Economic update: state revenues stabilized, GDP revisions improve outlook; board cautioned on WPU increase amid uncertainty
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Summary
School finance staff told the board state revenue snapshots and recent GDP revisions point to stabilization and growth, but economists warned ongoing federal uncertainties could limit the legislature's flexibility on a requested WPU increase.
School finance staff and the agency economist presented an economic update that described stabilizing state revenues and an improved second-quarter GDP estimate, while cautioning the board about continuing uncertainties that could affect legislature decisions on school funding.
Sam Urey, the school finance director, and economist Nestor Rogers summarized recent state and national indicators. Urey said the Utah State Tax Commission's monthly revenue snapshot and other reports show year-over-year gains and stabilization in revenue collections; the Gardner Institute and state revenue snapshots were cited as consistent with those trends. "These green arrows are indicating that growth has been above and beyond what was expected," Urey said while reviewing revenue slides.
The presenters cited national figures from the Bureau of Economic Analysis showing revised real GDP growth for the year’s second quarter. Rogers said the second-quarter advanced estimate had been revised upward, and presenters referenced a further revision to a 3.8% year-over-year increase in second-quarter real GDP published by the Bureau of Economic Analysis.
Federal monetary policy was also discussed. Rogers and Urey noted the Federal Reserve's recent 0.25 percentage-point reduction in the federal funds rate—the first cut of 2025—and that the Fed projected additional easing later in the year. Rogers described this as the start of an "easing cycle," and said the Fed still sees a trade-off between inflation and employment.
Board members asked how this outlook affects the board's legislative funding priorities. Vice Chair Wood and another board member raised the Joint Legislative Committee (JLC) request for an additional 2% on top of the previous 4% increase to the Weighted Pupil Unit (WPU). Wood asked whether a 2% supplemental increase is realistic given the economic picture.
Rogers urged caution. "We have to be really careful. We just this week alone, there's just so much uncertainty," he said, citing the government shutdown and prior tariff uncertainty as factors that make forecasting difficult. Urey explained the technical inflation measure the board uses for planning is a five-year rolling average of core CPI (less food and energy). He said the August rolling figure was 3.1%, and that the September number had not yet been released; staff said they would provide the latest CPI when available.
Urey and Rogers both said onetime funds can be useful in tight years because inflation reduces the future purchasing power of ongoing allocations; Urey noted that last year's 4% WPU increase costs about $200 million in ongoing revenue. "Onetime money can be more valuable in that... we get to spend it on that year without further inflation," Urey said.
Why this matters: The board's guidance on WPU and other funding priorities will inform legislative proposals and budget planning. Presenters recommended a cautious approach that prioritizes steady funding and selective increases rather than broad ongoing commitments while uncertainties persist.
Next steps: Staff will provide updated CPI and revenue snapshots to the board and will lay out which board motions may require legislative action ahead of the session so members can review and act if needed.
