Utah Puts Off $3.9 Billion of Road Projects, Citing Downturn

DALLAS - Utah has halted $3.9 billion of road projects representing all new construction amid a worsening budget crunch, officials said.

The triple-A-rated state that is known for fiscal conservatism will consider funding solutions when the Legislature reconvenes in Salt Lake City in January, officials said.

The most recent report from the Utah State Tax Commission shows that transportation tax revenue from July 1 through Oct. 31 is down 6.7%.

The biggest project affected by the construction moratorium is the $2.6 billion expansion of Interstate 15 in the Salt Lake City area.

Utah Department of Transportation executive director John Njord said that the only way to keep the existing projects and 47 more on track would be through a tax increase.

Additional revenues could come from increasing gas taxes, a vehicle-mileage fee, a quarter-cent sales-tax increase, or other measures, said Rep. Wayne Harper, chairman of the House Transportation Budget Committee.

In a September special session, the Legislature cut spending by $272 million to rebalance the budget amid falling revenues. But the tax commission last week reported that revenue has fallen over the past four months at a faster than expected rate. The projected 2.4% decline in revenue for the general and education fund has grown to 7.3%, the commission said.

On the jobs front, a state economist predicts the state will lose up to 19,000 jobs next year, sending the unemployment rate to 5.5% from the current 3.5%. While that sounds benign compared to predictions of an 8% unemployment rate nationally, it would be the worst economic environment in Utah since 1954, according to Mark Knold, chief economist for the Department of Workforce Services.

"We've only had four times since 1950 where there's fewer jobs in one year than there was the previous year," Knold said in a recorded statement issued with the October jobs report last week.

The report said Utah lost 2,200 jobs in October, a decline of 0.2% compared to October 2007.

From housing, the apparent recession is now reaching manufacturing, financial activities, and professional and business services, Knold said.

State personal income tax revenue has fallen 12.6% for the fiscal year that started July 1, according to the tax commission.

After not issuing any general obligation debt in fiscal years 2006 and 2007, the state issued $75 million in GO and $15.8 million in lease-backed revenue bonds in fiscal 2008, followed by the issuance in April of $387 million of debt. Utah still has $1.4 billion in authorized, but unissued, GO building and highway bond debt from previous legislative sessions.

Tax reform measures enacted in the 2007 session of the Legislature are expected to cost the state about $220 million in revenue this year. The new law sets a flat tax rate of 5% on income and lowers the sales tax rate from the previous 4.75% to the current 4.65%. Sales tax on food was reduced from 2.75% to the current 1.75%, and a reduction in business taxes lowered revenue by $30 million.

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