Before the legislative session began, the topic I was asked about most often was Medical Marijuana and the two different bills that would allow and regulate the product in Utah. However, after the bill sponsors agreed to instead support a joint medical research instead, the alcohol reform bills became the topic of most questions. I’m not sure what this says about the people I routinely encounter that these two topics come up so frequently! Perhaps these topics are more likely to make the evening news (rather than the less exciting tax bills we are heavily involved in), or maybe it is just because Utah is known for being conservative, and these topics are decidedly not conservative. Either way, if you had been wondering about the alcohol bills, but didn’t want to ask, below is your update on the Utah alcohol reform bills this year.
There are two bills dealing with proposed changes to the treatment of alcohol in Utah. The first, HB155 Driving Under the Influence and Public Safety Revisions, is sponsored by Rep. Norman Thurston (R-Provo). It lowers the blood alcohol limit for driving under the influence from 0.08% to 0.05%. The bill has passed the State House, the Senate Transportation, Public Utilities & Transportation Standing Committee, and is awaiting a full hearing on the floor of the State Senate. If the bill passes by midnight on Thursday (the final day of the session), Utah will be the first state in the nation to enact blood alcohol limits lower than 0.08%.
The second bill, HB 442 Alcohol Amendments, is sponsored by Rep. Brad Wilson (R-Kaysville). This bill contains many changes to how alcohol is purchased and consumed in Utah at restaurants, bars, grocery stores, and convenience stores. It also includes an alcohol pricing mark-up to fund new education programs in the 8th and 10th grades. The bill has passed all the way through the State House and is awaiting a hearing in the State Senate. Below is a summary of the various provisions in the bill:
HB442 includes improved prevention measures which are focused on youth education as well as on-premise and off-premise training programs. Two new underage drinking prevention programs will be implemented in the 8th and 10th grades. These programs will focus on the tools to address the dangers of underage drinking and the risks of drinking and driving. This bill would also mark up the price of alcohol by 2%, with these funds earmarked for the K-12 school lunch program and these underage drinking prevention efforts.
The bill also mandates improved training requirements for new licensees and license renewals (every three years). This training will concentrate on statute awareness, operating requirements, prevention of over-consumption, prevention of selling to minors, and the implementation of age verification tools.
Retailer, Restaurant, and Bar Operations
On-Premise One of the major areas for this new policy implementation is “On-Premise” or restaurants and bars that prepare and serve alcohol directly to customers. Under HB 442 these establishments must have a Responsible Alcohol Service Plan (RASP). This plan will consist of a written set of policies and procedures that outline measures to prevent employees from over-serving alcoholic beverages to customers and serving alcoholic beverages to minors. The requirement to implement a RASP will apply to all new licensees and the regular renewal of existing licenses.
Under the current bill there are two options for a dispensing area. The first is a physically separate area that prevents patrons seated in the dining area or waiting area from viewing the dispensing of alcohol (the current “Zion Curtain”). Or, a restaurant has the option of creating an area that is essentially a 10-foot radius around the dispensing structure (no physical separation requirement). Restaurants can comply by meeting either of these requirements, and minors are not allowed in either type of dispensing area. The bill would also require electronic age verification for the dispensing area and signage at the entrance stating “Restaurant not a bar.”
Off-Premise The “Off-Premise” category includes convenience stores, grocery stores, or any business that engages in the retail sale of alcohol for consumption off the retailer's premises. HB 442 requires retailers to move all beer and like products to two locations and separate the beer from other beverages. The bill requires approval by the Department of Alcohol Beverage Control of a product’s labeling and packaging if the product looks like a nonalcoholic product or could confuse or mislead a consumer to believe that the product does not contain alcohol. This requirement to obtain Department approval falls on the manufacturer. The bill will also give the Department authority in the issuance of licenses to ‘off-premise’ retailers. However, local law enforcement will retain authority for the Eliminate Alcohol Sales to Youth (EASY) program.
HB 442 will implement a new flat license fee of $1,650. It will revise the licensing proximity specifications on how far a bar or restaurant may be from a community location such as a school, church, library, playground, or park. Under this bill, a restaurant cannot be located within 450 feet walking distance from a community location, or within 200 feet of a measured straight line. One other notable change to the proximity requirements is the elimination of a variance by the DABC Commission. Existing licensees operating under a previously granted variance can continue to operate under it.
