CHEYENNE — With more than a third of lawmakers dissenting, the Wyoming Legislature approved a state budget for the next two years Saturday, sending it to Gov. Matt Mead for his review.
“I for one am not satisfied with what we did with reductions,” Senate President Eli Bebout, R-Riverton, said prior to the vote. “Is this the compromise I wanted? No.”
But Bebout nonetheless urged approval of the budget, on what is scheduled to be the last day of the legislative session, noting that the Legislature was obligated to pass a budget.
The Senate passed the budget 19-11 and the House passed it 38-20.
Two other major pieces of spending legislation regarding capitol construction and education were still being debated by press time.
The dissent stemmed from what many lawmakers believed was a failure to create a budget that significantly shrinks the state’s $850 million budget deficit, which is currently being paid for mostly out of savings, or to reduce spending on schools.
“This general fund just has so much pork in it,” said Rep. Chuck Gray, R-Casper.
Gray was specifically frustrated with some particular appropriations, including a new tourism website for the state and money to rescue a private vocational school in the state.
Two members of legislative leadership — Sen. Drew Perkins, R-Casper, and Rep. David Miller, R-Riverton — voted against it.
The approved budget hews closely to Gov. Matt Mead’s recommendations for how to fund state agencies, though in an attempt to find a compromise between the House and Senate’s spending plans, lawmakers removed both education cuts and state construction projects from the bill last week.
The budget keeps funding levels for most of state government largely stable, with increases in spending on social services that Mead argued were hit too hard by cuts passed during the last legislative session.
It also includes about $42 million for Endow, the governor’s economic diversification initiative, and Legislative Service Office finance director Don Richards said it increased the state’s spending gap — the difference between revenue and spending — to around $1 billion without including any of the construction projects.
Much of the Senate debate acknowledged that many state agencies had already been significantly cut and instead focused on the lack of reductions to school funding. Lawmakers cut education roughly $70 million last year and there is a proposal to further reduce school spending by about $30 million this year, far less than the Senate’s original proposal to slash around $80 million.
Sen. Dave Kinskey, R-Sheridan, argued that the state was spending its savings too quickly and setting the stage for future tax increases.
“We’re burning cash,” Kinskey said.
However, Senate Minority Leader Chris Rothfuss, D-Laramie, said it was disingenuous to balk at spending savings while rejecting out of hand any new taxes or tax increases.
“The idea that we could have miraculously possibly found $900 million of additional cuts is absurd,” Rothfuss said. “It’s impossible.”
The Legislature rejected all major revenue bills in its first week, including a statewide lodging tax that was supported by Bebout.
Divisions between the House and Senate on spending were laid bare later Saturday when members clashed over the construction spending at a meeting meant to resolve the differences.
After about half an hour of productive discussions on loan programs, Senate President Eli Bebout faced off against Rep. Bob Nicholas, who was representing the House. Bebout first accused the House of violating verbal agreements on construction spending, which Nicholas disputed.
Bebout then said that the only construction projects that the Senate would vote to approve were two healthcare facilities and a road improvement project related to coal mining.
“Then we don’t need to meet,” Nicholas said.
“Ok then we’re done,” Bebout said before standing up and leaving the room.
The House wants to fund several other projects, including a state office building Casper, improvements to the prison in Rawlins and a science facility at the University of Wyoming.
Earlier in the meeting, Nicholas had disputed that the House had failed to provide revenue to cover the $1 billion in spending, pointing to several hundred million dollars in leftover cash from last year and a tweaked model for the state’s trust funds that covered roughly two-thirds of that amount.
“We have all of it fixed in the short term,” Nicholas said.
As of press time, the committee had not met again to solve the construction spending question. Education funding also remained up in the air and several lawmakers acknowledged decisions related to construction that needed to be made before dealing with school finance. It was not clear when either of those meetings would take place.
House Speaker Steve Harshman said the Legislature was planning to meet late into the night. While Saturday is the last scheduled day of the Legislature’s four-week session, they can meet for three additional days at the discretion of leadership if necessary.
Before taking an evening break, Rep. Donald Burkhart, R-Rawlins, suggested that committees were set to work on both construction and education later that night.
