Governor Gary Herbert's Final Budget Recommendations 12.10.2014 for Fiscal Year 2016

Future of

UtahINVESTING IN THE

Budget Recommendations Fiscal Year 2016

Fiscal Year 2015 Supplementals

Governor Gary R. Herbert

FISCAL RESPONSIBILITY Total FY2016 budget

EDUCATION K12

Future of


$14 billionbalanced budget

Economic growth boosts state budget

$190 millionone-time

$70 millionUSHE, UCAT, UEN

3 percentcompensation increase

UTAH GOVERNOR

GARY HERBERT

$325 millionnew ongoing money

$500 millionnew money for public and higher education

$313 millionnew one-time money

$310 millionongoing money

$1.3 billionnew money over

past 4 years

$15 millionfor performance

incentives

$3 million for Regent Scholarships

$13 millionUtah College of Applied

Technology to expand programs and fill

high tech jobs

$56 millionCapital Outlay Program

pays for buildings, technology, infrastructure

$94.2 millionsales tax earmarks returned

to General Fund

HIGHER EDUCATION

increase teacher salary

$2.4 million

website

technology investment

professional development

6.25%increase ($161 million)

Weighted Pupil Unit (WPU)

$1.5 millionschool counseling

2X+ More than doublelast years increase

$478 millionRainy Day Funds

above pre-recession level

$58 millionenrollment growth

$99 millionnew buildings

including operation and maintenance

local decisions for:

8,000 new students

$3.1 billionincome tax

$2.3 billionsales tax

Largest revenue sources:

Largest increase in 25 years

What is WPU used for?

UTAH GOVERNOR

GARY HERBERT

Future of


We work to make government more efficient.

CLEAN AIR

PUBLIC SAFETYCORRECTIONS

$20 millionreplace old school buses

$1.5 millionreplace high-pollution equipment in homes, small businesses

$750,000air quality research

$46 millionprison relocation

$500,OOOPay-for-Success pilot program

$1 millionbody cameras for state troopers

HEALTHY UTAH

$446 millionRecovered from approximately

$700-800 million in Affordable Care Act taxes Utahns already paying

$4.6 millioncost to UtahFY201516

95,000Utahns earning less

than $15,521 per year are covered

$10.5 millionRecidivism reform

Reducing Recidivism

37%prison population projected increase by 2033 with no

intervention

TableofContents

GovernorsBudgetOverview.........................................................................................................1Table1:GovernorsEducationBudgetRecommendations..........................................................7Table2:SourcesandUsesofUnrestrictedGeneralFundandEducationFund...........................9Table3:SourcesandUsesofStateCollectedFunds..................................................................11Table4:SourcesandUsesofAllFunds.......................................................................................15InvestinginWhatWorksPolicyBrief..........................................................................................17UtahsMajorRevenueSourcesBudgetandPolicyBrief............................................................19Table5:ConsensusRevenueEstimates.......................................................................................22RevenueEarmarksBudgetandPolicyBrief................................................................................23Table6:EarmarksandSetAsides................................................................................................25PublicEducationBudgetandPolicyBrief....................................................................................27Table7:MinimumSchoolProgram.............................................................................................34CareerCounselingBudgetandPolicyBrief.................................................................................37PostSecondaryEducationBudgetandPolicyBrief....................................................................39HealthyUtahBudgetandPolicyBrief.........................................................................................43MedicaidBudgetandPolicyBrief................................................................................................47CorrectionsandRecidivismReformBudgetandPolicyBrief.....................................................49InfrastructureBudgetandPolicyBrief........................................................................................55Table8:GeneralObligationBonds..............................................................................................57TransportationInfrastructureBudgetandPolicyBrief..............................................................59WaterBudgetandPolicyBrief.....................................................................................................61AirQualityBudgetandPolicyBrief.............................................................................................65Table9:RecommendedAdjustmentsbyAgency.......................................................................67GOMBContactList.......................................................................................................................73

GOVERNORSBUDGETOVERVIEWBudgetPrinciplesMaintainingUtahs competitiveedgeandqualityof life requires thatwe proactivelymanage andaddress the multiple demands being placed onlimited taxpayer dollars. Utahs growing andchangingpopulation,alongwithnewdynamics inourrevenuestreams,placean increaseddemandon everything from education to infrastructureand the states natural resources to ourcorrectionalsystem.

Reacting only to new demands and changeswithintheeconomywithoutaproactiveapproachto budget design and strategy could potentiallyleave Utah vulnerable to a diminished futureprosperity.A proactive focus on doing a limitednumber of things well will often yield betterresults than trying to do too many things andlosing focus on what is most important. TheGovernors recommended budget reflectsstrategic investments of scarce taxpayerresources to best manage the many demandsplacedontheStateofUtah.

GovernorHerbertsbudgetproposal isbasedonfourmajorprinciples:1. Optimizeahealthyandgrowingeconomy2. MakestrategicinvestmentsinUtahs

people3. Providemaximumreturnontaxpayer

dollarspursuinginnovativealternativestomeetdemandsshouldbeastandardbusinesspractice

4. Livewithinourmeans

BudgetSummaryThe Governors total recommended budget forfiscal year 201516 (FY 2016) is$14.3 billion,includingstate,federal,andcertainlocalsources.The recommended budget financed by statecollectedfunds(i.e.,excludingfederalfunds,localproperty tax for schools, and higher educationtuition) totals about $9.1 billion. Therecommendedbudget for theGeneral Fund andtheEducationFund,thestatestwolargestfunds,totalsapproximately$6.3billion.

Major categoriesofGeneralFundandEducationFund expenditures include public education(about$3 billion), Medicaid and other socialservices (about$1 billion), higher education(about$1billion), and corrections,public safety,and justice (about$500 million). In addition,transportation expenditures from statecollectedfunds total about$1 billion(including debtservice payments for transportation projects).These expenditures are funded through varioustransportationfundsoutsideoftheGeneralFund.

BudgetBookOutlineThere are many ways to view the variouscomponents of Utahs budget. This documentsummarizes major components of the budget,including the Governors proposed budgetchanges. This years budget recommendationbookisdividedintotwosegments.Thefirstdealswithbudgetpolicyissuesandismorenarrativeinnature.The secondprovides additional technicaldetails about the Governors budget

1

recommendations and can be found onlineatgomb.utah.gov.

AStrongandGrowingEconomyThe Governors economic focus has been tocreatea strongeconomy.A vibranteconomy, inturn, provides the financial resources forUtahsmanybudgetdemands,includingeducation.

Utahhasemergedfromtherecessionwithoneofthestrongesteconomiesinthenation,withotherstateslookingtoourexample.AsofOctober2014(the most recent data available), Utah has anunemployment rateof3.6%.Over thepastyear,over47,000new jobshavebeenaddedtoUtahseconomy, a healthy growth rate of 3.6%.Although theGovernors focuscontinues tobeafurther improvement of the job situation forUtahs families, significant progress has beenmade.

RevenueForecastAfter years of budget challenges, a growingeconomyisnowprovidingtheresourcestoinvestin the states longterm future. Utahs vibranteconomy and broadbased economic growth isreflected ingrowing stategovernment revenues.Stateindividualincometaxandcorporateincometaxrevenuesaregrowingwithmorepeoplebackto work and businesses earning a profit. Aspeople feelmore confident about the economyand purchase more goods, sales tax revenuescontinuetoincrease.

In November 2014, the Governor's Office ofManagement and Budget, the Office of theLegislativeFiscalAnalyst,and theUtahStateTaxCommission revised the states FY2015 revenueforecastanddevelopedanewconsensusrevenueforecast for FY 2016. The Governors budgetrecommendations are based on this forecast,which yields approximately$313 millionin newonetime funds (including$112 millionfrom the

FY2014revenuesurplus)and$325millioninnewavailableongoingunrestrictedGeneral FundandEducation Fund revenue. In addition, a net$56million ongoing and$7 milliononetime fundsare allocated for earmarks. These revenueincreasescomefromstrongincreasesinindividualincome taxes (nearly$200 millionabove theFebruary forecast forFY2015)andsalesandusetaxes (over$140 million, of which about$80millionis deposited into the General Fundand$60millionisused forearmarked funds), aswellasothersources.

PrudentFiscalManagementThroughsoundbudgetingpractices,thestatehasprudentlymanaged its resources.Rainyday fundbalanceshavenowbeenrestoredandexceedprerecession totals, with about$470 millionin thestates various rainy day funds (Education FundBudget Reserve Account, General Fund BudgetReserveAccount,MedicaidGrowthReductionandBudget Stabilization Account, and DisasterRecovery Restricted Account). In addition, theGovernor recommends an additional$8millionbedepositedtoRainyDayfunds.

Utahisrecognizednationallyforitsprudentfiscalmanagement, includingmaintaining itsAAAbondrating, which creates sizable interest savingsrelative to states with lower bond ratings. TheGovernors budget funds actuariallyestimated,longterm obligations including pensions, bondpayments, and various employee benefitprograms.

In addition, and in large part due to theGovernors SUCCESS initiative and a revampedbudget process, agency budget requests werereduced by nearly 40% as many agencies haveimproved the capacity to resolve issues withexisting resources. Although this is an ongoingprocess, significant progress has beenmade.Ofthesystemscurrentlyreportingmeasuresthrough

2

the Success Management Information System(SMIS),thereisa17%improvementafterthefirstphaseofimplementation.

One concerning budget practice in recent yearshas been the proliferation of General Fundearmarks. As detailed in the budget brief onearmarks, this continuing practice can createbudgetary problems. The Governors budgetproposes to shift a portion of earmarkedrevenues ($94.2 million) back to the GeneralFund. Although providing transportationinfrastructure is clearly important for a wellfunctioningeconomy, transportationneedsmustbe balanced against all other needs, includingeducation. The Department of Transportationindicates that it can effectivelymanage existingprojects with the change in transportationearmarks with no postponement of currentlyprogrammed projects. In addition, theGovernorintendstoworkwiththe legislaturetodevelopasustainable funding plan for transportation,including the maintenance of existinginfrastructure.

With theseprudent fiscalmanagementpracticesinplace, theGovernorsbudgetproposes tousegrowing revenues to strategically invest in thepeopleofUtah.

InvestinginPeople:EducationTobesuccessful longterm,thestatemust investin its people. In the 21st century, a dynamiceconomy requires an educated population.Education drives innovation, attracts employerslookingtofillhighskilled jobs,andprovidesforahigherqualityoflife.

The Governors budget starts with education,providingover$500million for thestatespublicandhighereducationsystems,bringingtotalstateeducation spending to approximately $4 billion.The Governor recommends over$340 millionin

support of public education ($246millionongoing,$96 milliononetime). Thisamount includes the largest net increase in theweightedpupilunit (WPU) in25years,at6.25%.In addition, the budget builds on last yearshistoric increases in higher education funding,providing nearly$160 million($64 millionongoing, $95 million onetime) for the statespostsecondary institutions. Together, theseongoing and onetime increases for educationtotalhalfabilliondollars.

