By virtue of their brevity, Wyoming’s legislative sessions are always relatively exciting for those who care to pay attention: the wheeling and dealing, bills killed and others rushed through, vetoes from the governor and overrides from the Legislature. But aside from the general rush of Cowboy State politics, this year’s four-week budget session has some specific stories that are worth paying attention to. These storylines are all intertwined, and how lawmakers handle their intersection is as likely to determine what happens this year as any particular policy position.
What to do about education
The several-hundred-million-dollar deficit facing Wyoming’s education funds is the most important issue facing legislators as they meet in Cheyenne this year. The state’s revenue streams have been battered over the last two years, but while lawmakers appear close to figuring out what to do about funding most state services, education remains largely unsolved. Partially that’s because many legislators were holding their breath until late January. That’s when the official state revenue estimates for the next several years were updated and when the committee reevaluating the state’s education funding model released its final findings. While those were both important reports, the delay meant that open discussion over the past year on what to do about the education deficit was largely stunted until barely two weeks ahead of the session itself. In the end, the revenue update found several hundred million more dollars for the Legislature to work with, but the education committee did not recommend a less expensive model. Lawmakers, in other words, still have lots of hard work set out for themselves over the next four weeks.
While on the surface it seems as though the question is whether to cut spending on education or raise revenue to pay for the existing cost, it’s actually a bit more complicated than that. The Legislature can certainly choose to significantly cut expenses, but that comes with certain caveats. First, any major cuts would expose the state to being sued by school districts who can point to funding requirements enshrined in the state constitution. Second, the politics of where to cut education spending are complicated
For example, while legislative leaders — and voters, according to some polls — are eager to cut “administrative costs,” many of those costs go toward supporting small rural districts in regions of the state that have outsize representation in the Legislature. If lawmakers decide not to fill the deficit primarily with cuts, they must somehow find more dollars to pour into the hole. The two obvious sources of additional revenue are raising taxes, introducing new taxes, spending money out of existing savings accounts or diverting existing revenue streams that are currently earmarked for savings. Again, the question is not as simple as whether or not to raise taxes. Doing so would be politically difficult and depending on which taxes are raised, likely unpopular with the public. On the other hand, spending reserves is likely to be popular with the public but will raise hackles from some fiscal conservatives in the Legislature. Plus, everyone acknowledges that it is not a sustainable solution because, at some point, the savings run out.
To divert or not to divert
Given the evident lack of appetite among lawmakers to either significantly raise taxes or take a chainsaw to education funding in the state, using a portion of the state’s several billion dollars in savings seems a likely resolution to the funding crisis. But because nothing is ever simple when it comes to funding public services, diverting reserves to pay for government operations is not a question of lawmakers looking at a single, $5 billion savings account and moving the necessary amount over to a single education fund. In fact, it’s not even that there are multiple funds for both the state’s savings and education accounts. Instead, the different savings funds have distinct revenue streams and those sources are controlled by a combination of state law, the Wyoming constitution and less formal policies periodically set and changed by the Legislature. At the same time, the education funds that need filled are meant to pay for different things — the two major accounts go toward regular operations and construction or maintenance, respectively — and are regularly funded by some revenue streams that are themselves split between several different sources. Is your head spinning yet? Because none of this addresses the details of any of these funds nor the fact that the anticipated revenue and anticipated education costs are in flux due to changes in the commodity markets that stock many of the funds and the impact of fluctuating student numbers.
Nor does this touch on all the non-education expenses that will likely need to be covered with reserves or eliminated altogether. Those include the direct distribution to cities, towns and counties that local governments insist they rely on. Originally introduced during an energy boom, it is now being paid with savings and some lawmakers are chafing at continuing to do so. A new expense that Gov. Matt Mead is requesting be covered with reserves is nearly $60 million for his economic diversification initiative known as Endow.