“It could be a long, long evening so you might want to make sure you have a place to sleep tonight,” Burkhart said.
Given that the main budget bill has passed with full funding for schools, if the House and Senate cannot resolve their differences on the building projects or education finance, that means there will be no money available for construction until at least next year, but also that the cuts to schools being considered would not go through.
But Harshman suggested he did not want to go that route in an interview Friday.
“My motivation is not to get out of here, it’s to do it the right way,” he said.
Tom Rosenof deals in metal. His machine shop in Casper didn’t get hit by the oil downturn like some of his neighbors because IPA Machining is not fully dependent on the oil and gas fields. But Rosenof is dependent on those who provide him with metal. And he’s worried now about what a sudden increase in taxes on foreign steel and aluminum will do for business.
President Donald Trump wants to win a trade war over steel and aluminum and is proposing a dramatic increase in taxes for buying those metals from other countries — 25 percent on steel, 10 percent on aluminum. The tariff, he argues, is retaliation on China for dumping cheap products on the market driving down global prices. He says it could bring about a renaissance of metal mills and jobs in the United States.
From the oil and gas firms in Louisiana to craft beer producers in Montana, states are measuring the full impact of the president’s suggested tariffs, with most expecting their costs to jump and droughts to show up for certain products not made in the USA.
Wyoming does not create steel, but it uses it. The fossil fuel industries that make, and sometimes break, Wyoming’s economy rest on metal girders. Steel goes down the well bore in the oil fields in eastern Wyoming, and into the widgets manufactured at IPA Machining. Aluminum, too, is key, found in heat exchangers at natural gas processing plants and oil refineries.
For Rosenof in Casper, the international trade war has already hit home, he said. His steel providers raised prices last week.
Wind developers, gas providers, manufacturers, pipelines operators and oil and gas producers could all experience an increase in costs or a shortage of key goods as a result of the broad tariffs, they say.
Sinclair Oil Corporation, which operates two refineries in Wyoming, says rising prices are a concern. The developers of what will be Wyoming’s largest wind farm, Chokecherry Sierra Madre, are concerned. The oil and gas industry is concerned.
Coming off a high from a Republican-led tax overhaul that graced oil and gas earnings, industry is trying to get through to the President the severe repercussion of his decision.
The Independent Petroleum Association of America penned a letter to Trump on Thursday, before he had signed off on the tariffs, arguing that industry fresh out of a downturn does not need a shock to one of the key products used to do business — steel.
“Oil and natural gas production facilities require certain quality surface, intermediate and completion tubing, but as much as 30 percent of specific products are simply not made in the U.S. and must be imported,” the group wrote.
Part of Trump’s platform when running for the president was on bringing back the steel industry and winning this fight with China, said vice president of the Petroleum Association, Lee Fuller in an interview.
Dealing with China certainly needs to be on the agenda, he said. But the president needs to move past that big picture and understand the steel and energy industries to achieve his goals with trade without damaging other priorities, he said.
“There is a risk to his entire energy agenda, energy dominance, national security, if the steel tariffs have the effect of suppressing the development of U.S. oil and natural gas,” he said. “That’s not consistent with his other objectives.”
Other industry groups are singing the same song of skyrocketing costs and shortages ahead. The Interstate Natural Gas Association of America represents midstream and downstream natural gas operators. Its officials argue that there is a shortage of goods in the U.S. today, and the tariffs will only exacerbate the problem.
“For certain steel products used in pipelines, there is zero domestic availability,” said CEO Don Santa in a statement Thursday. “The ability to expand pipeline infrastructure in an efficient and predictable manner is critical to the United States realizing the full potential of its domestic energy abundance.”
High Country Fabrication of Casper sits off a highway and most days the squeal of metal on metal can be heard above the wind. It is a Wyoming focused business and much of what the workers manufacture goes into refineries, pipelines and processing plants.
They are expecting their cost of material to go up 15 to 25 percent with the tariffs, said Ryan Noel, sales manager. For their large metal projects, materials account for about half of their costs, he said.
“It’s a huge shock to us,” Noel said. “Initially it’s going to raise our costs quite a bit to build anything.”
Noel said he understands the desire to support metal industries, and the push to bring back those jobs. The problem as he sees it, however, is that those industries don’t exist right now. U.S. steel and aluminum mills aren’t making what the business needs.