PublicEducationUnlike those who want to micromanage thepubliceducationsystemfromthestate level,theGovernorbelievesthatthestateshouldestablishgeneralpolicygoalsandexpectedoutcomesandallow local control in the specific methods ofattaining those goals. The Governors budgetproposes a substantial increase in locallycontrolledbasic schoolprogram funding througha 6.25% increase in the value of the weightedpupil unit (WPU), estimated at$161 million.Again, this represents the largestnet increase intheWPUin25years.

Suchasizable increase isprovided toallow localschoolsboardsflexibilityastheyfocusonneededlocal investments, including professionaldevelopment for educators. Our teachers,principals, and other educators are key toreaching toGovernors goal of being in the toptenstatesforstudentachievement.

Inthefallof2015,Utahsschoolsareestimatedtohavenearly8,000morestudentscomingthroughthe door. The budget funds this anticipatedenrollment growth, at a cost of$58 million,includingfournewprogramsreceivingenrollmentgrowth funding and a oneyear extension of anexpiringcharterschoolaveragedailymembership(ADM)fundingprovision.

3

While thesehistoric increases represent a goodfaith down payment to increase resources forpubliceducation,meaningfulaccountabilitymustaccompanythis investment.Overtime, improvedstudentoutcomesfromthismajorinvestment,asmeasuredon thenewPACE school report cards,should be expected. Important benchmarksinclude elementary school reading proficiencylevels, middle school math proficiency levels,graduation rates, and disadvantaged studentoutcomes.

Over the coming year, the Governor calls oneducation stakeholders to unite in developing atenyearplanforUtahseducationsystem.Aspartof this plan development, a comprehensivereview of the public education funding systemshould be undertaken to: (a) identifyopportunities for simplifying and streamliningfunding to enhance local control and meetmoderndeliverysystemsandstudentneedswhilealsomaintainingfundingequity;and(b)ascertainwaysofproviding thepublicwithgreater insightinto the relationship between school costs andoutcomes.

The Governors budget also provides funds forcapital infrastructure forUtah schools, includingtechnology. Major investments include $10.7million ($4.5 millionongoing and $6.2milliononetime)fortheUtahEducationNetwork(UEN) to connect schoolsbyproviding statewidetechnology infrastructure. An additional$56million($20millionongoingand$36milliononetime) is recommended for the capital outlayfoundation program that provides funds forbuildings or technology infrastructure to smallschool districts and school districts with acomparatively lowproperty taxbaseperstudentwhomakeasignificantpropertytaxeffort.

The budget recommends $1.5 million forinnovative approaches and collaboration for

collegeandcareercounselingand$2.4millionfortheUtahFutureswebsite.

TheGovernoralsoproposesoperationalincreases($900,000ongoingand$700,000onetime)andanew building for the Schools for the Deaf andBlind($14.5million).

HigherEducationAs an extension of last sessions historicinvestment in the states postsecondaryeducation institutions, the Governor proposesadditionalincreasesinhighereducation.

The budget includes$30 millionto fund a 3%compensation increase for higher educationemployeeswith the flexibility for institutions totarget funds to retain the best and brightestemployees and to addresshealth insurance costincreases.

In addition,$15 millionis recommended forperformancebased funding for Utah System ofHigher Education (USHE) institutions. In supportofthestatesgoalof66%ofadultswithadegreeorcertificateby2020, this funding is targeted toinstitutions making meaningful progress towardmissionspecific objectives leading to the 66%goal, including increasing the number ofgraduates. Rather than focusing on inputs, thisapproach focuses on higher education achievingdesiredoutcomeswhileleavingthedetailsofhowto attain these outcomes to the individualinstitution.

TheUtahCollegeofAppliedTechnology(UCAT)isa key factor inmeeting the 66% goal, providingmarketbasedtechnicaltrainingtomeetemployerdemands. The Governor recommends over$13millionto increase UCAT campus capacity,enhancing theabilityofeachcampus to increasethenumberofcertificatesawarded.

4

Inaddition, thebudget includes funding fornewhigher education buildings, including theUniversity ofUtah Crocker science building ($34million), Snow College science building ($19.9million),DixieAppliedTechnologyCollege ($31.9million), and theUniversity ofUtahsHuntsmanCancer Institute ($9.5million),aswellasvariousUCAT infrastructure needs ($3 million). Fundingfor related maintenance costs is alsorecommended($4million).

InvestinginPeople:HealthyUtahAsaresultofdecisionsmadeinWashington,D.C.regarding the Affordable Care Act (ACA), theGovernorhasobtained the flexibility foraUtahspecific approach to health care. The HealthyUtahprogram isdesignedtoprovidecoveragetoapproximately 95,000 lowincome Utahns,protect taxpayers, and promote individualresponsibility. The Governors budgetincludes$4.6millionforHealthyUtah.

Key featuresof theplan (detailsofwhichcanbefound athealthy.utah.gov) include providingcoverage through private insurance markets,charging premiums and copays for adults,automaticallyenrollingadultswhocanworkinanintegrated work program, and incentivizinghealthybehaviors.

CorrectionsReformBasedoncomprehensivestudiesto identifywaystoimproveUtahscorrectionalsystem,significantfunding ($10.5 million) is provided to reduceUtahsrecidivismrate.Theoverarchingstrategyisto continue to protect public safety by usingprisons for serious and violent offenders whileimplementing costeffective strategies thatensure appropriate oversight and a betterintegration of nondangerous offenders intosociety so they may make meaningfulcontributions. Strengthening probation andparole supervision and improved reentry and

treatment services, as well as support of localcorrections systems, are key strategyrecommendations. In addition, the proposalincludes funding for pilot Pay for Successcontracts for investors that fund programs thatdeliversuccessfuloutcomes.

Asanimportantaspectofthiscorrectionalreformeffort, additional funding is provided to addressspecific compensation issues for correctionalemployees($2.1million).

Inaddition, theGovernor recommends increasestocountyjailreimbursementrates($1.5million),jailcontractingrates($1million),andincreasesinthe number of prisoners housed through jailcontracting ($1.2 million). The budget alsoincludes$8 millionto fund operations at theexpanded Gunnison prison and includes$46millionforprisonrelocationcosts.

AirQualityandWaterIn addition to the many actions alreadyundertakenandthataredescribedinmoredetailin the air quality budget brief, the Governorsbudgetaddressesairqualityinanumberofways.First, the Governor proposes$20 millionfor thereplacementofolderpollutingschoolbuseswiththose that use clean fuel technology. Inaddition,$1.5 millionis provided for grants toincentivize households and small businesses toreplace polluting equipment, such as woodburningfireplaces,oldlawnmowers,andbusinessequipment. Inaddition,$750,000isproposed forair quality research and over$500,000isproposedforeducationandcomplianceeffortstoensurethateveryoneisplayingbythesamerulesand the publicatlarge is not suffering from thebadactionsofafew.

For water, the budget also includes$11.2million($5 millionGeneral Fund, $6.2millionfrom sales tax earmarks for water)for

5

improvements to dam safety,$600,000tomaintain a drinking water program,nearly$440,000to improve the water rightadjudicationprocess,and$130,000fromsalestaxearmarkstoconductcanalsafetyinspections.

InvestinginPeople:EmployeeCompensationThe Governors budget proposes an inflationary2% salary increase for state employees ($12.5million) aswell as targeted funding to increaseagency hot spot salaries in specific

classificationsthatarebelowmarketwages($6.6million). In addition, the budget funds ongoinghealth cost increases($5million) and includesongoing funding for the 401(k) match programfundedduring last years legislative sessionwithonetimefunds($4.3million).

SummaryThe Governors budget is rational, reasonable,and responsive to the needs of the state. ItinvestsinthefutureofUtah.

6

Table1

:

7

Table2SummaryofRecommendationsbyAgency:GeneralFundandEducationFundOperatingandCapitalBudgets,includingExpendableSpecialRevenueFundsandAccountsandRestrictedFundTransfers

Recom Ongoing& RecomActual Authorized Supple mended Base Onetime mendedFY2014 FY2015 mentals FY2015 FY2016 Adj. FY2016

