Lawmakers Ponder More Cuts Versus Taxes

Feb 26, 2016

The House of Representatives discuss a budget bill.
Credit Bob Beck

Wyoming lawmakers are addressing a revenue shortfall that could reach 600 million dollars by 2018, by making some budget cuts and using some of the nearly $2 billion dollars they have in savings. But things could get worse very soon, especially since the state is losing a major source of income for school construction, which is coal. 

Usually revenue means taxes. The state almost raised taxes in 1999 when the state was facing a budget shortfall and then overnight the Coalbed Methane boom exploded and Wyoming was on easy street. Senate Majority leader Eli Bebout of Riverton remembers those discussions well. He got into the legislature around the time of the bust in the 1980’s and remembers years of budget cuts. He will oppose tax increases in the short term, but that could change five years from now.

“If I had my crystal ball, I mean I don’t know I can’t really answer that. You know before everybody said we gotta have tax increases, remember, in the bust in the 80’s and 90’s? And we hung firm and said no and we were right. Uh, right now I’m saying no, but things change.”

What scares Bebout this time is coal. He’s a long time energy developer and so he knows oil and gas prices go up and down. But for Bebout the so-called war on coal has devastated Wyoming, especially the loss of millions of dollars in coal leases that the state used for school construction. It could be a shortfall of between 400 and 700 million dollars. 

Green River Senator John Hastert is the Democrat on the Senate Appropriations Committee. He said we are a ways from needing to raise taxes.

“I don’t think we need to do that right at this point and I don’t know if we will need to do it next biennium because we will still have plenty of resources. So I think that’s for quite a ways down the road.”

Hastert said if that legislature had expanded Medicaid it could have avoided some of the budget cuts the state is facing this year. That’s because expansion would have given the state millions in federal dollars.  

I don't see having the largest relative rainy day fund, spending on some of the things we are funding, and raising taxes, most of which would be paid by the industries that are hurting the most now, which is our mineral industries.

Sitting in his office several miles away from where the legislature is meeting, Governor Matt Mead said he’s been disappointed with the budget lawmakers have put together. Like Hastert, Mead contended that Medicaid Expansion would have helped the state. He also has no interest in raising any taxes right now, even for school buildings.

“I don’t see having the largest relative rainy day fund, spending on some of the things we are funding, and raising taxes, most of which would be paid by the industries that are hurting the most now, which is our mineral industries.”

One lawmaker has no problem taxing the energy industry. That’s Senate President Phil Nicholas of Laramie.

“If you create a hole that’s the size of $400-million dollars, the only industry that can pull you out is minerals. You can’t tax 400 thousand people enough to get that kind of a pickup,” said Nicholas.

He’s been worried about how the state will fund school construction for many months. Nicholas went to the legislature’s revenue committee and urged them to come up with a plan to pay for schools. He argues that if the state starts now, it will eventually raise enough money to handle the funding deficit for school buildings and overall education spending. 

“If you begin to marshal your problem early enough, you could go out and put a modest tax and raise $50 million dollars a year and you would never fall into that hole.”

House Appropriations Chairman Steve Harshman said future education funding keeps him awake at night.

“We are going to spend every dime of savings we have on the education side which is about 650-million, that are basically excess mineral royalties, we are going to spend every dime of it over the next three years.”

Standing in a hallway outside the Senate chambers is longtime legislative observer Bill Shilling of the Wyoming Business Alliance. He said the legislature has a legitimate problem.

“We are in this bind and the revenues are not keeping pace with expenditures and this precipitous drop in revenue, no one forecasted that, no one did.”

Shilling added that if you want budget cuts, lawmakers will have to focus on the main drivers of the budget. Education, health care, and family services, three areas that many people rely on and difficult places to cut. Shilling knows that taxes are very unpopular in Wyoming, but he said Wyoming’s tax burden is low.

“We don’t pay for the services we receive. The bang for our buck in terms of services is extraordinary in Wyoming. “

House Revenue Committee Chairman Mike Madden said his committee will spend the summer looking at how to acquire more money.

“A temporary 5 mill or 4 mill property tax is a possibility, others have talked about a half a percent increase in the excise use tax, we even talked a little bit about a wind generation tax, these are all logical things to look at first.”

But House Minority Leader Mary Throne would like the committee to consider something else. In Wyoming’s efforts to diversify it has brought in some companies that don’t nearly pay what other industries do.

“You know the data centers, the distribution centers, they have a pretty low tax rate. They don’t actually generate a lot of tax revenue over time. And so we need to look at the whole structure. Because energy might not come back this time and what are we going to do?”

Throne said her worry is the state becoming a commodity producing wasteland on the east side of the state with a couple nice tourist spots in the northwest.