A proposed amendment would change how lawmakers can spend your income tax dollars. Here’s how public education could be impacted.

Right now, Utah’s income tax revenue is earmarked exclusively for three purposes: public education, higher education and services for children and individuals with disabilities.

That revenue — an estimated $8.4 billion for fiscal 2025 alone — cannot be used on anything else, according to the state’s constitution. But lawmakers are hoping to change that.

To make it happen, Utah voters will need to pass a constitutional amendment, which will appear on ballots this November. The amendment would allow the Legislature to use income tax revenue for a broader range of unspecified “state needs.”

Ballot language has not yet been finalized. But those opposed to the amendment argue it stands to further divert money from public education in a state that already ranks among the lowest in per-student spending.

Renée Pinkney, president of the state’s largest teacher’s union, made that case before members of the Utah State Board of Education in June.

“If you want to see Utah’s public schools fully funded, with the professional educators, staff, resources, and programs our public education students deserve,” Pinkney said, “then you must oppose the constitutional change.”

The amendment’s sponsor, Rep. Karen Peterson, R-Clinton, argues it would achieve the “opposite” effect, because it would entrench the Legislature’s current practices for spending and saving for education into the state constitution.

For example, under state statute — which can be changed by lawmakers — 15% of any new income tax revenue growth is placed into a “rainy day” education savings account, which currently sits at $440 million.

Approving the amendment would also enshrine that education reserve fund (also called a “budgetary stabilization account”) into the constitution, which would mean it couldn’t be removed without voter approval.

Once the current education funding framework has been followed, only then could the Legislature use any remaining income tax revenue to “support other state needs,” according to the proposed amendment.

So, what does all this mean for the future of public education funding if the amendment passes?

Breaking down Utah’s framework

For 50 years, 100% of Utah’s income tax revenue was used solely for public education. That changed in 1997, when voters opted to amend the constitution to add higher education as an income tax earmark.

Another constitutional amendment (Amendment G) was passed in 2020, allowing income tax revenue to also be used for services for children and individuals with disabilities.

The passage of Amendment G triggered two new laws, including HB357, “Public Education Funding Stabilization.” This law established the current framework: the education savings account and a requirement that the Legislature factor in enrollment growth and long-term inflation when determining how many dollars schools receive per student each year.

That dollar amount is also called a weighted pupil unit (WPU) and is the basic formula used to determine how much state funding a school receives.

For example, if 1,000 students enroll in a school, the school receives funding equivalent to 1,000 WPUs, (excluding any add-on amounts for students with disabilities). The WPU is currently set by the state at just over $4,000.

If student enrollment decreases, such as through transfers to private schools or homeschooling, public schools receive less funding.

The WPU number is ultimately determined by lawmakers but is based on recommendations developed by the Legislative Fiscal Analyst in consultation with the Utah State Board of Education and the Governor’s Office of Management and Budget, according to Utah law.

State allocations are not the only source of income for public schools, as they also receive revenue through local tax levies and federal grants.

What changes if the amendment passes?

If the amendment passes, the “educational funding framework” established by HB357 would be cemented into Utah’s constitution, according to researchers from the University of Utah’s Kem C. Gardner Policy Institute. The Institute hosted a media roundtable this month to discuss the proposal.

The constitution does not stipulate that public education must be funded at a certain level, researchers said — just that income tax revenue can only fund three pots (public education, higher education, and services for children and people with disabilities). For fiscal 2025, lawmakers appropriated approximately 60% of income tax revenue to public education, amounting to about $4.9 billion.

Sen. Ann Millner, R-Ogden, argued the amendment would safeguard public education funding currently provided under state law.

“Statute can be easily changed,” Millner said. “I think that this better protects funding for public education and keeps it a top priority than the current earmark does.”

However, some children’s advocacy organizations in Utah aren’t as convinced, because they argue Utah would be protecting a status quo that is not adequately funding schools.

‘Not taking into account a number of factors’

For over two decades, Utah ranked last in the nation for its per-student spending, including Washington, D.C. That changed in 2021, when Utah slightly outspent Idaho to claim the No. 50 spot.

Utah currently maintains its second-to-last position, according to the latest rankings released in May, which are based on financial figures from 2021, the most recently available nationally. Utah allocated $9,095 per student, about a third of New York’s $26,571, which claimed the top spot.

Utah’s low ranking is a “major concern” for Moe Hickey, executive director at Voices for Utah Children, a child advocacy organization.

“We’ve been having this epic battle for last place [with Idaho,]” Hickey said.

Total per-student spending has steadily increased since 2010, save for a slight dip in 2022. Often, the state has spent more per student than the basic WPU requires.

However, education spending as a percentage of personal income has declined from 5.1% in 2002 (16th-highest in the nation) to 3.5% in 2022, placing Utah 40th among other states, according to the Kem C. Gardner Institute.

