Jan. 17, 2008

A Publication of the Economic Development Corporation of Utah

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FEATURE

Utah's Economy a Priority for House and Senate Leadership

Utah legislators will turn their eyes to the state's economy in the upcoming legislative session, House and Senate leaders say, with bills ranging from adjustments in tax law to remedies for sky-rocketing healthcare costs.

“We're going into a slower economic time period so we'll have to be a little bit more careful with our dollars,” says Senate President John Valentine. “We'll want to make certain we do some economic development—we don't want to let that go.”

Energy

For Valentine, energy is one of the key areas that Utah could better capitalize on to keep its economic engine running strong. In that regard, at least one bill will likely take aim at better access to oil shale areas in the Uintah Basin.

“We spend a lot of time trying to attract industry here, but we forget we have this great natural resource out in the Basin. We could really start making this into an economic development model for Utah,” Valentine says, noting that the natural resources area is one that could shine during a slowdown in the national economy.

Sales Tax

A potential change in the sales tax formula for Utah could also spur economic growth in Utah, he adds. An idea in the works among legislators would allow companies to relocate to Utah and pay tax on sales, but not on assets or payroll in Utah.

“They'd want to have their employees here because that doesn't count against them for purposes of how much income tax they pay to Utah,” he says. “If we encourage people to come here by allocating only the sales made in Utah, but don't require them to allocate their assets or payroll, it makes Utah a haven for purposes of taxation.”

Property Tax Law

Property tax laws are also expected to come under scrutiny this session, as well, according to Valentine and House Majority Leader David Clark. While there are several proposals on the table, Valentine says one of the most promising ones would help lessen the immediate jump in property taxes based on reappraisals.

“What's happened is that people had big increases that occurred all at once. All of a sudden their property was appraised and they had a 60 percent increase in their tax. That kind of action hits fast and hard,” Valentine says.

Clark has also seen a proposal to reduce property taxes by $15 million by funding a school reading program with income tax instead of property tax.

Healthcare Reform

In addition to tax changes, Clark says healthcare reform is a top economic issue coming out of the House of Representatives. He is currently sponsoring a bill that would give an income tax credit to individuals who purchase their own health insurance. That tax cut, he notes, could help counter the fact that Utah led the nation in recent years with the number of businesses that have dropped health insurance coverage for employees.

Clark's proposal is one step in a three-year prescription for healthcare reform legislative leaders are crafting. Another step is to “inject consumerism” into healthcare by giving people information and choice. “You probably did more research about that flat screen or digital camera you purchased than you did on your last medical,” he says. “We generally do not shop. We don't have any good comparisons.” Clark wants to put healthcare information within reach of consumers, who could then determine which medicines, treatments and hospitals are best for them, based upon factors such as recovery rates, length of hospital stay and mortality rates.

He is also pushing for language that will require business, medical and government leaders to collaborate on a strategic plan for healthcare costs. Clark says that plan is essential for Utah's economic growth with healthcare making up 16 percent of the state's economy and projected to exceed wages in less than 20 years.

“I don't mind participating in healthcare, but I can't pay everything I make to healthcare. That's the path we're on,” Clark says. “That's the pain in the market that businesses and consumers all feel right now.”

USTAR

Legislators will also have some good economic news to tackle this session, Clark says, with several programs exceeding initial expectations. The Utah Science Technology and Research Initiative (USTAR) has already succeeded in luring top research teams to both the University of Utah and Utah State University and will likely need a second installment of about $10 million to keep the momentum going.

“At this point in USTAR, we thought they would run the first lap. I think they're beginning the third lap,” Clark says. “They've spun off more commercialization than we expected.”

Fund of Funds

Other good news: The state's Fund of Funds program, which is helping to draw venture capital firms and money into the state, has also been successful and is ready for a second cycle of funds. Clark hopes to see that fund increased by about $100 million to make it self-perpetuating.

While House and Senate leaders sharpen their focus on different and often opposing bills throughout the session, Valentine says so far he hasn't seen any major rifts between the two groups. Both bodies agree on the need for a teacher salary increase and the need for property tax changes, Valentine says.

“We're starting out with a lot of agreement; let's hope we can keep it going,” he says.

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