Tax bills passing through the U.S. Congress right now could delay millions of dollars in mineral royalty payments to Wyoming.
It wouldn’t be the first time some of the money has been withheld. The federal government has a history of keeping mineral royalties owed to Wyoming, a money-caching consequence in recent years of Congress over spending or failing to pass a budget.
And that risk has cropped up again. Either tax bill would add more than $1 trillion to the federal deficit over the next 10 years, according to the Congressional Budget Office. If Congress can’t make up that money elsewhere, it initiates sequestration. That could mean a year delay to some or part of Wyoming’s 48 percent share of federal mineral royalties and lease income.
Wyoming has its own $770 million two-year deficit to contend with, a result of the downturn in key energy industries. The missing income would hit the state’s K-12 school purses particularly hard.
Some say the state is not in a position to shrug off a reduction in anticipated federal revenue. Wyoming’s delegation to Washington, on the other hand, insists that the mineral revenue is safe. If their budget bill causes sequestration, they say they have means to fight it. They’ve done it before.
Bending the rules
If Congress wants to pass a budget bill similar to what they’ve proposed without sequestration measures, it can pass accompanying legislation that addresses the deficit increase, the Congressional Budget Office wrote in a Nov. 13 letter to the House.
Or, it can bend its rules.
“Congress made the … law and Congress can also waive its requirements,” said Sen. Mike Enzi’s spokesman Max D’Onofrio in an email. “Congress has done it before on a bipartisan basis many times.”
Enzi has made tax reform a top priority, and he would fight any cuts in mineral payments that the budget proposal instigates, according to his spokesman.
Rep. Liz Cheney and Sen. John Barrasso’s spokeswomen were equally adamant that the mineral revenue would come back to the state.
“Congressman Cheney will always fight to protect Wyoming’s rightful share of mineral revenues,” said spokeswoman Maddy Weast, via email.
She also took issue with the Congressional Budget Office’s estimates. They don’t account for increased revenue that will be achieved by this tax reform, she argued.
But those estimates from the Congressional Budget Office are what counts when it comes to sequestration, according to the Pay As You Go Act, a budgeting restriction from the early ‘90s that was reinstated in 2010.
The CBO decides if sequestration is needed and determines the percentages that can be sequestered from a host of programs. The president is then required to sign off on that sequestration.
Gov. Matt Mead’s spokesman David Bush said it’s premature to speculate on potential cuts.
“[The governor] does not want to see reductions in federal mineral revenue, is following the tax bills, and will work with our Congressional Delegation to do what is best for Wyoming,” he said.
Heard it all before
This wouldn’t be the first time Wyoming’s been hit by sequestration. In fact, the state is dealing with it right now. In the last quarter, the state missed out on about $3 million a month.
But the state is also currently being paid back money that was withheld the previous year thanks to the Wyoming delegation’s work, Don Richards, a financial staffer with the Legislative Services Office.
It’s evened out so far, he said.
A potential risk in the sequestration story is if there is a significant increase in the percentage of the mineral payments that the feds holds onto.
That withheld portion can add up to a lot of money. Wyoming’s total federal mineral income for fiscal year 2017 was about $700 million. Sequestration hovers around 7 percent of that.
Between October 2016 and June, the feds withheld about $43 million in mineral payments, said Wyoming State Treasurer Mark Gordon.
Similar Congressional actions hit Wyoming’s mineral payments in 2013, due to the Budget Control Act, a piece of legislation devised to avoid hitting the debt-ceiling when negotiations between the White House and Congress stalled out. Wyoming was informed it would lose about $10 million in royalty payments every month due to sequestration, adding up to $53 million in withheld payments.
The potential of more sequestration down the line isn’t crippling, Gordon said. Wyoming has weathered this before and it can again, he added.
But that’s not to say cuts are insignificant for the state as it faces tough fiscal times, he said.
“In the context of a $3 billion budget, they don’t seem substantial. But in the context of a program, they can make the difference,” he said. “Every dollar counts.”