The bill will standardize all licensees and create a clear distinction between bars and restaurants. To do this, the bill removes all club licenses and requires all ‘grandfathered’ restaurants to comply with the same standards as other restaurants. “Dining Clubs” will migrate to either a bar or restaurant. Additionally, a “club license” would become a “bar establishment license,” an “equity club license” would become an “equity license,” and a “fraternal club license” would become a “fraternal license.” The bill would also simplify the dual/multiple licensing issues with a one license per room policy. The exception would be an establishment with a restaurant license and a banquet or reception center license. In that case, the different licenses cannot operate at the same time.
All licensees – including ‘grandfathered’ restaurants – must comply with new requirements or surrender their license by July 1, 2018. This provides an ample timeframe for establishments to decide how they would like to fulfill the new requirements.
DABC Advisory Board
Currently, the Department of Alcoholic Beverage Control (DABC) Advisory Board is comprised of 12 members: 11 voting members and one non-voting member. Of the voting members, 10 come from the retail industry, and the chair of the Utah Substance Use and Mental Health Advisory Council is the final voting member. This bill will reduce the Board to eight total members, with seven voting members and one non-voting member.
The Board is changing in size and in makeup. Under the new structure, three appointed members will represent the alcohol industry; two appointed members will represent an alcohol or drug abuse prevention, enforcement, or education group; and the director of the Division of Substance Abuse and Mental Health, and the chair of the Utah Substance Use and Mental Health Advisory Council is the final two voting member.
Budget Update & New Revenue Numbers
Final revenue estimates are always released in the last third of the Utah session as legislators work to finish balancing the state’s budget. The release of the final revenue estimates is a highly anticipated event. Last week, I reported that after base budgets were passed, the state had about $285 million in surplus and revenue growth available for new programs, teacher raises, and other spending priorities, but had received over $550 million requests for the money. This week the new revenue numbers gave the proponents of those spending requests reason to hope they might make the final cut, as they learned there is approximately $100 million in additional revenue now available.
The vast majority of the new estimated funds will be allocated to the Education Fund, because it is derived from income tax which is constitutionally dedicated to this fund. Of the $100 million in growth, $77 million will go toward education. The remaining $3 million in growth will flow to the General Fund and is largely being attributed to the State’s new deal with Amazon to collect sales tax on the marketplace items it sells to Utah consumers.
Tax Reform Proposal
Year-over-year growth in Utah is still positive, with the General Fund tax revenues growing by 4.6%, and the Education Fund tax revenues growing by 5.75%. However, rumors have been flying at the State Capitol for the past week that an omnibus tax reform proposal might happen this year. It is late in the session for a proposal of this size and nature, but it seems the Governor and leadership of the House and Senate are in agreement on key principles. If they are able to come to full agreement, several tax bills will be drafted and likely moved through the legislative process quickly. The overall goal of the reform proposed is to broaden the base and lower the rates while also providing tax stability. The proposals include:
- Lower the state income tax and phase out tax credits for federal exemptions at a lower adjusted gross income level than is currently allowed.
- Broaden the sales tax base by reinstituting the state portion of the sales tax on food and also pass online sales tax collection reform bills. This would include lowering the overall state sales tax rate so the proposal is revenue neutral.
- Increase the number of industries that can utilize single sales factor apportionment of business income.
- Adjust the gas tax trigger threshold that is tied to a wholesale rack index price. With the dramatic and sustained drop in oil prices, the trigger mechanism developed two years ago to slowly raise the gas tax by 5 cents, is now many years from being reached.
- Property Tax Basic Levy Freeze: The statewide basic property tax levy is used for education funding. The proposal would add a floor to the basic property tax levy so the tax rate doesn’t decrease as property values rise.
Education is one of the policy areas that always interests people. Here are a few funding updates on the Education budget that are known in this last third of the session. The Public Education Appropriations subcommittee is recommending a 3% ($90 million) increase to the K-12 budget this year. This is in addition to the $68 million that was also appropriated for student population growth.
My husband is a teacher so I’m very aware that teachers buy classroom supplies out of their personal household budgets. I’m very happy to report that the subcommittee also recommended moving the teacher supply budget from one-time funding to ongoing funding at the $5 million level. Hopefully over time this line item will grow.