(a) (b) (c) (d) (e)PlanofFinancingGeneralFund $2,173,778,900 $2,176,222,900 $0 $2,176,222,900 $2,179,051,800 $165,142,300 $2,344,194,100GeneralFund,Onetime (4,242,500) 155,934,500 (13,039,400) 142,895,100 0 182,596,001 182,596,001EducationFund 3,130,807,000 3,292,039,400 0 3,292,039,400 3,292,039,400 246,669,700 3,538,709,100EducationFund,Onetime 96,709,800 154,619,800 4,450,400 159,070,200 0 206,686,800 206,686,800TotalFinancing $5,397,053,200 $5,778,816,600 ($8,589,000) $5,770,227,600 $5,471,091,200 $801,094,801 $6,272,186,001OperatingBudgetAdministrativeServices $31,814,500 $31,855,300 $450,000 $32,305,300 $37,268,100 $3,599,000 $40,867,100AgricultureandFood 11,805,600 13,309,800 0 13,309,800 11,502,800 1,763,300 13,266,100AttorneyGeneral 45,140,200 32,911,100 0 32,911,100 32,578,400 1,394,900 33,973,300Auditor 3,446,100 3,534,600 0 3,534,600 3,522,700 (636,600) 2,886,100BoardofPardonsandParole 3,530,600 4,222,300 0 4,222,300 4,210,200 281,100 4,491,300CapitolPreservationBoard 4,037,000 4,375,200 0 4,375,200 4,246,800 3,273,500 7,520,300CareerServiceReviewOffice 288,700 261,900 0 261,900 260,500 7,100 267,600Corrections 239,871,800 262,339,400 0 262,339,400 261,044,600 19,988,000 281,032,600Courts 113,830,300 117,287,200 814,200 118,101,400 116,697,100 5,375,900 122,073,000EnvironmentalQuality 10,977,600 14,577,000 0 14,577,000 12,171,300 3,210,300 15,381,600GovernorandLt.Governor 11,141,700 12,474,600 48,200 12,522,800 11,179,500 6,994,300 18,173,800Gov.OfficeofEcon.Dev. 35,532,800 45,631,500 0 45,631,500 25,060,900 7,373,800 32,434,700Gov.OfficeofEnergyDev. 1,008,900 1,298,400 0 1,298,400 1,294,500 234,000 1,528,500Health 403,968,800 472,590,100 (14,539,500) 458,050,600 462,887,300 22,926,600 485,813,900HeritageandArts 16,501,900 14,335,000 0 14,335,000 13,270,900 1,653,600 14,924,500HigherEducation 726,325,500 809,710,200 0 809,710,200 805,738,800 47,149,900 852,888,700HumanResourceMgmt. 2,869,900 2,606,000 0 2,606,000 2,598,700 (2,523,500) 75,200HumanServices 305,193,100 320,281,100 0 320,281,100 305,611,000 12,592,000 318,203,000Insurance 8,087,900 4,400 0 4,400 4,400 0 4,400JuvenileJusticeServices 87,680,700 89,218,300 0 89,218,300 87,457,400 3,627,800 91,085,200LaborCommission 6,090,500 6,051,200 0 6,051,200 5,972,800 183,200 6,156,000Legislature 25,009,600 24,479,200 0 24,479,200 23,738,700 461,700 24,200,400NationalGuard 5,964,300 6,147,200 0 6,147,200 6,129,700 404,700 6,534,400NaturalResources 34,940,400 35,904,100 0 35,904,100 33,998,500 6,407,900 40,406,400PublicEducation 2,648,493,400 2,744,158,500 3,430,000 2,747,588,500 2,740,726,300 255,613,300 2,996,339,600PublicLandsOffice 861,400 853,700 0 853,700 851,900 915,600 1,767,500PublicSafety 71,423,600 69,797,200 0 69,797,200 70,086,800 5,487,400 75,574,200StateOfficeofRehab. 19,372,800 21,731,100 0 21,731,100 20,933,000 6,123,100 27,056,100TaxCommission 45,209,100 43,866,800 0 43,866,800 46,637,900 1,579,000 48,216,900TechnologyServices 2,266,200 1,319,000 0 1,319,000 1,309,300 56,600 1,365,900Transportation 100,000 3,150,000 0 3,150,000 0 0 0Treasurer 908,400 927,300 0 927,300 924,000 24,100 948,100UCAT 57,830,600 65,975,100 0 65,975,100 66,262,600 18,255,900 84,518,500UtahEducationNetwork 19,096,700 22,517,900 0 22,517,900 19,217,900 10,985,800 30,203,700USTAR 22,016,000 22,036,800 0 22,036,800 22,032,800 50,800 22,083,600Veterans'andMilitaryAffairs 1,555,200 2,512,800 0 2,512,800 2,205,200 245,300 2,450,500WorkforceServices 65,232,900 64,513,500 1,138,300 65,651,800 69,126,600 (584,200) 68,542,400SubtotalOperatingBudget 5,089,424,700 5,388,764,800 (8,658,800) 5,380,106,000 5,328,759,900 444,495,200 5,773,255,100CapitalBudgetCapitalBudget 184,039,100 264,643,600 0 264,643,600 46,777,300 259,378,100 306,155,400NaturalResources 1,772,100 772,100 0 772,100 772,100 0 772,100PublicEducation 14,499,700 14,499,700 0 14,499,700 14,499,700 56,000,000 70,499,700Transportation 1,470,600 0 0 0 0 0 0SubtotalCapitalBudget 201,781,500 279,915,400 0 279,915,400 62,049,100 315,378,100 377,427,200DebtService 85,939,900 85,829,300 69,800 85,899,100 71,675,100 14,221,500 85,896,600Transfers* 19,907,100 24,307,100 0 24,307,100 8,607,100 27,000,001 35,607,101

TotalBudget $5,397,053,200 $5,778,816,600 ($8,589,000) $5,770,227,600 $5,471,091,200 $801,094,801 $6,272,186,001

Thistableincludesrecommendedcapitalandoperatingbudgets,includingexpendablespecialrevenuefundsandaccounts,fromtheGeneralFundandEducationFundonly.

GovernorHerbert'sRecommendations

*ThetransferslineincludestransfersfromtheGeneralFundandEducationFundtorestrictedfundsandaccounts.Transferstoexpendablefundsandaccountsareincludedundertheageniesthatmanagetheexpendablefundsandaccounts.

9

Table3SummaryofRecommendationsbyAgency:StateCollectedFundsOperatingandCapitalBudgets,includingExpendableSpecialRevenueFundsandAccounts


(a) (b) (c) (d) (e)PlanofFinancingGeneralFund $2,168,171,800 $2,167,615,800 $0 $2,167,615,800 $2,170,444,700 $165,142,300 $2,335,587,000GeneralFund,Onetime (18,542,500) 140,234,500 (13,039,400) 127,195,100 0 155,596,000 155,596,000EducationFund 3,130,807,000 3,292,039,400 0 3,292,039,400 3,292,039,400 246,669,700 3,538,709,100EducationFund,Onetime 96,709,800 154,619,800 4,450,400 159,070,200 0 206,686,800 206,686,800TransportationFund 360,077,300 364,067,700 0 364,067,700 364,067,700 4,611,300 368,679,000TransportationFund,Onetime 1,100,200 637,400 0 637,400 0 0 0DedicatedCredits* 524,765,400 548,753,600 0 548,753,600 547,927,500 8,448,300 556,375,800Restricted/TrustFunds 1,641,002,600 1,366,546,900 500,000 1,367,046,900 1,277,234,100 (33,348,400) 1,243,885,700Transfers 621,358,500 534,688,600 1,244,500 535,933,100 382,003,800 13,081,000 395,084,800OtherFunds 784,100 500,500 0 500,500 500,500 37,900 538,400PassthroughFunds 23,370,800 23,368,100 0 23,368,100 23,330,900 0 23,330,900BeginningBalances 1,582,038,300 1,648,296,900 296,500 1,648,593,400 1,538,872,700 0 1,538,872,700NonlapsingBalances (1,648,593,400) (1,538,421,200) (451,500) (1,538,872,700) (1,217,782,400) 1,490,200 (1,216,292,200)LapsingFunds (454,459,500) (43,077,200) 0 (43,077,200) 0 0 0TotalFinancing $8,028,590,400 $8,659,870,800 ($6,999,500) $8,652,871,300 $8,378,638,900 $768,415,100 $9,147,054,000OperatingBudgetAdministrativeServices $47,448,500 $62,180,700 $450,000 $62,630,700 $55,370,400 $4,606,100 $59,976,500AgricultureandFood 22,988,300 27,371,300 184,300 27,555,600 23,130,700 3,939,300 27,070,000AlcoholicBeverageControl 225,831,300 42,679,700 0 42,679,700 41,086,800 2,819,800 43,906,600AttorneyGeneral 71,587,700 56,532,700 0 56,532,700 54,814,300 2,236,400 57,050,700Auditor 4,926,000 5,349,400 0 5,349,400 5,827,600 185,900 6,013,500BoardofPardonsandParole 3,830,700 4,424,500 0 4,424,500 4,212,400 281,100 4,493,500CapitolPreservationBoard 4,425,200 5,051,500 0 5,051,500 4,923,100 3,273,500 8,196,600CareerServiceReviewOffice 240,400 261,900 0 261,900 260,500 7,100 267,600Commerce 27,236,100 32,694,700 0 32,694,700 31,903,400 1,079,600 32,983,000Corrections 260,078,200 279,110,000 0 279,110,000 267,405,100 21,335,300 288,740,400Courts 132,608,100 146,549,900 814,200 147,364,100 143,217,300 5,073,100 148,290,400EnvironmentalQuality 36,954,100 43,150,600 (595,000) 42,555,600 40,833,800 3,859,500 44,693,300FinancialInstitutions 6,397,900 7,088,900 0 7,088,900 7,029,700 211,200 7,240,900GovernorandLt.Governor 26,598,600 27,194,000 (595,400) 26,598,600 26,598,600 4,356,000 30,954,600Gov.OfficeofEcon.Dev. 42,222,000 81,380,300 (39,158,300) 42,222,000 42,222,000 13,654,500 55,876,500Gov.OfficeofEnergyDev. 1,359,900 2,094,500 (734,600) 1,359,900 1,359,900 732,000 2,091,900Health 885,909,800 948,517,500 (14,539,500) 933,978,000 933,543,000 23,854,400 957,397,400HeritageandArts 18,584,800 18,656,000 0 18,656,000 16,506,400 1,715,200 18,221,600HigherEducation 757,505,600 883,148,100 0 883,148,100 824,780,100 47,153,500 871,933,600HumanResourceMgmt. 2,901,500 2,953,500 0% 2,953,500 2,693,500 (1,732,600) 960,900HumanServices 490,887,900 534,939,200 0 534,939,200 513,944,700 21,936,300 535,881,000Insurance 29,457,800 11,645,900 0 11,645,900 12,235,200 666,900 12,902,100JuvenileJusticeServices 89,678,900 91,773,100 0 91,773,100 88,883,000 3,708,500 92,591,500LaborCommission 9,677,200 10,969,900 0 10,969,900 10,491,500 378,600 10,870,100Legislature 24,701,200 24,729,200 0 24,729,200 23,988,700 462,700 24,451,400NationalGuard 7,006,600 6,200,900 0 6,200,900 6,149,700 404,700 6,554,400NaturalResources 147,150,400 153,451,800 65,000 153,516,800 136,781,700 26,444,200 163,225,900

Thistableincludestherecommendedcapitalandoperatingbudgets,includingexpendablespecialrevenuefundsandaccounts,fromallstatecollectedsourcesoffunding.SourcesoffundingincludenotonlytheGeneralFundandEducationFund,butalsoearmarkedtaxrevenueandotherfundingfromrestrictedfundsandaccounts,anddedicatedcredits.


11


(a) (b) (c) (d) (e)


PublicEducation 2,710,120,500 2,845,444,900 3,430,000 2,848,874,900 2,838,284,900 255,292,600 3,093,577,500PublicLandsOffice 1,353,300 4,796,600 0 4,796,600 2,122,300 938,200 3,060,500PublicSafety 148,966,500 159,278,300 0 159,278,300 150,526,700 9,922,400 160,449,100PublicServiceCommission 12,696,100 14,830,300 0 14,830,300 16,922,700 51,900 16,974,600SchoolTrustFundOffice 0 578,000 0 578,000 578,000 0 578,000SchoolTrustLandsAdmin 9,527,700 10,305,600 0 10,305,600 9,859,300 2,403,300 12,262,600StateOfficeofRehab. 25,059,200 17,891,200 0 17,891,200 21,733,000 6,789,700 28,522,700TaxCommission 85,834,300 88,179,000 300,000 88,479,000 88,258,500 2,823,900 91,082,400TechnologyServices 3,675,100 2,721,000 0 2,721,000 2,407,800 2,307,500 4,715,300Transportation 252,650,900 266,761,500 0 266,761,500 256,142,900 12,364,500 268,507,400Treasurer 2,716,700 3,202,100 0 3,202,100 2,984,500 70,200 3,054,700UCAT 57,828,100 65,962,300 0 65,962,300 65,662,300 18,255,900 83,918,200UtahEducationNetwork 34,663,700 44,113,100 0 44,113,100 37,841,100 11,039,200 48,880,300USTAR 19,722,800 24,692,800 0 24,692,800 22,190,100 50,800 22,240,900Veterans'andMilitaryAffairs 2,532,600 2,636,800 0 2,636,800 2,608,600 261,500 2,870,100WorkforceServices 104,300,000 183,765,400 2,382,800 186,148,200 163,744,700 6,547,800 170,292,500SubtotalOperatingBudget 6,849,842,200 7,245,258,600 (47,996,500) 7,197,262,100 7,002,060,500 521,762,200 7,523,822,700CapitalBudgetCapitalBudget 363,465,000 362,075,000 0 362,075,000 325,381,600 259,585,800 584,967,400NaturalResources 5,839,000 7,716,900 0 7,716,900 3,976,500 0 3,976,500PublicEducation 14,499,700 14,499,700 0 14,499,700 14,499,700 56,000,000 70,499,700SchoolTrustLandsAdmin 702,600 8,800,000 0 8,800,000 8,800,000 (3,300,000) 5,500,000Transportation 268,466,600 427,481,800 0 427,481,800 453,985,000 (94,781,900) 359,203,100Wokforce 48,103,600 123,760,000 0 123,760,000 132,530,000 0 132,530,000SubtotalCapitalBudget 701,076,500 944,333,400 0 944,333,400 939,172,800 217,503,900 1,156,676,700DebtService 477,671,700 470,278,800 (70,000) 470,208,800 452,333,100 14,221,500 466,554,600TotalBudget $8,028,590,400 $8,659,870,800 ($48,066,500) $8,611,804,300 $8,393,566,400 $753,487,600 $9,147,054,000

*Statecollectedfundsdoesnotincludefederalfunds,minerallease,orlocalpropertytaxandexcludeshighereducationtuition.