Details aside, the basic tension here is whether relying on existing savings, or taking money that would normally go to refill reserve accounts, and using it to cover Wyoming’s current budget deficit, is a form of robbing Peter to pay Paul. There are a few ways of balancing the politics and substance of this issue. The most basic is to balance reserve spending with cuts so that savings aren’t covering the entire gap. Other options include leaving some reserve accounts alone and simply taking the new money that is normally contributed to them and diverting those dollars to current expenses. There’s another important distinction that lawmakers will likely consider, which is that some accounts are explicitly designed to cover government operations during lean times — such as the Legislative Reserve Account, often referred to as the “rainy day fund” — while the corpus of others, most famously the Permanent Wyoming Mineral Trust Fund, are intended to be left alone with the state benefiting from annual interest earnings. Spending rainy day funds to cover the coming two-year budget cycle is likely to be far less controversial than spending trust fund dollars and diverting new funds from savings accounts to operational ones is likewise going to be an easier sell than spending down the corpus of an account intended to provide revenue for future generations in the state.
The taxes that won’t pass
Legislative leadership tasked the interim revenue committee with generating proposals to raise several hundred million dollars in revenue this session. That directive was intended to mean that there would be at least some options for raising taxes or creating new ones as a solution to the budget deficit. They were always going to be options that the majority of lawmakers were perfectly capable — and likely — of outright rejecting or simply ignoring. But two weeks before the session began, the revenue committee itself decided to reject all of the major tax bills it was considering. It’s probable that a few tax measures will still be earnestly considered but these are mostly minor adjustments to existing levies, such raising the taxes on cigarettes and alcohol. These minor taxes will generate tens of millions, a drop in the bucket given the looming $850 million deficit, but are nonetheless welcome dollars given that lawmakers will be scraping for any and all savings. The heftier proposals liable to raise hundreds of millions of dollars over the next few years would hike sales and property tax. These are likely dead in the water, after even members of the revenue committee — crafted in part of lawmakers more open to new taxes — rejected them. One interesting proposal that initially even garnered the support of tax skeptic and Senate President Eli Bebout, R-Riverton, is the so-called “tourism tax,” intended to tax out-of-state visitors and cover the cost of promoting Wyoming as a vacation and business destination. But shortly after receiving a warm reception at the revenue committee, the bill ran into trouble as it became clear that it would squarely hit Wyoming residents eating at bars and restaurants in the state. It was included among the bills rejected by lawmakers on the revenue committee. With Wyoming’s general aversion and positive revenue projections — reports found over $300 million more than anticipated at the end of last year’s legislative session — major tax reform is unlikely to be on the table over the next few weeks.
Kicking the can?
While confronting a major deficit seems like a judgement day scenario for any state legislature — slash services or hike taxes — one should never underestimate the propensity for politicians to do nothing. While Wyoming lawmakers do have to craft a budget of some sort, and can’t literally do nothing during this session, they can punt the difficult decisions surrounding education funding and the state’s revenue model. If the Legislature chooses to put off major changes to state spending and taxes, that will likely look like a heavy reliance on the use of existing state reserves, perhaps with sunset clauses phasing those diversions out within the next five or 10 years. The alternative would be a more serious reckoning with the state’s education funding — consolidating school districts, increasing class size — and energy-reliant revenue streams. While it’s impossible to predict what lawmakers will decide when push comes to shove, there has been little public discussion of major reforms in either of these areas during interim committee meetings and usually rank-and-file lawmakers need priming before taking the plunge on significant and controversial changes to state government, the consequences of which will be felt by their constituents.
Disagreement between the House and Senate
On both the national and state level, the House is usually a more conservative body than the Senate. Term limits are shorter in the Wyoming House than in the Senate, meaning state representatives are forced to face voters more often than senators. That generally leads to the House being a more populist body that shies away from items that are a tougher sell with voters, like new taxes, and toward red meat like rolling back restrictions on gun ownership. The Senate, meanwhile, is a smaller chamber intended to be the place for making sober and sometimes unpopular decisions. But under Senate President Eli Bebout, R-Riverton, and House Speaker Steve Harshman, R-Casper, these roles have been at least partially flipped. Harshman’s House has shown itself more open to raising revenue than Bebout’s Senate and some social issues — like abortion restrictions — that previous Senates had killed, passed last year. Bebout has also taken a harder line on education funding, pushing for significant cuts before considering new sources of revenue. Harshman, a teacher and football coach at Natrona County High School in Casper, is no tax-and-spend liberal but has appeared less interested in deep cuts to education. How these two leaders negotiate their differences and guide their chambers will play a significant role in what kind of budget comes out of the session this year.