Finally, I know that many students, parents and teachers are frustrated with SAGE testing. SB220 Student Assessment and School Accountability Amendments repeals the requirement for students in grades 10-12 to take the SAGE test and instead replaces it with the ACT test.
We are nearing the halfway mark of the Utah Legislative Session. From this point onward, the pace increases and more time will be spent debating bills and less on evaluating the State budget. It is always a sprint to the finish with long days on Capitol Hill. If you have questions or concerns about bills or budget line items, please feel free to email or use my mobile number (801-599-9017) for a faster response.
The Legislature really has two main responsibilities each year: passing laws and balancing the state budget. At just over $16 billion, the management of the State budget is a pretty big task. While that dollar amount might seem staggering, you would be amazed at how quickly requests arrive to spend the funds! The end of Week 3 marks the conclusion of the "base budget" process. These are the building blocks of the budget that basically ensure last year's level of funding, plus growth and inflation costs. As a State with a growing population, we know that the enrollment at the public schools grow each year by about 10,000 children which means the Public Education base budget has to keep pace to the tune of about $94 million in growth funding. Similar cost increases for construction, labor, or utilization expenses exist throughout the State budget and the funds start to quickly add up.
The bulk of the State budget is contained in the base budgets (one budget bill for each sub-appropriations committee). After all the base budgets are settled, the state usually has a small amount of revenue growth and budget surplus from the previous year that can be used for new buildings, programs, teacher or state employee raises, just to name a few. This year that pool of surplus revenue is $285 million.
The wrangling over this remaining pool of revenue will be intense because $550 million in spending requests have already been submitted, almost double the amount. Week 4 is when the final budget estimates are received that could increase or decrease the projected $285 million by some degree, though huge swings aren't expected. This is often the hardest part of the budgeting process because it is the last of the money available for an entire year and everyone thinks their need or idea is the best and highest use of the money.
Phase Out of the Residential Solar Tax Credit:
A drop in solar panel pricing and a residential solar tax credit has driven consumer demand for Utahns to install solar panels in a big way. In the first half of 2016, 7,700 Utahns installed solar panels. The tax credit cost to the State totaled nearly $42 million in 2016, and it is projected to cost nearly $60 million in 2017. Under our State Constitution, funds for income tax credits are drawn from the Education Fund. The impact of the increases in solar panel credits essentially pits solar users against the needs of K-12 students.
HB23 Income Tax Credit Modifications has been proposed for the 2017 session to phase out the residential solar tax credit. After extensive negotiations between bill sponsor Rep. Jeremy Peterson (R-Ogden) and the Utah Solar Energy Association, the bill contains a four-year phase out of the tax credit from $2,000 in 2018 to $0 in 2020.
Growth of Local Food Movement & Regulatory Landscape:
The growth of the local and "slow" food movement has created some interesting challenges for local growers, producers, and consumers. Some of who participate in the local food scene believe the current level of regulation required for inspections and labeling is cost prohibitive for small-scale growers and producers and makes the food items they produce inaccessible. Others worry that if standards are lowered for small producers, the integrity of the food safety system could be compromised. Supporters of the regulation argue that food-borne illness outbreaks impact sales up and down the supply chain and standards should be the same no matter the size of the grower/producer or the intended consumer.
Competing bills have been introduced from two legislators and a third legislator is seeking to create an advisory council to help navigate the future of food produced in Utah.
HB58 Direct Food Sales Amendments, Rep. Scott Sandall (R-Tremonton) This bill modifies existing cottage foods statutes. In some respects it makes the law more liberal (inspections) and in others making it more restrictive (labeling). The bill provides rulemaking authority to the Utah Department of Agriculture & Food.
HB 121 Local Food Advisory Council, Rep. Steve Handy (R-Layton) This bill creates a new local food advisory board that will report to the Natural Resources, Agriculture & Environment Interim Committee. The board will be a recommending board and will have wide latitude to study issues related to the local food economy.
HB277 Direct to Consumer Food Sales Modifications, Rep. Marc Roberts (R-Salem) Under this bill, certain kinds of food would be exempt from certain state, county, or city regulations regarding the preparation, serving, use/consumption, or storage of food and food products. Those exempt foods include: 1) food produced and sold within the state; 2) food sold directly to an informed end consumer; and 3) food grown for home consumption.