12

PAGEHASNOCONTENT

13

Table4SummaryofRecommendationsbyAgency:AllSourcesofFundingOperatingandCapitalBudgets,includingExpendableSpecialRevenueFundsandAccounts


(a) (b) (c) (d) (e)PlanofFinancingGeneralFund $2,168,171,800 $2,167,615,800 $0 $2,167,615,800 $2,170,444,700 $165,142,300 $2,335,587,000GeneralFund,Onetime (18,542,500) 140,234,500 (13,039,400) 127,195,100 0 155,596,000 155,596,000EducationFund 3,130,807,000 3,292,039,400 0 3,292,039,400 3,292,039,400 246,669,700 3,538,709,100EducationFund,Onetime 96,709,800 154,619,800 4,450,400 159,070,200 0 206,686,800 206,686,800TransportationFund 360,077,300 364,067,700 0 364,067,700 364,067,700 4,611,300 368,679,000TransportationFund,Onetime 1,100,200 637,400 0 637,400 0 0 0FederalFunds 3,496,814,000 3,688,706,000 1,606,500 3,690,312,500 3,625,941,000 61,343,300 3,687,284,300DedicatedCredits 1,204,255,200 1,209,548,800 0 1,209,548,800 1,208,722,700 17,647,300 1,226,370,000MineralLease 165,070,700 174,278,500 0 174,278,500 178,814,000 41,000 178,855,000Restricted/TrustFunds 1,641,002,600 1,366,546,900 500,000 1,367,046,900 1,277,234,100 (33,348,400) 1,243,885,700Transfers 621,358,500 534,688,600 1,244,500 535,933,100 382,003,800 13,081,000 395,084,800OtherFunds 784,100 500,500 0 500,500 500,500 37,900 538,400PassthroughFunds 23,370,800 23,368,100 0 23,368,100 23,330,900 0 23,330,900BeginningBalances 1,582,038,300 1,648,296,900 296,500 1,648,593,400 1,538,872,700 0 1,538,872,700NonlapsingBalances (1,648,593,400) (1,538,421,200) (451,500) (1,538,872,700) (1,217,782,400) 1,490,200 (1,216,292,200)LapsingFunds (454,459,500) (43,077,200) 0 (43,077,200) 0 0 0LocalPropertyTax 611,892,000 652,065,700 0 652,065,700 652,065,700 20,918,700 672,984,400TotalFinancing $12,981,856,900 $13,835,716,200 ($5,393,000) $13,830,323,200 $13,496,254,800 $859,917,100 $14,356,171,900OperatingBudgetAdministrativeServices $50,250,000 $65,139,500 $450,000 $65,589,500 $58,417,400 $4,606,100 $63,023,500AgricultureandFood 30,017,300 33,391,600 184,300 33,575,900 34,337,700 4,574,200 38,911,900AlcoholicBeverageControl 225,831,300 42,679,700 0 42,679,700 41,086,800 2,819,800 43,906,600AttorneyGeneral 73,491,800 58,618,400 0 58,618,400 56,900,000 2,574,800 59,474,800Auditor 4,926,000 5,349,400 0 5,349,400 5,827,600 185,900 6,013,500BoardofPardonsandParole 3,830,700 4,424,500 0 4,424,500 4,212,400 281,100 4,493,500CapitolPreservationBoard 4,425,200 5,051,500 0 5,051,500 4,923,100 3,273,500 8,196,600CareerServiceReviewOffice 240,400 261,900 0 261,900 260,500 7,100 267,600Commerce 27,566,100 33,097,800 0 33,097,800 32,203,400 1,087,800 33,291,200Corrections 260,522,100 279,504,300 0 279,504,300 267,799,400 21,335,900 289,135,300Courts 133,120,300 147,281,700 814,200 148,095,900 143,964,600 5,079,300 149,043,900EnvironmentalQuality 54,192,400 62,787,900 (595,000) 62,192,900 58,788,600 4,407,200 63,195,800FinancialInstitutions 6,397,900 7,088,900 0 7,088,900 7,029,700 211,200 7,240,900GovernorandLt.Governor 36,726,700 46,315,800 248,200 46,564,000 40,402,900 8,077,400 48,480,300Gov.OfficeofEcon.Dev. 44,001,600 83,291,400 0 83,291,400 31,514,500 25,375,600 56,890,100Gov.OfficeofEnergyDev. 2,039,500 2,604,400 330,500 2,934,900 2,351,400 253,800 2,605,200Health 2,670,990,100 2,811,482,100 (12,916,000) 2,798,566,100 2,740,365,300 75,788,900 2,816,154,200HeritageandArts 24,278,000 26,811,500 0 26,811,500 24,291,600 1,736,800 26,028,400HigherEducation 1,439,444,900 1,546,339,400 0 1,546,339,400 1,487,071,500 56,352,500 1,543,424,000HumanResourceMgmt. 2,901,500 2,953,500 0 2,953,500 2,693,500 (1,732,600) 960,900HumanServices 605,235,800 653,440,600 0 653,440,600 632,649,500 23,206,100 655,855,600Insurance 31,487,200 14,598,000 0 14,598,000 13,950,200 669,700 14,619,900JuvenileJusticeServices 92,959,100 96,058,500 0 96,058,500 92,726,200 3,793,600 96,519,800LaborCommission 12,456,400 13,868,900 0 13,868,900 13,447,400 503,000 13,950,400Legislature 24,701,200 24,729,200 0 24,729,200 23,988,700 462,700 24,451,400NationalGuard 77,963,700 69,423,600 0 69,423,600 52,459,200 926,100 53,385,300NaturalResources 185,407,100 206,719,900 65,000 206,784,900 198,096,400 26,973,800 225,070,200

Thistableincludestherecommendedcapitalandoperatingbudgets,includingexpendablespecialrevenuefundsandaccounts,fromallsourcesoffunding.Thesesourcesoffundingincludenotonlystatecollectedfundsfromtaxesandfees,butalsofederalfunds,mineralleaserevenues,highereducationtuition,andaportionofschoolpropertytaxes.


15


(a) (b) (c) (d) (e)


PublicEducation 3,744,769,100 3,983,388,600 3,430,000 3,986,818,600 3,976,296,000 276,622,200 4,252,918,200PublicLandsOffice 1,353,300 4,796,600 0 4,796,600 2,122,300 938,200 3,060,500PublicSafety 177,059,800 196,974,500 0 196,974,500 187,721,700 10,707,100 198,428,800PublicServiceCommission 13,783,000 16,322,200 0 16,322,200 16,922,700 55,100 16,977,800SchoolTrustFundOffice 0 578,000 0 578,000 578,000 0 578,000SchoolTrustLandsAdmin 9,527,700 10,305,600 0 10,305,600 9,859,300 2,403,300 12,262,600StateOfficeofRehab. 79,106,300 78,088,700 0 78,088,700 80,907,000 7,798,700 88,705,700TaxCommission 86,353,400 88,769,600 300,000 89,069,600 88,849,100 2,823,900 91,673,000TechnologyServices 3,881,100 3,021,000 0 3,021,000 2,707,800 2,307,500 5,015,300Transportation 291,534,700 296,656,400 0 296,656,400 286,037,800 12,502,300 298,540,100Treasurer 2,716,700 3,202,100 0 3,202,100 2,984,500 70,200 3,054,700UCAT 64,984,600 73,079,800 0 73,079,800 72,779,800 18,255,900 91,035,700UtahEducationNetwork 38,769,500 47,271,200 0 47,271,200 40,996,000 11,063,400 52,059,400USTAR 19,722,800 24,692,800 0 24,692,800 22,190,100 50,800 22,240,900Veterans'andMilitaryAffairs 17,322,100 19,126,100 0 19,126,100 19,118,700 263,700 19,382,400WorkforceServices 726,211,600 980,934,200 2,382,800 983,317,000 970,390,100 9,498,100 979,888,200SubtotalOperatingBudget 11,402,500,000 12,170,521,300 (5,306,000) 12,165,215,300 11,852,220,400 628,191,700 12,480,412,100CapitalBudgetCapitalBudget 363,465,000 362,075,000 0 362,075,000 325,381,600 259,585,800 584,967,400NaturalResources 9,315,300 11,386,600 0 11,386,600 7,646,200 0 7,646,200PublicEducation 14,499,700 14,499,700 0 14,499,700 14,499,700 56,000,000 70,499,700SchoolTrustLandsAdmin 702,600 8,800,000 0 8,800,000 8,800,000 (3,300,000) 5,500,000Transportation 641,866,800 650,290,900 0 650,290,900 678,538,900 (94,781,900) 583,757,000WorkforceServices 56,059,900 132,088,000 0 132,088,000 141,076,000 0 141,076,000SubtotalCapitalBudget 1,085,909,300 1,179,140,200 0 1,179,140,200 1,175,942,400 217,503,900 1,393,446,300DebtService 493,447,600 486,054,700 (87,000) 485,967,700 468,092,000 14,221,500 482,313,500TotalBudget $12,981,856,900 $13,835,716,200 ($5,393,000) $13,830,323,200 $13,496,254,800 $859,917,100 $14,356,171,900

16

INVESTINGINWHATWORKSConnectingtheBudgetwithOperationalPerformance

______________________________________________________

GovernanceThe executive branch approach to operationalexcellence is to createmore value for every taxdollar invested. That strategy, combined with asound, conservative approach to budgeting andpolicy, is thebedrock of the Governors budgetrecommendation. Government, like allorganizations, has an inherent appetite toexpand. Without the constraints of the marketplace, a natural tendency to grow must becontainedthroughaccountability,fiscaldiscipline,and a healthy respect for the pocket books oftaxpayers.Webelieve thatgovernmentneeds tobe accountable to the public by first looking tointernal improvements andways to changehowwe do business before defaulting to increasedspending. Just like individuals and families,governmentmustlivewithinitsmeansspendingonlywhatitcanafford.Inorder toalignwith theseprinciples,GovernorHerbert charged state agencies to improveperformance by at least 25%.This goal isntsimply rhetoric. Aset ofmanagement principlesand tools is being implemented across stategovernment designed to boost the quality andefficiency of government services. These tools,known as the SUCEESS Framework, are yieldingmeasurable results and require thatwe ask twofundamental questions prior to recommendingnewfundsforaprogramorentity.1. Hastheentitymaximizedexistingresources?2. Does the request for new money

demonstratehowtheinvestmentwillmakeameasurabledifference?

