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Hope for an energy comeback chills desire for tax reform

It’s a familiar refrain: Hunker down. Weather the storm. Ask God for one more boom.

But most agree tightening your belt isn’t a long-term solution, it’s a way to get you through a bust.

When schools eventually close, businesses leave and government makes cuts, people begin to wonder how many times they can weather the same storm.

They talk about tax changes and economic diversification. But then prices tick up or a miracle happens, and those debates are drowned out by shouts that the economy is improving.

Nearly 500 coal miners lost their jobs on a single day in March of 2016. Crude prices dropped by 50 percent from one summer to the next. Natural gas struggled. But coal production has improved, oil is creeping towards $60 a barrel, and some talk of export terminals turning natural gas into a global commodity.

Meanwhile, Wyoming still faces a nearly $770 million deficit over the next two years and experts warn that continual improvements in the energy sectors may not be a safe bet anymore.

Yet many state officials are convinced Wyoming’s economy is recovering. Despite some of the most conservative lawmakers agreeing earlier this year that overhauling taxes might be necessary for solving the budget crisis and enabling economic diversification, it now appears the will to do so is waning.

“People are pretty much expecting that our downturn has flattened out and that we’re maybe on the upswing,” said Buck McVeigh, executive director of the Wyoming Taxpayers Association, which seeks to broaden the state’s tax base. “It’s going to have a dampening effect for lawmakers.”

Eating your vegetables

Even staring down a major budget shortfall last winter, lawmakers decided not to raise taxes.

But following the session, leaders asked a committee to generate proposals to raise significant sums of money — up to $300 million — before lawmakers meet again this February. And, very reluctantly, they did.

The committee took a painstaking approach to considering tax options, often voting not on whether to sponsor a given measure but simply whether to move it on to their final meeting. Then, at what was supposed to be its final meeting Monday in Cheyenne, the committee punted once again. It created a new meeting in January at which it would really — finally — decide which bills to sponsor.

Even with all the caution, lawmakers on the revenue committee aren’t considering any fundamentally new measures like a corporate or personal income tax, either of which experts say would lessen dependence on minerals. Instead, the weightiest items considered have been modest increases in the state’s very low sales tax and a temporary increase to the property tax rate — which would be removed after a few years or when the energy industry recovers, whichever happens first.

But the recoveries of years’ past aren’t expected this time around.

Not out of the woods

The factors that drove coal, oil and gas into a bust haven’t really changed, according to Rob Godby, director of the Center for Energy Economics and Public Policy at the University of Wyoming.

“All the dynamics are still there,” he said. “They are only getting worse.”

This is particularly true of coal, a resource that’s been an economic bedrock for Wyoming for more than 30 years. Coal is now in direct competition with natural gas as its long-term dominance in the electricity sector diminishes. Coal-fired power plants are closing. Renewable sources of power are on the rise.

Oil, which showed some improvement this year, has trouble of its own. The global upset that led to the downturn was caused by a sudden rise in U.S. production. If companies adjust to the new normal of $60-plus a barrel, that could upset the balance again and drive the price right back down, Godby said.

Long-term concerns about climate change only add to the mix as the transportation sector moves away from gas and diesel.

Meanwhile, predictions that natural gas prices will tick up haven’t proved true, Godby said. The state revenue projections, released in October, made similar warnings.

But it’s the short-term boosts projected by the Consensus Revenue Estimating Group that appear to be what those in charge are focused on.

The CREG projections determined that the state would have at least $200 million more than expected to spend over the next two-year budget cycle. That still leaves the gap of $770 million, according to an estimate from the Legislative Service Office.

State officials and political watchers are now convinced that whatever iota of momentum major tax changes may have had with lawmakers going into the February budget session is quickly evaporating.

Confusing politics

Mead acknowledged recently that the tax changes needed to go along with economic diversification, a major priority for the governor, are now unlikely to come during the Legislature’s winter session.

“I think as the revenue picture improves, whatever appetite that was out there — if any — is somewhat diminished,” he said last week.

The revenue committee’s new January meeting is meant to take place after CREG releases its quarterly update to the October report, which may project even more of a revenue boost. It will also come after a select committee on school funding issues its final recommendation, which some lawmakers are likewise hoping will allow the Legislature to spend less on education.

Senate President Eli Bebout, R-Riverton, a strident opponent of most new taxes, said he thinks the senate remains largely opposed to new taxes. “The CREG numbers being better ... certainly make it easier to say no.”

