
systems and self-generating funding sources. As in other states, the future is
at stake.

About the author

Bill Swichtenberg is Editorial Director. He can be reached at [email protected]