ResultsThere are currently 46 systems reporting resultsof SUCCESS Framework initiatives. GOMB isworking with agencies to finalize another 19systems for reportingduring thenextmonth.Anadditional 11 systems are on track to beginreporting results by the start of the legislativesession. In all,GOMB is presently engagedwithmore than 90 systems to improve operationsthroughoutstategovernment.Ofthecurrent46systemscurrentlyreporting,26haveexperiencedefficiency improvementsabove10%.Among the26,a totalof22have reportedimprovements exceeding 20%.The remainingsystems are in different phases of processimprovementworkandwillbegintoshowresultsinthenearfuture.Agencies that have embraced the SUCCESSFramework can demonstrate measurable costbenefits to meet growing demand and to offerimproved services given current funding.Amongthe 46 systems currently reporting, 31 (67%)show fewer costs per service/unit based onimproved quality and/or greater throughput.Averagequalityisupin33agencies(72%).Amongthose agencies with improved quality, theaverageisup16%.Improvementsrangefromeverythingtoreducingthe risk factors that lead to recidivism amongprison inmates to improving how snow isremoved from our roads during thewinter andfromprojectmanagementwithintechnologyandinfrastructuretoensuringthesafetyofchildren.

17

Specificresultsinclude: The Department of Public Safetys Crime Lab

Divisionhasexperiencedmarked improvementintheabilitytoprocess latentfingerprints.Thedivision has significantly improved evidenceprocessing turnaround times andmoved froman average of 67 cases in amonth to a newpeakof92.

The Utah Office for Victims of Crime reducedthe costperunit fordeterminingeligibility forcrime victim financial assistance by $2.71 perapplication or 40% below the baseline cost of$6.81.Operational improvementsalso resultedin an average of 74% of application decisionsbeingmadewithin30daysascomparedtothebaselineof49%.

The Department of Commerce hasaccommodated an average increase of 33% inthe number of monthly real estate licenseapplications without adding any additionaloperating expense. By increasing processing

speed, the Real Estate Division absorbed thisdramaticincreasewhilealsoimprovingthetimeittakestoapprovealicense.

The Utah Correctional Industries Divisiondoubled the capacity of the furniture shop byimproving the production processleading tomorejobopportunitiesforinmates.

With current systems reportingrepresenting $317million inoperating expense and asmore systemscome online, decision makers will have greaterinsights into the need for new investments.Likewise, as government agencies continue toimprove performance and existing resources aremaximized,thegrowthcurve forexistingprogramscanbendallowingfornewrevenuetomoreeasilybe diverted to critical areas, includingeducation.Thisconcertedeffortwillspanmultipleyears and require a mindset of continuousimprovement and focus alongwith buildingmoreexpert capacity across state government in orderforthemomentumtocontinue.

.

18

BUDGETANDPOLICYBRIEFUtahsMajorRevenueSources

Highlights:

$3.1billionindividualincometax $2.3billionstatesalesandusetax $370millioncorporatetaxes $360milliongastaxes

______________________________________________________

StateTaxesandFeesTheStateofUtah imposesvarious taxes to fundgovernment programs administered at both thestate and local level. The individual income taxand state sales and use tax are by far the twolargeststatetaxes.Variousotherrevenuesourcesinclude a corporate franchise and income tax;motorandspecialfueltaxes(commonlycalledgastaxes); severance taxes on oil, gas, andmineralextraction;beer,cigarette,andtobaccotaxes;andinsurancepremiumtaxes.Tax revenues are deposited into various statefunds. Budget bills enacted by the legislatureauthorize the use of these funds for designatedpurposes.Sales andUse Tax.The sales and use tax is thelargest revenue source for state governmentoperations, generating $2.3 billion in revenue inFY 2016.Most sales and use tax revenues ($1.8billion)aredepositedintothestateGeneralFund.Of the $550million in sales tax earmarks, $517millionarefortransportation,withtheremaining$33 million for water and other purposes. TheGovernorsbudgetproposesreducingtheamountofsalestaxearmarks.

Additional revenues are also set aside foreconomic development purposes after beingdepositedintotheGeneralFund.Individual Income and Corporate IncomeTax.TheUtah Constitution requires that incometaxes be used to support public and highereducation.Basedon thisconstitutionaldirective,revenuesfrombothindividualincometaxes($3.1billion)andcorporatefranchiseandincometaxes($370 million) are not deposited into the stateGeneralFundtobeusedforanypurpose.Rather,theyaredeposited into theEducationFund thatcan only be used to support the states publiceducationandhighereducationsystems.GasTax.TheUtahConstitutionalsorequiresthatproceeds from fees, taxes, and other chargesrelated to the operation of motor vehicles onpublichighwaysandproceeds fromanexcisetaxon liquidmotor fuelused topropel thosemotorvehicles be used for transportation purposes.Consequently, motor and special fuel taxes orgas taxes ($360 million) are deposited into aseparatestateTransportationFundtobeusedfortransportationpurposes.GeneralFundRevenueSource.AsshowninFigure1, state sales and use taxes are the primaryrevenuesourceforthestatesGeneralFund($1.8

19

billion). Other taxes deposited into the GeneralFund include severance taxes on oil, gas, andmineralextraction ($115million);beer,cigarette,and tobacco taxes ($105 million); insurancepremium taxes ($96 million); and cable andsatellite excise taxes ($26 million). In addition,other nontax revenues are deposited into theGeneralFund,suchasprofitsfromliquorsalesbythe Department of Alcoholic Beverage Control($97million),investmentincome($6million),andother sources including legal settlements,transfersofcertain fee revenue,andcredits (net$73million).Earmarked Sales Taxes.As the Earmarks PolicyBriefhighlightsinmoredetail,inthepastdecadethe legislature has significantly increasedearmarksof salesanduse tax revenues tootherfunds,meaning that revenue is not available inthe General Fund. FY 2016 earmarks areestimated at about $550million. In prior years,thisrevenuewouldhavebeendeposited intotheGeneral Fund. This change makes it difficult tocreate a meaningful historical comparison ofGeneral Fund allocations or combined GeneralFundandEducationFundallocationsacrossyears.

The Governors budget proposes returning aportion of earmarked sales tax to the GeneralFund.StateImposed Fees.In addition to tax revenues,the state collects about $1.4 billion infeeseachyear.Thisfigureexcludeshighereducationtuitionandfees, which are an additional $700 million.Revenue collected fromfeesis intended to tiethecostofprovidingspecificgovernmentservicesor regulation directly to the user of the service.State statute requires that stateimposedfeesbereasonable, fair, and reflect thecostof servicesprovidedandthatapublichearingbeheldpriortoadoptingafee.Examples of stateimposedfeesinclude businessregistrations and licenses, motor vehicleregistration, hunting and fishing licenses, andfeesimposedon regulatedbusinesses (i.e., stateregulatoryfeesimposed on banks by theDepartment of Financial Institutions or oninsurance companies by the Department ofInsurance).

Figure1GeneralFundRevenueSourcesandSalesTaxEarmarks

SalesandUseTaxGeneral

Fundportion63%

SalesTaxEarmarkedportion19%

Severance4%

Beer,Cigarette,andTobacco

4%Other4%

InsurancePremium

3%

LiquorProfits3%

20

FederalFundsSignificant federal funds (estimatedat$3.7billion)also flow through the state budget. For majorprograms such as Medicaid, state and federalfunding are often combined becausemanymajorfederalprogramsrequireastatematchoffunds.Inaddition,somefederalfundsflowthroughthestateto local entities such as school districts, counties,andcities.Otherfederalfunds,includinggrants,canalsobeprovideddirectlytolocalentitiesanddonotflowthroughthestatesbudget.RevenueEstimatesTheGovernor'sOfficeofManagementandBudget,theOfficeof theLegislativeFiscalAnalyst,and theUtah State Tax Commission develop a consensuspoint forecast for unrestricted General Fund,Education Fund, Transportation Fund, andearmarkedsalesandusetaxrevenuesinNovemberand February of each year (range forecasts arereleasedinJuneandSeptember).TheGovernorsbudgetrecommendationsarebasedon the November 2014 consensus forecast. Thisforecast anticipates new available General Fund,Education Fund, earmark revenues ofapproximately$381millioninongoingrevenueand

$321 million of onetime revenue. Of this,approximately$56millionisongoingand$8millionis onetime earmarked revenue under currentstatute. As detailed elsewhere, the Governorsbudget proposes altering the states sales taxearmarkpolicy.After subtracting earmarked revenue from totalrevenue, a total of approximately $325million innew ongoing unrestricted General Fund andEducation Fund revenue and $313million in newonetime fundsremainsavailable forappropriationduring the 2015General Legislative Session. Fromthese unrestricted amounts, outstanding itemsinclude additional earmarks for tourismmarketingand resolution of SB 269 of the 2014 GeneralSession,whichtheGovernorsbudgetassumescanberesolvedwithoutadditionalfunding.LapsingandNonlapsingBalancesAmounts that are appropriated to state agencies,butnotexpendedduringtheyearofappropriation,remain available in future years, eitherwhen returned to the fund fromwhich theycame(lapsingbalances)orremainingwiththeagencyforexpenditure(nonlapsingbalances).

21

BUDGETANDPOLICYBRIEFRevenueEarmarks

Highlights: 43%ofstatesalesandusetaxgrowthisearmarkedundercurrentlaw $94.2millioninsalestaxearmarksproposedtobereturnedtotheGeneralFund $586millionGeneralFundearmarksandsetasidesundercurrentstatute

______________________________________________________

SalesTaxEarmarksAs used in this summary, earmark refers torevenuesetasideforaspecificpurpose.Overthepast decade, the legislature has dramaticallyincreased the use of sales tax earmarks (SeeFigure 1). Historically, the legislature resistedearmarksbecauseearmarkfundedprogramstendtoreceive lessscrutiny than thosesubject to thestandardintenseexaminationandprioritizationofGeneral Fund revenue through the legislativebudgetprocess.

Figure1:SalesTaxEarmarks

Based on current law, 43% of sales and use taxrevenue growth for FY 2016 are earmarkedprimarily for transportation andwater.Unless alegislativechangeismade,thistrendwillcontinueandwill result ina significantportionofGeneralFundrevenuesbeingearmarkedforaspecificuse.

