What is the purpose of a 401(K)? Placing money aside now for later expenses, specifically during retirement. A future retiree will set aside a certain amount of money per paycheck to pay for possible future expenses. Are there other more immediate expenses that money could be used towards? Certainly, but a little sacrifice heeds substantial rewards later.
House Joint Resolution 6, Joint Resolution on Severance Tax, would start a process very similar to investing. Using some of the money collected from the severance tax, it would be placed in a trust fund that would collect interest each year. Severance tax is simply taxes received from revenue on oil and natural gas, primarily.
Trust funds, such as the one proposed in HJR 6, are already quite prevalent in state government, and these funds generate quite a bit in interest. In past years, the School Trust Fund received a 23% interest rate, which brought additional funds into the account. The Permanent State Fund, received 11% interest return in that account. The interest rates are enough to help Utah prepare for the future, and for future growth.
In years of budget reductions, some might say this is the wrong time to start investing. This bill starts funding this trust fund in a responsible way. For the first $50 million collected in severance tax, 25% is set aside for the trust fund. The next $50 million, 50% would be set aside. After that, the next $100 million would have 75% set aside to be placed in this trust fund.
But there are also ways to retrieve the money in this trust fund, in the case of an immediate emergency. If 3/4 of the Legislature allow, the money can be tapped to be used for alternate purposes in the future. Not only are we saving for our future, but this money is available to us if we must use it.
Finally, citizens will vote on whether this idea should be implemented. The resolution will go to the voters, as this is their money we are looking to invest, and continue saving for Utah’s future.
Sponsor Rep. Jim Nielson, R- Bountiful, asked when the best time to plant a tree is. The answer is 20 years ago. When is the second best time? Right now. Utah has a history of strategic and financial planning and it has served us well. This bill continues that tradition.
The bill has passed the House, and is on the Senate 2nd Calendar, up for discussion.