Bebout’s views on the state’s tax code are complex. He believes in Mead’s Endow effort to move the state away from its reliance on minerals through job training and infrastructure spending, and Bebout recognizes the role taxes will play in achieving a more diverse economy.

“We’ll never be totally out of the woods unless we truly make a good effort to diversify our economy and broaden our tax base,” Bebout said.

But Bebout’s priorities are cutting state spending and, while he freely acknowledges that the Legislature can’t cut its way entirely out of its current hole, the longtime lawmaker still rejects most of the steps that would broaden the tax base and provide revenue to accompany spending reductions.

“I’m a no on property tax increase. I’m a no on sales tax increase. I don’t like the 1 percent leisure tax,” Bebout said. “I’m a no on an income tax.”

(Bebout has said he may support a so-called “tourism tax.”)

While Bebout may be one of the anti-tax leaders in the Legislature, Speaker of the House Steve Harshman, R-Casper, whose chamber has been more open to increasing revenue, is now also saying the potential for major tax changes this session has been all but killed by the CREG report.

“I just don’t think we’re going to have to do those big ones at this point,” Harshman said. “That’s kind of the way I’m looking at these numbers.”

Long term risks

But that doesn’t mean the conversations about taxation that have been taking place on the revenue committee over the past year have been a total waste. Revenue committee co-chair Rep. Mike Madden, R-Buffalo, thinks they have set the stage for fundamental tax reform at some point in the future.

“There’s no good time to reform taxes in Wyoming,” he noted.

But the longer the state waits, Madden added, the more desperate the future will be.

For formerly resource-dependent regions like the clusters of timber towns across the Pacific Northwest, surviving the loss of their primary economic driver hinged on transitioning their economy before the final bust, according to Mark Haggerty, a natural resources expert for Headwaters Economics in Montana.

The areas in Washington and Oregon that were already removing themselves from dependency on the mill and the forest could continue to do so as the logging industries finally collapsed. The communities that put off those tough decisions withered.

“They are still depressed,” Haggerty said. “They never recovered, and they never diversified.”

A similar story has played out in Appalachia, but in those towns and states it was coal’s decline that drove down regional economies, he said.

McVeigh, with the taxpayers association, has mixed feelings about the air running out from the Legislature’s tax reform balloon. His organization supports broadening the tax base, but McVeigh worries that some proposals, such as raising taxes on liquor, are the “knee jerk” result of lawmakers desperate for revenue. That’s not good policy, he said, and if lawmakers abandon major tax reform this year, they may avoid passing some of those bills.

But the Legislature has been putting off major tax reform since at least the late 1990s, when a study called Tax Reform 2000 that recommended implementing an income tax was shunted aside by skeptical lawmakers. McVeigh said that if elected officials again decide to ignore the problems with Wyoming’s tax code this winter, it is unclear when they will ever tackle an issue that he agrees is crucial to stabilizing the state’s economy for decades to come.

“I don’t think anything’s going to change,” McVeigh said. “In the next downturn we will be just as vulnerable as we are now.”

Josh Galemore, Casper Star-Tribune 

A private room for meetings and parties at the Pump Room.

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House, Senate tax bills have implications for Wyoming health and schools, officials say

As Sen. Mike Enzi and other national lawmakers negotiate a final tax bill, Wyoming education and health officials warn that some possible provisions could have a negative effect on schools and hospitals here.

“Overall I think it’s a pretty tough way to go about undoing the Affordable Care Act,” Eric Boley, who runs the Wyoming Hospital Association, said of the provision in both the Senate and House tax bills that would eliminate the individual mandate, which requires people buy health insurance or face a penalty. “It’s a workaround. I don’t really see what it has to do with taxes. I don’t think they’re addressing the issue of making it better.”

“I think it would be a real hardship on graduate students at the University of Wyoming today and graduate students going forward,” Chris Boswell, UW’s vice president for community and governmental affairs, said of the House bill’s provision that would tax graduate student’s tuition waivers as income.

In recent weeks, both the U.S. Senate and House passed tax reform legislation. Both would provide steep tax cuts for businesses and more modest tax breaks for families and individuals. The tax cuts in each bill add up to about $1.5 trillion over the next decade.

Wyoming’s congressional delegation — Enzi, Sen. John Barrasso and Rep. Liz Cheney — each supported their chamber’s tax bill.

In statements, Barrasso, Cheney and the spokesman for Enzi praised the legislation.

