Utah's Education Funding Effort: Update and Historical Perspective

Note: On 9/13/07, we corrected income tax figures in this report, affecting Figures 1 and 5. The conclusions remain the same, but the 2007 and 2008 income tax growth is higher than previously stated.

After about ten years of decline, the Legislature has increased state funding effort for public education in the most recent two state budgets. This is the result of large state budget surpluses resulting from strong income tax growth. Funding effort is defined as total revenues for public education per $1,000 of personal income. When funding effort declines, it is because education funding is growing slower than Utah’s overall economy. When funding effort increases, education funding is growing faster than the overall economy.

The decline in education funding effort after 1995 was unprecedented, given the state’s long history of very high proportions of personal income dedicated to public education. Looking at historical data, Utah traditionally placed a very high priority on education spending, ranking in the top 10 states for education spending per $1,000 of personal income through the 1960s, 70s, and 80s.

After the mid-1990s, a steady decline eventually pushed Utah’s funding effort below the national average. This decline was partly caused by tax reductions, but largely by the diversion of funding growth to other state priorities, including healthcare, prisons, and transportation.

For fiscal years 2007 and 2008 (the current fiscal year), income tax revenues appropriated to public education have grown faster than the economy for the first time since 1997. The report finds that the earmarking of income taxes to public and higher education will likely lead to more increases in funding effort in the coming years, unless the Legislature reduces income taxes to dampen the growth.