EarmarksareProblematicLegislative earmarks to General Fund revenuesare problematic because they are not fullytransparent tothepublic.Suchearmarkstendtobeviewedascapturedrevenuebelongingtothesystembenefiting from the earmark rather thanasgeneraltaxpayerdollars.Inaddition,programsfunded with earmarked revenues are often notfullyprioritizedagainstcompetingneeds,suchaseducation, as an integral part of the budgetprocess.Thosewho do not have a historical or indepthknowledge of the state budget may notunderstand the implications and impact ofprevious legislative actions to current budgetingdecisions.For example, references to new revenue havehistorically only included Education Fund andGeneral Fund increases, even though the actualgrowth in tax collections is higher than thereportednew revenue.Similarly, the termstatefunds has historically been used synonymouslywithEducationFundandGeneralFundrevenueimplyingthatearmarkedrevenuesoutsideoftheGeneralFundarenotavailablestatefunds.Growth in General Fund & Sales TaxEarmarksFigure2illustratesthatsincetheGreatRecession,revenuesthatwerehistoricallydepositedintothe

0

100

200

300

400

500

600

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

(cur)

2016

(rec)

Millions

23

General Fund have experienced solid growth.However, only those adept at managing thedetailsof the statebudgetmayunderstand thatthe reason for the slow growth to the GeneralFund revenue isbecause a significantportionoftotal revenue growth is earmarked and notavailableintheGeneralFund.IfearmarkingGeneralFundrevenuecontinuestobe viewed as a successful budget strategy topermanently fund programs, it is likely thatprogramadvocateswillcontinuetocomeforwardwith proposals to set aside dedicated revenuesfor a particular program or system in order tobypass the annual scrutiny and prioritization ofthebudgetprocess.As shown in Table 6, a total of $586million inGeneral Fund revenue is earmarked or setasideforcertainpurposesasofFY2016andbasedoncurrentstatute.This includesnearly$552millionin sales tax earmarks and over $34 million ofrevenuesetasideforotherpurposes.

GovernorsProposaltoReformEarmarksInorder to invest inUtahssignificantpublicandhigher education needs aswell as other budgetpriorities, the Governors budget proposes tostem the tide in the growth of earmarks. Therecommendationincludesmoving$94.2millionofsales tax transportation earmarks back to theGeneralFund,therebyallowingincreasedfundingoptions for other prioritiesspecificallyeducation. At the same time, the Governorintends toworkwith the legislature to find longterm solutions for funding future transportationneeds. It is thepositionof theGovernorsOfficeof Management and Budget that changes toearmarks constitute changes to expenditurepolicy,not taxpolicy. Inotherwords, redirectingearmarks does not change the amount ofrevenue, it changes how the revenue isdistributed.

Figure2:SalesTaxEarmarksandGeneralFundRevenues

0.00.51.01.52.02.53.0

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

(cur)

2016

(rec)

Billion

s

GeneralFund SalesTaxEarmarks

24

PAGEHASNOCONTENT

26

BUDGETANDPOLICYBRIEFPublicEducation

Highlights: 6.25%increase($161million)inweightedpupilunit(WPU),thelargestnetincreasein25years $58millionforenrollmentgrowthofnearly8,000newstudents $56millionforcapitaloutlayfoundationprogram $20milliontoreplaceold,pollutingschoolbuses $10.7millionforstatewidetechnologyinfrastructurethroughUtahEducationNetwork $5millionforprofessionaldevelopmentofprincipals $1milliontoprovideschoolswithtechnicalsupporttohelpimproveoutcomes

______________________________________________________

Objective Todevelopeffectivepubliceducationpolicies

andfundingsolutionstoensure: an equitable funding structure that supports

similareducationalopportunities forchildrenacrossthestate;

significant investments in public educationthatprovidetheresourcestofacilitateUtahsgoal to be among the top ten states forstudentachievement;

meaningful local control over funding thatprovides the flexibility tomeet varying localneeds, including providing sufficient basicschoolprogram funds for localschoolboardstoprovideprofessionaldevelopmenttailoredto unique local needs and to appropriatelyaddresstechnologyuseatthelocallevel;

local school board accountability allowingconstituents and the state to clearlyunderstand theuseofstate taxpayerdollars,includingtransparency intocostsandstudentachievementonkeymetrics.

GuidingPrinciples The public education system should not be

micromanaged at the state level. Onecommon form of micromanagement is theestablishment of a long list of separatefundingprograms thatbecomedilutedwhendistributed statewide andmay not take intoaccount local schoolneeds. Inaddition,eachprogram added at the state level carriesadditionaladministrativeburdenwithspecificrequirements,tracking,andprocesses.Ratherthan micromanaging through a long list ofprograms, the state should provide flexibleresources in concert with a robustaccountability system and allow local schoolboards to prioritize expenditures based onlocalneedsandexpectedoutcomes.

A robust accountability structure shouldaccompanytheemphasison localcontrol.Toensure the $3 billion in state tax revenues(estimated $5.3 billion in total revenues)allocated to public education translates topositive outcomes, student achievementshouldbereportedtostatepolicymakersand

27

the public through tools such as the newPACESchoolReportCard (samplesfollow). Inaddition,furthereffortsshouldbeundertakento promote added visibility into therelationshipbetweencostsandoutcomes.

Technology usewithin public education is ahot topic. The public education systemincludes three types of technology. First, astatewide technology infrastructureprovidedby the Utah Education Network (UEN). Thestatehasplayedamajorrole inthisareaandshould continue to do so. Second, localtechnology infrastructure that should befunded primarily through locally controlledsources such as Minimum School Programallocationsor localproperty taxes.However,the state may partially equalize majordisparities inpropertytaxresourcesforsmallschool districts and when school districtsmake a significantproperty taxeffort.Third,specific devices, software, or other studenttechnologiesshouldbecontrolledatthelocallevel and paid for with locallycontrolledresources suchasgeneralpurposeMinimumSchool Program allocations or local propertytaxes. Local school boards should prioritizestudent technology purchases against othercompetinglocalneeds.

BackgroundEnrollment.The number of children in Utahspublic schools continues to grow, albeit at aslower pace than in previous years. Utahsstudent population is estimated to reach about630,000studentsinFY2016,anincreaseof7,951studentsor1.3%.After a decade of relatively flat, and evendeclining, enrollment during the late 1990s andearly 2000s, a baby boomer echoecho wavebegan hitting the public education system in2004.AsillustratedinFigures1and2,enrollmenthasincreasedsignificantlyoverthepastdecade.

Although enrollment growth is anticipated tocontinue for the foreseeable future, growth isexpectedtocontinueataslowerpace.Fundingnewenrollmentgrowthisamajorbudgetdriver for the state. Annual enrollment growthcost increases have ranged between $50millionand $70 million in recent years, which exceedsthe entire budget of many state agencies. TheGovernorsbudgetfullyfundsenrollmentgrowth.Inaddition, thebudgetadds fournewprogramstotheenrollmentgrowthcalculationandassumesaoneyearextensionofanexpiringcharterschoolaverage daily membership (ADM) provisionapermanent solution should be studied over thecomingyearincontextofacomprehensiveschoolfunding review. These enrollment growthinvestmentsareestimatedat$58.1million($54.7millionongoingand$3.4milliononetime).

Figure1PublicEducationTotalEnrollment

Figure2PublicEducationEnrollmentGrowth

100,000200,000300,000400,000500,000600,000700,000

1980

1985

1990

1995

2000

2005

2010

2015

p

TotalK

12St

uden

tPop

ulation

SchoolYear

(2,500)

2,5005,0007,500

10,00012,50015,000

1980

1985

1990

1995

2000

2005

2010

2015

p

Chan

gein

K12

Stud

entP

opulation

SchoolYear

28

Funding Overview.Utahs public educationsystem has a shared state and local governanceand funding structure. The legislature andgovernor exercise oversight of the system byallocating state funds for public education;establishing tax policies that provide the stateportion of public education revenues; and bysettingbroadparameterswithinwhichthesystemoperates.TheStateBoardofEducationexercisesgeneral control and supervision of publiceducation. School district boards impose localproperty taxes and local school district andcharter school boards oversee the delivery ofeducationservices.TotalFunding.Whentotalfundingsources(state,local,andfederal)forallusesareconsidered,itisestimated that Utahs public education systemwilltotalapproximately$5.3billion inFY2016orabout$8,400perstudent.Thisincludes$3billioninstate funds (generally income tax),$1.8billioninlocalfunds(generallypropertytaxexpendituresbasedonlocaldecisions),andnearly$500millionin federal funds.Basedon theseestimates,statefunds constitute approximately 55% of totalschool funding (the exact percentage will varyslightly depending on actual local fundingdecisions).

Figure3State,Local,andFederalFunding

WhatistheMinimumSchoolProgram?Of the estimated $5.3 billion total in publiceducation funding for FY 2016, approximately$3.6billion(nearly70%)fallswithintheMinimum

SchoolProgram.TheMinimumSchoolProgramiscomprised of the following three major subprograms: (1) the Basic Program, (2) the VotedandBoardLevyProgram,and (3) theRelatedtoBasicPrograms.Of the $3.6 billion inMinimum School Programfunding,about$670millioncomesfromaportionof localschoolpropertytaxeswiththeremaining$2.95billionallocatedfromstatefunds.BasicSchoolProgram.TheBasicSchoolProgramis the largest subprogram within the MinimumSchoolProgram and is funded in theGovernorsbudget at$2.6billion. These funds are spentbylocal school boards on local priorities. TheBasicSchoolProgramcomprisesabouthalfofallschoolfunding and is equalized on both the spendingand the revenue side. Thismeans that similarlysituated students and taxpayers are treatedsimilarly throughout the statenot that everystudentisfundedatthesamelevel.Ontherevenueside,Utahsstatewideincometaxsystem is themain sourceof state funds for theMinimum School Program. The program isequalized because a uniform property tax rate(the basic levy) is imposed statewide by schooldistricts.Onthespendingside,schooldistrictsandcharterschools receiveallocationsbasedon thenumberofweightedpupilunits (WPUs)generatedwithintheschooldistrictorcharterschoolmultipliedbythevalueoftheWPU.AschooldistrictorcharterschoolsWPU amount is generally based on thenumber of students and the characteristics ofthosestudents.Forexample,aregularstudentin grades 112 typically generates 1.0 WPU. Akindergartenstudentwillgenerate0.55ofaWPU.Charter school WPUs vary by grade range.AdditionalWPUnumbersaregeneratedbasedonstudent or other characteristics such as special

29

education students, school district size, or theexistenceofsmallruralschoolswithinthedistrict.Asaresultofenrollmentgrowth, theGovernorsbudget funds an increase in the number ofWPUs. In addition, thebudget includes a6.25%increase in WPU value, which would increaselocally controlled school funding by about $161million.The6.25%increaserepresentsthelargestnetincreaseintheWPUoverthelast25years.