“Under the bill, (Enzi) believes Wyomingites would generally see their taxes simplified, lower tax rates, increased wages, more jobs in their communities and a stronger economy,” Enzi’s spokesman, Max D’Onofrio, wrote in an email statement to the Star-Tribune.

Enzi is one of a handful of senators selected by Senate Majority Leader Mitch McConnell to meet with House members and negotiate a final tax bill.

Axing the mandate

Among other things, the Senate bill would eliminate the individual mandate, one of the most controversial parts of the Affordable Care Act. Republican lawmakers tried for much of this year to roll back the bill but ultimately failed earlier in the fall.

The nonpartisan Congressional Budget Office has said that repealing the mandate will result in 13 million fewer people possessing health insurance in the coming years. It would also provide about $338 billion in revenue over the next 10 years.

Cheney, Barrasso and D’Onofrio all praised the Senate’s proposed repeal of the mandate.

“It takes Obamacare from being a mandatory program to a voluntary program,” Barrasso said in a statement. “This will give additional relief to low- and middle-income families.”

D’Onofrio noted that should the mandate be repealed, it wouldn’t eliminate Americans’ ability to obtain subsidies to help pay for insurance.

But Boley — who has criticized parts of the Affordable Care Act — said the elimination of the mandate would destabilize the insurance exchanges and cause prices to jump.

“They’re not really addressing the overall issue and not coming up with an overall solution,” he said of lawmakers. “They’re just dismantling it piece by piece.”

Affecting students and teachers

The bills also have notable implications for education. The House bill would tax the tuition waiver that many graduate students often receive as income. For instance, Rachel Edie — an atmospheric science PhD student at UW — currently has her tuition covered by her department. Should the House’s bill provision become law, that tuition would be treated as income on which Edie would have to pay taxes.

“It feels very — I don’t know — hostile toward higher education,” Edie said.

According to UW’s website, masters students receive an average stipend of $19,987.46 for about nine months worth of work. PhD students like Edie receive an average of $24,694.46.

She said that going back to graduate school meant setting aside a career — and the salary it would bring.

“We’re making way less money than our peers generally because we’re making maybe 20 grand a year,” she continued. “So we’re kind of setting ourselves back in that respect. ... I think if I were just considering going to graduate school and the price tag were a lot higher and departments couldn’t offset it by offering higher stipends, I think it would” deter her from going.

Boswell said the university has spoken with its delegation about its concerns with the tuition waivers. He said UW President Laurie Nichols ran into Enzi in an airport and spoke with him.

“We are not passive on this,” Boswell said.

He said the university was simultaneously most concerned with taxing tuition waivers and most hopeful that particular provision won’t make it into the final bill.

The tuition waivers were not the only provision affecting higher education. The House version would also eliminate the tax deduction that can be taken by paying student loan interest, Boswell said. Essentially, those with student loans can deduct a certain amount that they pay on the interest of those loans.

Barrasso said he supported keeping both that deduction in place and tuition waivers untaxed. Cheney responded to a list of detailed questions with a statement, and her spokeswoman did not respond to a follow up question about whether the representative supported taxing tuition waivers.

D’Onofrio, Enzi’s spokesman, said he would leave comments on the House bill to House members and that “he is not going to negotiate the different provisions of the tax bill through the media.”

The bill has implications for K-12 education, as well. The House’s bill would eliminate the $250 deduction teachers can take for spending their own money on school supplies, while the Senate would double the amount they can deduct.

Kathy Vetter, the president of the Wyoming Education Association, said the $250 current deduction is already less than the more than $500 the average teacher spends on school supplies each year.

She said that while eliminating the deduction would keep more money out of teachers’ pockets, it wouldn’t stop them from trying to help students.

“I don’t think it will significantly affect the amount of money that teachers spend,” Vetter said. “I don’t believe they spend it because they get a tax deduction. Teachers spent that money because they believe in students.”

Barrasso said he supported “ensuring teachers who spend their own money on classroom supplies receive a tax deduction.”

Fear of future cuts

Vetter and Boley both said they were concerned that a final tax bill — which could add more than a trillion dollars to the federal deficit — will result in cuts to Medicaid, Medicare and other entitlements.

“We have a lot of children that live in poverty and they rely on those government services to insure that they get their health care and all of the food and everything,” Vetter said. “This tax bill raises the deficit and then consequently they may cut services, that really does affect our children.”

