CHEYENNE – Since the last energy bust sent Wyoming’s budget in a downward spiral, lawmakers have increasingly called for a means to diversify the state’s revenue streams in ways that avoid direct hits on residents’ wallets.
After two years of interim sessions focused on addressing the issue, state lawmakers rolled into Cheyenne this Legislative session with numerous bills set to not only raise revenue, but with multiple carve-outs to introduce more sustainable sources of funding for the state’s education system, which has undergone tens of millions of dollars in cuts over the past several years.
Among those bills: a tax mill on industrial properties, legislation to index fuel taxes to inflation, a lodging tax, new sales taxes, tobacco and wind taxes, a corporate income tax and numerous others.
Nearly all of them failed, however, leading Joint Appropriations Committee co-chairman Sen. Eli Bebout, R-Riverton, to tell reporters Wednesday that the state could be facing even more cuts in the 2020 budget session – namely programmatic cuts to education and in mental health and substance abuse funding.
“We talk about how we can’t cut our way into taking care of our issues, but we also can’t tax our way into it,” Bebout said. “Well, we tried the tax side, and it failed. So my inclination now is we’re going to have to look at more reductions in spending.”
“We’ll still want to provide citizens what they need and what they demand,” he added. “But we tried to broaden, and we just can’t seem to get there.”
Spending problem, revenue problem, or both?
In an appearance at a Democratic Caucus lunch several weeks ago, Wyoming’s Budget and Fiscal Administrator Don Richards gave an update on the state’s fiscal health that, for the most part, was far more optimistic than the dire financial scenario of several years ago.
On the general fund side, Wyoming’s budget is generally balanced, he said, and after years of multi-million dollar cuts, as well as increased revenues, the state was finally looking at what could be a time of prosperity following the bust.
However, he did note one issue with the state’s checkbook: Over the past five years, Wyoming has been rushing through its reserves, and not properly replenishing its savings.
“We are burning through cash,” he said.
In conservative Facebook groups, comment sections on news websites and in meetings across the state, many Wyomingites echo that thought: that the state has a spending problem.
In its Liberty Line newsletter last Monday, the Wyoming Liberty Group put out a list of recommendations on how to skinny up the state’s finances even further, including slashing regulations on the state’s medical providers, increasing school choice and continuing recent efforts on criminal justice reform.
All the while, the group presented a staunch front against any new taxes.
“Tax increases are dangerous as well as painful,” the group wrote. “No matter how elaborately designed and described, they foolishly remove resources from the productive tax base and place them in a public sector that depends on the very tax base it depletes. Greed kills the goose that lays the golden eggs.”
However, after years of efforts, Wyoming’s government has been stripped to the essentials as much as possible, a fact lawmakers are often reminded of by department heads when called to testify in legislative meetings over a new set of responsibilities being delegated to some government office.
While continuing to find new means to save money, the Wyoming Legislature – in the 2019 session – remained adamantly opposed to raising new funds for the state. Six separate pieces legislation designed to raise revenue – including proposals for a wind tax, a lodging tax and a corporate income tax – failed to pass and, though members of the Joint Revenue Committee discussed plans to revisit some strategies, there was visible frustration amid the group with the reluctance of the Legislature to take on any new taxes.
“I hate to keep restudying these things if one of the majority parties’ straight line is ‘no new taxes,’” said Rep. Pat Sweeney, R-Casper, during the meeting. “It makes it difficult to convince enough new members to get bills out, which is sort of criminal. That’s our task on the revenue committee, to get these bills out, but to just restudy stuff over and over… what’s the thought of the committee members who have worked on this? To keep trying and in 12 years, maybe we’ll do something?”
Even on fairly uncontroversial bills to come out of committee – such as a new mill levy for education – revenue-raising proposals failed to pan out at even the most basic level.
“The committee did its job on school funding, but the entire body didn’t,” said Rep. Cathy Connolly, D-Laramie. “Just because they didn’t do the work, doesn’t mean we drop the subject.”
Persistence might be the key, said Rep. Albert Sommers, R-Pinedale.
“A revenue bill is no different than any other bill,” he said. “Some bills die two or three times before that idea becomes law. It’s really about educating people on that bill, and letting the people decide what’s good or what’s bad, and moving on to the next study. Ultimately, with a $300 million deficit in education every year… that’s 3,300 teachers. We’re not going to be able to cut to that. It’s not happening.”
Are there other ways?
Similar scenarios have played out in other, energy-centric, low-tax states such as Alaska, where the governor has proposed massive cuts across the entire budget in order to avoid the creation of new taxes, prompting outrage all across the Last Frontier.
However, Senate President Drew Perkins, R-Casper, said that Wyoming – despite its similarities – does not bear similar risks, largely due to its slightly more diverse array of energy resources, taxes and investment streams.
“I don’t know that you have to have revenue [bills] right now,” said Perkins. “I think when you look at the Legislature, and what we’re trying to do here, we have things we’re looking to get done immediately. Then there are things in the midterm – the next three to six years – that you’ve got to be looking at. Quite frankly, we’ve saved enough that – if all the projections that are in the budget come true – we can fill two-thirds to three-fourths of the anticipated gaps in the next session. Then you pull another million out of the LSRA (rainy day fund), and we may have the next biennium covered.”
However, he acknowledged, Alaska presents a cautionary tale.
“We recognize if we’re going to continue to not have an income tax in the state, we’ve got to find other ways to broaden and diversify,” he said, touting the success of bills related to economic development and blockchain that were seen in the 2019 session.
But many of the more desirable taxes to come up for discussion – despite the Legislature’s best intentions – can cause collateral damage that makes them unsavory to Wyoming residents who have grown accustomed to the one of the lowest tax burdens per capita in the country, particularly in smaller, rural communities.
“It’s not specific taxes,” said Sen. Dan Dockstader, R-Afton. “It’s the concept of taxation itself. You have people trying to live within their means and on small budgets. In my area alone, we sent more than a thousand people up the canyon to Jackson for work, because we don’t have as strong an economy.”
One example of these bills was the lodging tax, which was killed after numerous lawmakers were buried with emails from in-state residents who might potentially have to pay more money when travelling to Casper for their kid’s soccer tournament, or to Cheyenne for a business conference.
“There tends to be a propensity to try and figure out how to tax someone from out-of-state, and it’s not as easy as it looks,” Ogden Driskill, R-Devils Tower, said Wednesday. “We tried this with the gas tax – 70 to 80 percent is paid by out-of-state people, but that 30 percent of people won’t be happy.”
Taxation remains a difficult issue, but the idea that something needs to be done to diversify the state’s revenue streams is one that is almost universal among members of the 65th Legislature.
“At some point, we’re going to have to do it,” said Rep. Steve Harshman, R-Casper.
However, nobody is quite clear on when those tough conversations will actually take place.
“Unless something changes six or eight years out, the LSRA (the state’s rainy day fund) is going to be drawn down, and you have to wonder where the money is going to come from,” said Driskill. “Oil, gas and minerals pays most of our taxes, and that number is down more than a billion dollars since when I came in. That’s going to drop, and it’s going to continue to drop, and at some point we’re going to have to talk about who pays it, or what services go away. The two balances are black and white.”