Figure4MinimumSchoolProgramFunds

Voted and Board Levy Program: A PartiallyEqualized Program.Under the voted and boardlevy program, the state provides about $100million to school districts with a comparativelylowpropertytaxbaseperstudentandisbasedonthedistricts taxeffortasmeasuredby the localpropertytaxrate.About$370million inpropertytaxes are imposed under the voted and boardlocal levyprogram and are included in the statebudget; however, school districts may alsoimpose taxes above the amount included forpurposes of the state partial equalizationprogram.Related to Basic Program.This subprogram isfundedwithstaterevenuesgenerallytargetedfora specific purpose. Examples include educatorsalary adjustments, pupil transportation, charter

school local property tax replacement funding,andatriskstudentfunding.State Funding of Public Education.Publiceducation is by far Utahs largest statefundedprogramwithover$3billionrecommended inFY2016. This equals almost half of the statescombinedEducationFund/GeneralFundbudget.The Minimum School Program ($3.6 billion)provides a substantially equalized fundingstructurethroughtheBasicSchoolProgram($2.3billionstate/$300million local)andthepartiallyequalized Voted and Board Levy GuaranteeProgram ($100millionstate/$370million local).In addition, theGovernors budget recommendsover $560 million through the Related to BasicSchool Program for specific items such astransportation, charter school local property taxreplacement,andeducatorsalaryadjustments.InadditiontoMinimumSchoolProgramfunding,theGovernorsbudget recommends an allocationof$70millionthroughtheSchoolBuildingProgram.With such a large public education budget,changes that may appear small have majorbudget implications. For example, it costs $58milliontofundtheanticipated1.3%growthintheprojectednumberofnewchildren (8,000) in thepubliceducationsystem.Local Funding.School districts are authorized toimpose five discretionary property tax levies,subject to certain limits, to provide additionallocal education funding. In other words, localschoolboardsare responsible for imposing taxesif theywant toprovideservicesabove the levelspossiblewith state funding. Local school boardsalso have political accountability to local votersfor use of local funds. Charter schools cannotimposeproperty taxesbutdo receiveallocationsbasedontheamountofpropertytax imposedbyschooldistricts.

BasicProgramEducationFund,$2.28

BasicProgramPropertyTax(BasicLevy),

$0.31

VotedandBoardLevyProgram

PropertyTax,$0.37

VotedandBoardLevyProgramEducationFund,$0.10

RelatedtoBasic

Programs,$0.56

$inbillions

30

Asof2014, schooldistrictsbudgetedabout$1.3billion in ad valorem property tax, consisting ofabout $300million in themandatory basic levyand about $1billion in discretionary local taxes.Approximately$245million in localdiscretionaryproperty tax authority remains available underexisting statutory property tax rate caps ($105million under the board levy and $140 millionunder the voted levy). In addition, nearly $400million is available statewide under the capitallevy, which can be used for items such asbuildingsandtechnologyinfrastructure.While unused property tax capacity varies byschooldistrict,alldistrictshaveunusedpropertytax authority through the board local or votedlocal levy for operations; the vast majority ofdistrictshaveunusedauthorityunderbothlevies;and all districts but one have unused authorityunder the capital levy.Although charter schoolscannotimposepropertytaxes,theCharterSchoolLocal Replacement Program provides charterschoolswith an amount equal to the statewideaverageofperpupilpropertytaxrevenues.UnlikeUtahs substantially equalized funding foroperations,capitalexpensesaregenerallyfundedat the local level with property taxes or otherlocally controlled funds. In FY 2015, only about$15 million is provided to equalize funding forcapital infrastructure.ForFY2016, theGovernorrecommends a significant increase to thisprogram ($20 million ongoing, $36 million onetime) for local schoolboards toprioritize capitalinfrastructure needs such as buildings andtechnology infrastructure. In addition, increasesare recommended to minimum allocations forsmallschooldistrictsundertheprogram.ProposedSolutions Work in concert with the State Board of

Education and stakeholders such as

Prosperity 2020 and Education First toestablisha10yeareducationplan.

Explorewaystoprovidepolicymakersandthepublicwithmore visibility into education bymakingeducationaloutcomesandcostsmoresimple,transparent,andeasilyunderstood.

Overthenextyear,workwiththeStateBoardofEducationandkeystakeholderstoconducta comprehensive review of the stateseducation funding system to exploreopportunitiesforsimplifyingandstreamliningfunding to enhance local control whilemaintaining appropriate funding equity,includingareviewoftheabilityofthecurrentfunding structure to deal with changingeducation delivery structures, demographics,andstudentneeds.

Provide significant flexible general purposefunding through the Basic Program and itsweighted pupil unit (WPU) allocationmethodology allowing local educationagencies to prioritize and fund competinglocal needs including professionaldevelopment and student technologypurchases.

Resistpressuresforthestatetoassumewhatshouldbelocalrolesingovernanceorfundingsuch as the purchase and use of studenttechnologyandotherlocalneeds.

Assist districts with capital needs, includingbuildings and technology infrastructure, byproviding increased funding through theCapital Outlay Foundation Program, whichprovidesadditionalstateresourcesforschooldistricts with a comparatively low propertytaxbaseperstudentandincludesasignificantemphasisonlocalpropertytaxeffort

Establish methodologies for sharing bestpracticesacrossthestate,whileallowinglocaldecisionmaking.

Providefundingforschoolevaluationsupportto assist when expected outcomes are notbeingmet.

31

To improve the states air quality, provide

funding to replaceoldpollutingschoolbuseswithnewbusesusingcleanfueltechnologies.

GOMB was charged to administer HB 96which creates funding to support earlyinterventionprogramsfortargetedandatriskpopulations.Thisprogram isbasedonanewand innovative funding model whichleveragesprivate investmentsthatarerepaidbasedonmeasurableoutcomes.Ifsuccessful,capturedsavingsandbenefitscouldextendtoreach additional students and/or serve as amodelforthefuture.

ImprovingAccountability:PACEReportCardsThe new PACE School Report Cards and PACEProgress Reports (samples follow) are thebeginning of an ongoing effort to improveaccountability reporting inpublic education. Thereport cards provide a variety of educationoutcome measures along with importantcontextual information in a comprehensive,transparent,yeteasytounderstandformat.Theyare intended to engage parents, administrators,policymakers and the general public in aconstructiveandproductiveway.

The public education report cards incorporatemetricsfromtheGovernor's"PACE66%by2020"road map to success, along with studentperformanceandgrowthdatacurrentlycontainedin State Board and State Office of Educationreports.The new PACE School Report Cards wereoriginally initiated by the Governor, but byworking collaboratively with the State Office ofEducation, these new report cards meet thereporting requirements of the State Board ofEducation and State Office of Education. InSeptember2014,theStateBoardvotedtoadoptthenewPACESchoolReportCardstoreplacethepreviousUCASaccountabilitysystem.Efforts were made during the past legislativesession to reach out to members of theLegislature in an attempt to design the PACEReportCardwhile alsomeeting the Legislature'sschool grading system objectives. However, thetimingofthesessionbecameanissue,preventinga more thorough discussion of the new reportcards. So, just as last year, there will be twoseparate accountability reports issued for K12publicschools.

32

BUDGETANDPOLICYBRIEFCareerCounseling

Highlights: $1.5millionforcollegeandcareercounselingandmentoring $2.4millionforUtahFutureswebsite

______________________________________________________

ObjectiveTodevelopeducationpolicyandfundingpracticesin support of college and career counselors andotherpersonnelwho guide students in activitiesthat will connect them with postsecondaryeducationopportunitiesandafuturecareer.BackgroundCollege and career counselorswithin the publiceducationsystemcanbeanimportantresourceinhelping students identify college and careerdesires and in making decisions that will leadstudentsalong thepath toaspecificcollegeandcareer. Counselors are often required, however,toperformothernoncounselingfunctions.Utahfutures.org isawebsiteadministeredby theDepartment of Workforce Services that bringstogether information related to college andcareerplanningforstudents,parents,counselors,teachers, andmembers of the public. Over thepastyear,thewebsitewasrevampedtobemoreuserfriendly; however, due to minimalappropriations in recent years, additionalenhancements to improve overall functionalityhave not been made. A bill passed during the2014LegislativeSessionrequiredan independentreviewof theupgradedUtahFutureswebsite todetermine if use of the system should be

continued or if the state should hire a privatevendor. The independent panel recommendedcontinuation of the staterun Utah Futureswebsite with ongoing improvements. Theupdated website includes additional resourcesdesigned with the flexibility to add futureenhancements.GuidingPrinciples Maintain the focus on local control by

providingschooldistrictsandcharterschoolsthe ability to make decisions on how andwhere to spend career counseling fundingbasedonbestpracticesandavailablesupport.

Ensure that students have adequate, uptodate, readily accessible information andguidance on a wide array of college andcareerpaths,thusenablingstudentstomakedecisions based on individual skills andinterests.

Provide the training and supports necessaryto ensure school counselors limited time isfocused on counseling activities directlyrelatedtocollegeandcareerreadiness.

ProposedSolutions Allocate$1.5millionforacollaborativepublic

andhighereducationpartnership to improvecounseling (including college and career

37

counseling certifications and parentalinvolvement)andforgrantstoschoolstopilotinnovativeideas,includingafocusonthebestuseof counselor time.Bestpracticeswillbesharedstatewide.

UtahFuturesisavaluableonlinetoolwiththepotential to greatly enhance the amount of

career informationcounselorscansharewithstudents. Allocate $2.4 million ($1.4 millionongoingand$1milliononetime)tomaintainthe Utah Futures website and ongoingimprovements.

38

BUDGETANDPOLICYBRIEFPostSecondaryEducation

Highlights: $30millionforcompensation(including3%forflexibleemployeewageincreases) $15millionforperformancebasedfundingforthestateshighereducationinstitutions $16millionforUtahCollegeofAppliedTechnology $3millionforRegentsScholarships $10.7millionforUtahEducationNetwork(alsodiscussedunderpubliceducation) $99millionfornewbuildingconstructionandoperationandmaintenancefunding

______________________________________________________

Objective Tosupportthestategoalof66%ofworking

ageadultsattainingapostsecondarydegreeorcertificateby2020by:

increasingthegraduation/completionrate; ensuring affordability for students at all

economiclevels; providing access and support infrastructure

for first generation and nontraditionalstudents;and

improving the alignment between graduatesskillsandworkforceneeds.

BackgroundInthe21stcentury,adynamiceconomyrequiresan educated population. Education drivesinnovation,attractsemployerslookingtofillhighskilled jobs, andprovides for ahigherqualityoflife.Highereducation levelscorrespondtohigheraverage income and lower levelsof governmentdependence.Utah has two major systems providing postsecondaryeducationtheUtahSystemofHigher

Education (USHE) and Utah College of AppliedTechnology(UCAT).