Hickey said adequately funding education is about using those dollars to make a meaningful impact.

“You’ll hear lawmakers say that we’re ‘improving our funding for education,’ and that’s true in theory,” said Hickey, “but it’s also not taking into account a number of factors.”

He explained that student needs have become increasingly complex and a school-funding framework based primarily on enrollment growth and inflation doesn’t currently address those needs adequately — and won’t for years to come if the amendment passes.

“We’re asking schools to do so much more than even five years ago, or 10 years ago,” Hickey said. “We need more counselors in schools. We need more [mental health] professionals in schools, because we have growing demand. Our rural districts need more support. They don’t have a local property tax base to draw [from] to provide adequate coverage for things, and yet we’re not funding those things.”

Hickey argued that expanding the use of income tax revenue eliminates the “last buffer” Utah has for maintaining a dedicated pool of revenue specifically for public schools.

“Have we historically done right by education in the state?” Hickey said. “And from my perspective, the answer is clearly no, in terms of funding. ... Think about the math. They’ve been cutting taxes. So what is the probability of them doing anything additive, significantly additive, or meaningfully additive, for public school funding?”

This year’s legislative session marked the third consecutive year of income tax cuts, with a reduction of 0.1 percentage point to 4.55%, amounting to approximately $170 million.

“The pot keeps getting smaller,” said Hickey, “and if anybody thinks that they are not going to continue to cut taxes, they’re so wrong.”

Passing the amendment would trigger new laws

Two companion bills from the 2023 legislative session would go into effect as new laws if the amendment passes. The first is HB394, “Hold Harmless for Public Education Enrollment.”

Right now, schools receive less state funding if student enrollment declines. This new law would ensure that funding remains the same if student enrollment drops, which it’s predicted to do in the next decade. The “Hold Harmless” law would remain in place for five years, but lawmakers would have the option to extend it for an additional five years.

Hickey said that while the “Hold Harmless” provision would “maintain” school funding levels, it wouldn’t necessarily ensure that all districts have enough resources to cover their costs — and that could result in higher property taxes as districts try to keep up with student needs.

“That’s what happens when you get less funding from the state,” Hickey said. “Not just in education, but in other areas. … If you want to maintain the level of service, the money has to come from somewhere. And it comes from property tax, which is much more regressive and then affects senior citizens much more than income tax does.”

The second bill that would go into effect should the constitutional amendment pass is HB54, “Tax Revisions.” This would repeal the state portion of sales tax on food, which is 1.75%. Local governments levy an additional 1.25% sales tax on groceries, which would remain intact.

Sen. Millner explained that this is due to the current restrictions on how income tax revenue can be used. If the constitutional amendment passes, and income tax revenue can be used for other state needs, then the state-imposed sales tax would no longer be necessary, Millner said.

What other ‘state needs’ could be funded?

Income tax revenue is the state’s largest revenue source, accounting for 35% of all state and local taxes. Utah is also one of just eight states that has a portion of its income tax revenue earmarked for education, according to the Kem C. Gardner Policy Institute.

Utah lawmakers currently rely on sales tax revenue, allocated to the state’s general fund, to finance most state priorities, including Medicaid, transportation and public safety. By broadening the use of income tax revenue to include “other state needs,” they hope for more budget flexibility.

Sen. Millner said that the current earmarks are too restrictive, preventing funds from being reallocated when other needs take priority. She likened it to living in a dual-income household where only one source of income is allowed to pay for groceries, while the other cannot be used for that purpose.

“I think what most of us do is say, ‘I have this much money from whatever sources,’ and then we develop a budget that’s based on our priorities for our family,” Millner said.

And that’s exactly what lawmakers are hoping to achieve with the constitutional amendment, she said. “What this does is allow the Legislature to, once we’ve funded public education … [any] remaining dollars could be used to fund other high-priority needs of the state,” she said.

Millner said there isn’t yet anything, in particular, the Legislature plans to fund if the amendment passes.

“There’s nothing on the table right now,” she said. “We’ve not been able to use it for anything else, so we haven’t. What happens is those things don’t get funded.”

Billy Hesterman, president of the Utah Taxpayers Association, said “budget flexibility” is a positive thing.

“We always think it’s been a good idea not to earmark anything in the budget, so that then the highest needs for the citizens can be met,” Hesterman said. “Elected officials need to be nimble and need to not have their hands tied, and need to be able to react each year to the budget.”

He added that he does not believe education funding will be impacted.

“I’ve yet to sit in a political meeting with legislative candidates where they haven’t said education is one of their top priorities,” Hesterman said. “I’m confident in our lawmakers seeing where the needs are, and that they will make sure that the proper amount is set where it needs to go.”

Should the constitutional amendment pass, the change — along with its two companion laws — would take effect Jan., 1, 2025.