Innovators in Action (November 2013 edition): Pursuing Fiscal Self-Reliance in Utah

The latest interview in Reason Foundation’s Innovators in Action 2013 series focuses on recent reforms enacted in Utah in the pursuit of fiscal self-reliance. One state that is increasingly recognizing its heavy reliance on federal funds is Utah, where over a quarter of total state revenues are derived from federal funding sources. A growing awareness of this reliance prompted the Utah state legislature to pass a package of bills in 2011 and 2012—known collectively as the “Financial Ready Utah” initiative—aimed at quantifying the amount of federal funding used by state agencies and making contingency plans in the event of a major cutback in the flow of federal funds.

Utah is also among those western states with significant federal land ownership—representing a majority of the total land area in several states. The greater the federal land holdings, the less land available for commerce and the more land off the tax rolls, making it more difficult for the western states to generate funding for education and other priorities.

Utah State Representative Ken Ivory has been a leader on both issues. He was a primary sponsor of the Financial Ready Utah bills, as well as the 2012 Transfer of Public Lands Act, which establishes a framework for the transfer of certain federal lands to the state of Utah in the coming years. Ivory also serves as president of the American Lands Council, a nonprofit advancing the cause of local control of land access, land use and land ownership.

I recently interviewed Rep. Ivory on the rationale behind the Financial Ready Utah bills and the Transfer of Public Lands Act, the history of federal control of western lands, and much more. Here’s an excerpt:

Leonard Gilroy, Reason Foundation: Can you describe the thinking behind the Financial Ready Utah initiative?

Utah State Representative Ken Ivory: In my first session in the Utah House in 2011, I was concerned we didn’t seem to know exactly how much federal funding came into Utah. I heard a variety of guesses, but as we really started to look the numbers, we discovered that as much as 45% of our total revenue in the state of Utah comes from a federal government that is broke. The federal consolidated financial statement from the Government Accountability Office reports annually that federal finances are unsustainable. The GAO will not issue an unqualified financial statement on the United States. So, nearly 45% of Utah’s revenue comes from a federal governing partner that is fiscally reckless, as repeatedly demonstrated with each new debt ceiling or continuing resolution debacle.

So, we began looking at how to attain a level of economic self-reliance, and given increasing federal uncertainty, how do we assess the immediacy, severity and probability of the risk of a reduction in the amount or value of federal funds—what do we do at the state level? Also, how can we foster community preparation for the fiscal earthquake that is, in all likelihood, more probable than the physical disasters that we spend millions of dollars preparing for?


Gilroy: You’ve also been engaged on issues related to western lands—specifically the large amount of federal ownership of land in western states—which plays into this state self-reliance concept as well. How did you get involved in that?

Ivory: They evolved simultaneously. In the 2011 session—when we realized that over $5 billion of our state revenue comes from a federal government that’s broke—that’s when we started to flesh out how serious those numbers were. Something on the order of 40% of our state revenue comes from an unsustainable source in our federal governing partner. We looked at the magnitude of this risk and started to think about how we could broaden our revenue base and get to a point of economic self-reliance.

You’re not going to close a revenue gap in the billions of dollars by tweaking the tax code with minor adjustments; you’d have to more than double the income tax and kill the economy. You’d have to increase corporate taxes by more than 1000%, again, killing the economy in an attempt to close that gap. On top of the general fiscal gap, in Utah we are $2.6 billion below average in annual per-pupil funding. There’s no amount of nipping, tucking and tweaking in the tax code that even closes decimals on that gap. The magnitude is tremendous.

Yet, what we know from the U.S. Government Accountability Office is that there’s more recoverable oil in Utah, Colorado and Wyoming than the rest of the world combined. There’s a study from earlier this year by the Institute for Energy Research that there’s $150 trillion in mineral value locked up in the federally controlled lands throughout the West. Right now the forests—which were a renewable resource, with the revenue funding schools, roads and public safety—have been shut down to timber harvesting, and now they’re basically tinder boxes. We’ve got so much dead wood standing in the forests that, in fact, the FBI is even warning our state foresters that terrorists are encouraging wildfires as a form of jihad. The forests are so dense now that the trees can’t defend themselves and fend off natural diseases and pests, so forests throughout the West are largely dead or dying just waiting for any spark to ignite the next catastrophic wildfire.

So we looked at these conditions. And as you pointed out, more than 50% of all land in the western United States is owned and controlled by the federal government. This is in a nation that was founded on the principles of inherent, inalienable rights to life, liberty and property. World-renowned economist John Kenneth Galbraith made a statement in the mid-1980s that “where the socialized ownership of land is concerned, only the U.S.S.R. and China can claim company with the United States.” […]

Check out the full interview here. Other articles featured in the Innovators in Action 2013 series are available here.