High Country buys from distributors, who procure the parts overseas.
It’s not just that the mills don’t make the steel, though. It’s that the steel workforce has shrunk, he said.
“A lot of people fought for generations to get the bachelor’s degrees and get the office job. That was the dream,” he said. “Now, a lot of people can’t even use their hands anymore.”
The business supports trying to bring those jobs back, but in the meantime, it will be hard to get parts, he said.
“It’s going to be a wild ride if this goes through,” Noel said.
The tariffs are meant to address China, and most agree that China is the source of trouble worldwide when it comes to steel.
But the tariffs, which will exclude Canada and Mexico, don’t hit China exclusively, industry groups and many economists argue.
They do intimidate everyone else, said Rob Godby, director of the Center for Energy Economic and Public Policy at the University of Wyoming.
“It’s just the wrong approach to trying to address the problem,” he said. “All it’s doing is creating much larger problems with respect to our allies, because they have the same problems we do.”
The U.S. is backing countries into a corner by threatening their economies, Godby said.
Trump has held firm in his position that the tariffs will benefit the U.S., tweeting early last week that the country is on the losing end of trade deals and its steel and aluminum industries are “dead.”
But he has failed to garner many allies in his own party for his tariffs position.
The president’s economic advisor, Gary Cohn, resigned last week over the proposed tariffs, and 107 House Republicans sent a joint letter to Trump urging him to desist for the sake of the U.S. economy.
In some ways, China may be facing the same domestic steel industry challenges the U.S. has faced, Godby said.
The steel industry in China grew in large part to meet the country’s meteoric growth. It needed that initial infrastructure, but as growth slowed it had too much capacity and not enough demand.
China’s steel industry now it has a large steel workforce that it may not know what to do with, he said.
“If they were just to say, ‘Well, we don’t need that steel anymore we are just going to throw those workers out of work, that could create significant political discontent,” he said.
China could also be dumping cheap steel on the market to push out competition until it dominates, he said.
The dumping argument is the one used by the president and many others.
But there are ways to address that globally, which would target China for driving down prices for its own gain, Godby said.
The bottom line is that the tariffs are likely ineffective against China, because the U.S. is such a minor customer, he said.
“You don’t typically deal with a distortion (in the market) by creating another distortion that is so widespread like this one,” he said. “You’d like to be a little more surgical about it.”
In economic terms, protecting U.S. steel means taking away resources from somewhere else in the country.
“For every one of those steel workers this might help, you have to ask yourself, how does it threaten oil field workers, or the suppliers of the oil fields and any other sector that uses steel?” Godby said.
The Trade Partnership, an international economic consulting firm, said the tariffs would increase jobs in the steel and aluminum industries by about 33,000, at the price of 179,000 jobs in other sectors of the economy.
Back in Casper, Rosenof is worried about price quotes. Until the steel suppliers secure their numbers, he can’t honor a price contract with his own customers.
In the short term, shops in central Wyoming with product on hand are going to have a competitive advantage. As inventory is used up, the costs are going to go up for everyone, he said.
Rosenof expects to be hit by both the short and long term effects of the tariffs.
“It will become a new norm,” he said of higher costs. “But then people are going to buy less because the parts cost more. I think it’s going to have a direct impact on our business for sure.”
The Associated Press contributed to this report.
Editors note: The original version of this story incorrectly named Tom Rosenof’s business WyoNebraska Machining. That shop was closed and relocated to Michigan. Rosenof’s current business is IPA Machining.
CHEYENNE — On Saturday morning, the 20th and final day of the Legislative session, the House finally took up the sole surviving education funding bill. It then swiftly refused to agree with the Senate’s amendments to it, and as the sun set on the 64th Legislature, lawmakers had not settled on a deal.
“When the good people down the hall took it and obliterated the bill, and then tried to put it back together again, some of the language on special education got messed up,” Rep. David Northrup told lawmakers.
Northrup had sponsored the measure, which passed the chamber and was sent to the Senate. Senators there gutted it, over the objections of Speaker Steve Harshman, because, they said, that it was unconstitutional.
