Even in tough times, Utah has U.S's best economic outlook

By Brice Wallace

Imagine earning the top spot in a ranking by beating 49 competitors. At anything.

Now imagine keeping that up for 13 consecutive years.

Utah has done just that, once again having the nation’s best economic outlook. The “Rich States, Poor States” ALEC-Laffer State Economic Competitive Index has been produced for 13 years, with Utah being the proverbial “king of the hill” every single time.

“Just an incredible, incredible story of free market success for a state now over this period of time — well more than a decade now at this No. 1 ranking spot,” Jonathan Williams, chief economist at the American Legislative Exchange Council (ALEC), said during a webinar briefing about the rankings.

Among the factors helping Utah rise to the top have been disciplined government, adoption of pension reform, innovative property tax reform, and preparation for the eventuality that the federal government will be unable to support states at its current level.

“They’ve really kept a disciplined approach to budgeting and spending,” Williams said. “They’ve kept spending in check, and they’ve been able to reduce taxes as a result.”

The economic outlook ranking is a forecast based on a state’s current standing in 15 equally weighted state policy variables. Generally, states that spend less and tax less experience higher economic growth rates than states that tax and spend more, ALEC says.

The variables are “things that state lawmakers control within their 50 state capitols,” Williams said, and ALEC members nationally “are united in the idea of free markets, limited government and federalism.”

“One of the ultimate measures of if a state is a success or not, is are people voting with their feet toward that state or away from that state.”

U-Haul statistics released in January showed that Utah remains a top state for incoming moves. It was No. 8 for in-migration trips in 2019, which U-Haul said is an effective gauge of how well cities and states are attracting and maintaining residents.

Economist Arthur B. Laffer complimented Gov. Gary Herbert by saying Herbert “has run the state beautifully for a long period of time.”

Several states near Utah also fared well in ALEC-Laffer the rankings. Wyoming was No. 2, Idaho No. 3 and Nevada No. 6. The bottom-ranked state is New York.

Among the variables, Utah was ranked No. 5 for average workers’ compensation costs, No. 11 for public employees per 10,000 population, No. 12 for both top marginal corporate income tax rate and personal income tax progressivity, No. 14 for both property tax burden and the number of tax expenditure limits, No. 16 for top marginal personal income tax rate, No. 17 for “remaining” tax burden, No. 19 for both debt service as a share of tax revenue and a state liability system survey, No. 31 for sales tax burden and No. 32 for recently legislated tax changes.

Economist Stephen Moore said Utah is among a very few states to have balanced budgets this year — without a tax increase in Utah — during the midst of a pandemic.

“These states that control their budgets and have sound tax systems and they don’t have massive income taxes, they’ve been able to balance their budgets,” Moore said, contrasting them with states looking for increased federal money to help themselves and their cities.

“And that is completely unfair to the states like Utah and South Dakota and North Dakota and states like Iowa and Idaho and Nebraska that have balanced their budgets,” he said.

In addition to economic outlook, the ALEC-Laffer report also included rankings for economic performance, looking at state gross domestic product, absolute domestic migration and nonfarm payroll employment during 2008-18. Utah finished third, behind top-ranked Texas and Washington. The bottom-ranked state is Connecticut.

Utah was No. 3 for state gross domestic product, which had cumulative growth of 53.6 percent during that period; No. 13 for absolute domestic migration, rising 77,933; and No. 1 for non-farm payroll, growing 23.6 percent.

“They’re directionally correct in all the ways you’d want them to be,” Williams said. “The in-migration, the income growth, the job growth are all exactly what you’d want them to be. … We’re just very proud of how Utah has done, both on an outlook and a performance side.”