The concern has been raised by the media and opposing lawmakers, who say that Republican lawmakers will turn to slashing entitlements to pay for the cuts that will come from the tax bill.

Medicare’s giant fund for inpatient care isn’t expected to start running out until 2029, more than a decade away. But an anti-deficit law currently in effect could trigger automatic cuts as early as next year — about $25 billion from Medicare.

McConnell, the Senate majority leader, has denied this, and Barrasso noted that the tax bill itself does not cut Medicaid, Medicare and other entitlements.

But he said that if “we want to get serious about the debt, we must cut wasteful spending, shrink the federal government and permanently strengthen critical programs like Medicare, Medicaid and Social Security.”

The Associated Press contributed to this report.

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Nichols says UW must balance free speech with protecting students, campus diversity

In September and October, Native American students at Sheridan College were the target of racial threats. In November, fliers calling the Holocaust a hoax were posted in several buildings at the University of Wyoming.

After the leaflets were discovered, UW President Laurie Nichols condemned them. At Sheridan College, officials are still searching for the person or people who wrote the racial epithets, and the college says it’s undergoing changes to make it is more open to non-white students, especially Native Americans.

“All campuses are dealing with this right now, this is not unique to the University of Wyoming,” Nichols said in a recent interview with the Star-Tribune. “I mean, you can’t pick up anything in the world of higher ed and not read about serious issues around racism.”

But the charges of racism on American college campuses often bump against free speech, Nichols said. Take the flyers: The university took them down, and they were technically illegal as the posting of handbills violated a Laramie ordinance. But the flyers’ content was free speech that, while completely false, is protected by the First Amendment, a UW spokesman said.

The university hired a diversity coordinator over the summer, a move partially spurred by student protests at UW. Nichols made the position a priority when she took over in spring 2016. Last week, she said “there has never been a time when it’s more important to have one than right now.”

American college campuses have been wrestling with charges of institutional racism in recent years. The University of Missouri was the site of widespread protests calling for the resignation of top college and state education officials in 2015. A student went on a hunger strike, and the school’s chancellor and the university system’s president both stepped down.

More recently, college campuses have been the site of clashes and protests related to controversial speakers. Protesters caused $100,000 worth of damage at the University of California, Berkeley over a planned appearance by controversial right-wing commentator Milo Yiannopoulos, who has called feminism cancer and has been associated with neo-Nazis.

After Buzzfeed News released emails revealing those associations, Yiannopoulos disavowed racism. A video discovered by Buzzfeed showed white supremacists performing the Nazi salute as Yiannopoulos sang “America the Beautiful” at a karaoke bar in Texas; Yiannopoulos said in his statement he could not see the men.

Richard Spencer was one of the men giving the Nazi salute to Yiannopoulos. A white supremacist who believes in the separation of the races, Spencer gave a speech at the University of Florida that drew massive protests and prompted Gov. Rick Scott to declare a state of emergency.

While the University of Wyoming has not been visited by a speaker similar to Yiannopoulos or Spencer, some students in Laramie were upset by conservative writer Dennis Prager, who spoke on campus last month.

UW students peacefully protested the speech, which was about how socialism makes people selfish. Prager was invited by Turning Point USA, a young conservative activism group.

A frequent recipient of criticism from the political left, Prager has written about a number of controversial topics, including his opposition to gay marriage, which he said was a more radical redefinition of marriage than the outlawing of polygamy.

Nichols said she was approached by students who wanted to invite Prager to speak and she “encouraged them to bring him in.”

“And then a group of students immediately were concerned by it and were kind of upset by it and wanted us to shut him down,” she continued. “But you know that’s an area where speaking about the right to free speech is very important and where we encourage you – this is what a college education is about. Go listen to what this person has to say. And if you don’t agree, speak up because it’s your opportunity to voice your opinion about it.”

While Prager may be controversial, protests against Yiannopoulos were sparked at least in part because he had previously displayed pictures of a transgender student at the University of Wisconsin, Milwaukee. The student was ridiculed and eventually withdrew from the school.

Asked where universities draw the line — if they do at all — on speakers, Nichols said it was a “really hard” and colleges must evaluate them on a case-by-case basis.

“You sit down with the student group, you talk about who they want to bring in, talk about the level of controversy,” she said. “You know, respecting rights on campus, you do try to do that. And if you need to up security, you just do it. That seems to be the stance that most universities have taken.”

“People are polarized,” she continued, “and that coming together and sitting down and talking about it, it’s a tougher issue today than maybe it was 10 years ago.”