Northrup’s reasoning behind opposing the Senate’s version was that an amendment to the bill — which capped special education and provided a $2 million appropriation — was in conflict with other language in the measure. Effectively, he said, that $2 million, which was meant to somewhat offset the special education cap, was impossible for districts to receive.
The House agreed with him. Fifty-eight of 60 representatives voted against accepting the bill as it was, prompting leadership in both chambers to appoint a conference committee to hammer out a deal. By press time Saturday evening, the committee had not met to resolve their differences.
It was the latest in weeks of disagreement on education funding between the House and Senate. Speaker Steve Harshman favored using revenue diversions to bridge a school funding deficit of $240 million a year.
Senate President Eli Bebout and much of his chamber were firm in their position that education needed to be further cut and that lawmakers should be transparent in how it’s paid for. They advocated using savings and the state’s general fund.
“I think we should’ve maybe been a little more aggressive (with education cuts), but I’m satisfied with where we ended up,” Bebout said Friday morning. “Did the House think we did too much? Probably. But it’s called compromise.”
The bill that went back to and was promptly rejected by the House on Saturday proposed $26 million in cuts in the next two years, with the bulk coming in fiscal year 2020.
Both sides agree that some amount of cuts need to be made. Northrup has repeatedly said the $26 million in cuts are modest. Those reductions largely focus on closing loopholes within the state’s school funding model.
Educators seemed as satisfied with the proposed cuts as they were ever likely to be.
After two years of reductions, the close of this legislative session may bring with it the end of serious cuts. Harshman, a Casper Republican, said Friday he thought reductions seemed mostly done, though lawmakers may take a closer look at efficiencies, like combining bus routes or districts’ administrations.
“Everybody wanted to say, ‘Well, it’s not cut as much as other state agencies,’” Harshman said, an argument that would be repeated on Saturday in the Senate. “Well, first of all, education’s not a state agency, right?”
He ticked off some agencies like the Department of Health that have had funding restored to the point, he said, that education has now been cut more.
In any case, lawmakers in the Senate have suggested they’re not done looking at school funding. As the chamber debated its budget bill Saturday, the conversation continued to swing toward education.
“How long until we hit the day of reckoning?” Sheridan Republican Sen. Dave Kinskey asked, after noting that K-12 cuts were removed from the budget bill.
Sen. Ogden Driskill of Devils Tower said that until everyone came together, the state would continue to slide backward.
“That’s education. They’ve got to come to the table,” he said. “We’re going to continue on this path until we hit a hard wall.”
Bebout, a Riverton Republican, told media Friday that he wanted to look at the “escalators” — like health insurance — that keep ticking up the cost of education in Wyoming. He’s also repeatedly asked why Wyoming pays so much more per student than the Equality State’s neighbors.
But Harshman dismissed the idea of cutting those cost increases and “ghost insurance,” or the money districts receive for health insurance that goes unused and instead covers other costs.
“When you hear all this about ghosts, that’s all just talk,” Harshman said. “And it’s a harmful narrative to locally elected school boards.”
He stressed that lawmakers should honor local control and give the districts the ability to use their funds as they see best. But he added that 90 percent of the money that goes to the 48 school boards is spent as dictated in the state’s funding model.
While the disagreements in the House and Senate ran deep — they were repeatedly described as fundamental philosophical differences — the two chambers did agree to a deal Friday. The Senate stripped school cuts from its budget and in return, the House agreed to try its method of paying for schools in 2019 and the Senate’s in 2020.
Natrona County Superintendent Steve Hopkins said Thursday that he felt good about the House’s education bill as it stood then. It won’t throw Natrona County School District’s off of its plan to deal with previous budget cuts, which amount to $77 million statewide and $12 million in the Casper area.
Kathy Vetter, the president of the Wyoming Education Association, said the bill was the best she’d seen. But, she said, any cuts are going to hurt, especially now that districts have exhausted some of their flexibility to absorb reductions.
“This will hurt kids,” she said.
All things considered, the House’s bill was likely the best-case scenario for educators. The Senate’s primary education bill would’ve cut tens of millions from schools over the next three years.
In a meeting about state capital construction, Rep. Bob Nicholas said the House “is happy with the cuts in 140 now.” Whether that means that number won’t change remains to be seen.