Figure1HigherEducationEnrollment

TheeightUSHEinstitutionsincludetheUniversityof Utah, Utah State University (including USUEastern),Weber StateUniversity, SouthernUtahUniversity, Utah Valley University, Dixie StateUniversity, Salt Lake Community College, andSnowCollege.USHEprojects totalenrollmentofabout190,000 inFY2015,orabout130,000endofterm fulltime equivalent students. USHE

0

25

50

75

100

125

150

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

FTEE

nrollm

ent

Thou

sand

s

USHE UCAT

39

granted nearly 30,700 degrees in FY 2014, anincrease of nearly 2,900 over the number ofdegreesgrantedinFY2011(seeFigure2).

Figure2NumberofDegreesbyInstitution

Figure3HigherEducationCompletionsbyType

The eight UCAT institutions include Bridgerland,OgdenWeber, Davis, Tooele, Mountainland,Uintah Basin, Southwest, and Dixie ATC. UCATcurrentlyservesabout36,000students, includinghigh school, occupational upgrade, certificateseeking, and other postsecondary trainingstudents. UCAT currently grants about 10,000certificatesperyear.

TheUtahEducationNetworkandUtahTelehealthNetwork provide the technology infrastructureconnecting education and health care entitiesstatewide.Postsecondary education is one of the largestprogramsfundedinthestatebudget,constitutingof about 15% of the combined Education FundandGeneralFundbudgets.

Funding for postsecondary education comesfromstatefunds,tuition,andotherfundssuchasfederalandendowmentfunds.Tuitionispaidnotonly with direct student payments but alsothroughscholarships,grants,andstudentloans.

Tuitioncostshavebeenincreasingatahigherratethan overall inflation. Increasing tuition costshave ledstudents to increasingly turn tostudentloans. Changing demographics include a higherproportion of immigrants, refugees, and firstgeneration college students, many of whomstruggle topay for college andwhomaynotbeawareofalloptionsavailabletothem.

GuidingPrinciples Improvethedegreecompletionrateofhigher

educationstudents. Focus on ways to deliver education more

economically and provide additional fundingaccessforstudents.

Develop mechanisms to support postsecondary education access and success fornontraditionalstudents.

Incentivize education innovation to explorenew models of delivering postsecondaryeducation.

Offer programs that meet the workforcedemandsofhighwageindustries.

ProposedSolutions Following a legislative session in which

historic funding increases were provided to

5

101520253035

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

Thou

sand

s

UU USU UVU WSU SLCC SUU CEU DSU SC

5

1015202530354045

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

Thou

sand

s

Associate Bachelor Master 1stProf. Doctoral Certificates

40

postsecondary education, continue theinvestmentinUtahsfuture.

To ensure the states desired outcomes areattained, provide $15 million in USHEperformancebased funding contingent ondemonstrable improvements in meaningfulperformancemeasurescorrelatedwitheachinstitutions distinct missionincluding thenumber of degrees granted overall anddegreesforfirstgenerationordisadvantagedstudents.

Provide$13million incampusequityfundingtoUCATtoexpandcapacityand increasethenumberofcertificatesawardedbythevariousUCATcampusesinhighdemandfields.

Provide $30million in flexible compensationfundingtoUSHE,UCAT,andUENhelpensureinstitutions are able to maintain a highlyqualifiedworkforce.

Provide$3millionforRegentsScholarships. The Governors budget includes funds for a

science building at Snow College ($19.9million), the Crocker science building at theUniversity of Utah ($34 million), a newbuilding at the Dixie Applied Technology

College ($31.9 million), and a sizablecontribution toward the Huntsman CancerCenterattheUniversityofUtah($9.5million).The budget also includes additional fundingfor the operation andmaintenance of thesenewbuildings.

TheGovernorsbudget includes$10.7million($4.5 million ongoing and $6.2 million onetime) for the Utah Education Network toimprove existing infrastructure and expandcapacitythroughoutthestate.

Obtainabetterunderstandingofthenetoutofpocket cost of higher education tostudents (after scholarships and grants) toensure that postsecondary educationremainsaffordableandassistspolicymakersin gaining a better understanding of how tobestfundthesystem.

Explore different curriculum developmentand delivery models, including leveragingtechnologytodelivercurriculumandtobringpeopletogetherfromremotelocations.

Lookforopportunitiesforsharedresourcesincurriculumdevelopmentanddeliveryaswellassharedadministrativeresources.

41

BUDGETANDPOLICYBRIEFHealthyUtah

Highlights:95,000Utahnscovered$446millioninUtahpaidfederaltaxdollarsreturningtothestate$4.6millionnetfundinginFY2015andFY2016______________________________________________________

ObjectiveTo implement a Utahcultivated solution toprovide privatemarket healthcare coverage tolowincome Utah adults; to recoup over $446million in Utahpaid Affordable Care Act federaltax dollars through an enhanced federalassistancepercentageof90100%,comparedtothe70/30matchratefortraditionalMedicaid.BackgroundAsUtahsMedicaidprogramiscurrentlydesigned,notalllowincomecitizensqualifyforcoverage.Ingeneral, nondisabled adultswithout dependentchildren and parents who earn more thanapproximately 50% of the federal poverty level(~$7,500 a year for a family of two) arecategorically ineligible for Medicaid benefits.Likewise, the Affordable Care Act dictates thatindividualswith incomesbelow thepoverty levelcannot receive federal premium subsidiestowards the purchase of coverage through thefederal health insurance marketplace. It isestimatedthatmorethan62,000Utahns living inpoverty fall into a coverage gapwhere they canneither accessMedicaid nor financial assistancetowards thepurchaseofhealth insurance.Manyof these individuals may only need transitionalassistance as they seek to improve their

employment situation, whereas others aremedicallyfrailandhaveacutehealthcareneeds.AnotherfeatureoftheAffordableCareAct istheimposition of billions of dollars of new taxes inthe form of Medicare taxes on higher incomefamilies, Cadillac taxes on highcost insuranceplans, and increases in taxes on employers andinsuranceproviders,amongothers.Utahsannualshareofthistaxburden isestimatedtobe$700800million.Finally, the Affordable Care Act created a newMedicaideligibilitygroupforadultsupto133%ofthe federal poverty level ($20,900 a year for afamily of two). States that elect to extendcoverage to individuals in this new aid categorywillreceive100%federalcostsharing incalendaryear 2016 and 95% federal cost sharing incalendaryear2017,withonepercent reductionseach year until calendar year 2020 when costsharingwillremainconstantat90%.GuidingPrinciples To develop Utahspecific policy solutions

which optimally address the needs of thepublic while maintaining the proper role ofgovernment.

43

To respect the taxpayer by ensuring that

expenditure decisions yield return on theinvestment of both state and federal taxdollarspaidbyUtahns.

Tohonorourcollectiveresponsibilitytoassistourstatesmostvulnerable,buttodoso inafashion that instills individual responsibilityandpromotesselfdetermination.

ProposedSolutionsWhere the Affordable Care Act failed, HealthyUtah succeeds. Healthy Utah provides premiumsubsidiestoUtahadultsbetweentheagesof1964whoearn incomes less than133%ofpovertyto be used towards the purchase of privatemarket healthcare coverage. Newly eligibleparents with Medicaidqualifying dependentchildrenwillalsohavetheoptionofunifyingtheirfamiliescoveragebybringingtheirchildrenontotheir qualified health plan. Healthy UtahbeneficiarieswhoaredeterminedtobemedicallyfrailwillhavetheoptionofenrollingintraditionalMedicaid coverage, primarily provided throughAccountable Care Organizations, or they mayreceive premium subsidies like their nonfrailcounterparts. Healthy Utah will also providepremium assistance with employerprovidedinsurance for enrollees who possess suchbenefits.Healthy Utah beneficiaries must meet financialandparticipation requirementsasa conditionoftheir enrollment. All members must pay someformofcopayandthoseabovepovertywillhavehigher copays and pay a monthly premium.Healthy Utah participants who are not workingwillbe automatically enrolled into an integratedwork program. This benefit will help peopleimprove their skills and provide themopportunities to improve their employmentsituation.Thestateisexploringvariousoptionstoensure and maximize compliance with theintegrated work plan. Consequences for non

compliance could range from thewithholdingorreducing of TANF and SNAP benefits, to therevocationofdriverlicenses.While the Governor recognizes some of thechallenges associated with the Affordable CareAct and continues to encourage Congress toaddresssomeof itsdeficiencies,hebelievesthatdoingnothingisnotanoption.TheACAisthelawof the land and as suchUtahmustworkwithinthe laws constraints inorder to create thebestplanpossiblefortaxpayersandthose inneedofhealth care coverage. By primarily offeringpremiumsubsidiesinsteadoftraditionalMedicaidbenefits,HealthyUtah leveragesefficienciesandpreserves the integrity of private insurance andhealthcare markets, while reducinguncompensatedcarebyanestimated$51millionannually.With themajorityof thenewlyeligiblepopulationeither inpovertyorofmedically frailstatus,HealthyUtahclosesthecoveragegapandprovides assistance to our most needy andvulnerable. For those who are ablebodied andwork ready, Healthy Utah requires beneficiariesto demonstrate efforts towards selfsufficiency.By recouping millions of Utahpaid federal taxdollars,HealthyUtah respects the taxpayerandbenefitsallcitizensofthestate.BudgetRecommendationsThe most recent actuarial projections are that72,500 newly eligible individuals will enroll inHealthyUtahinFiscalYear2016.Servicecostsforthese new enrollees will be paid exclusively byfederal funds thatyear.However, is itestimatedthat22,500 individualswhoarecurrentlyeligibleforMedicaidbut unenrolled in the programwillseek out benefits due to increased awarenessaroundthe implementationofHealthyUtah.Thisphenomenon is commonly referred to as theWoodwork Effect. Service costs forWoodworkenrollees are covered at the traditional matchrateof70%FederalFundsand30%StateFunds.

44

Conversely, Healthy Utah generates savings inareas where new Medicaid dollars will displacestate funds that are supporting the provision ofnonMedicaid healthcare benefits, such as thePrimary Care Network, behavioral healthprograms and inpatient hospital services forprisoners.

The Governor recommends $930,000 in FiscalYear2015forHealthyUtahrelated infrastructureand administration costs in the Department ofHealthandDepartmentofWorkforceServices.InFiscal Year 2016, the Governor $3,683,000available to cover the totality of expected netcostsinFiscalYear2016.

45

PAGE HAS NO CONTENT

46

BUDGETANDPOLICYBRIEFMedicaid

Highlights:

$12.9millionnegativesupplementalinFiscalYear2015 $10.1millioninnewfundinginFiscalYear2016 $4.5millionreductioninPrimaryCareNetworkfundingforHealthyUtah

______________________________________________________

ObjectiveTo provide healthcare coverage to Medicaidbeneficiariesatalongrunsustainablecostandinafashionthatmaintainsorimprovesbenchmarksforqualityofcare.BackgroundMedicaidisajointstateandfederalprogramthatfunds health care services for an estimated321,000lowin

Documents

Governor Gary Herbert's Final Budget Recommendations 12.10.2014 for Fiscal Year 2016